Retail Lending Examination Procedures

For all debt suspension/cancellation products:

  1. Must the account be current to activate benefits? If not, are there delinquency limits with respect to benefit activation?

  2. If accounts are delinquent when benefits are approved, does the bank re-age the account to current, freeze it at the payment/delinquency status at the time the benefit event occurred, or freeze it at the delinquency status at the time of claim approval?

  3. At what delinquency status does the bank terminate coverage (e.g., cancel coverage/premium assessment at 90 days past due)?

  4. Does the bank stop premium assessments on accounts that are over-limit? If not, under what conditions does the bank “force” premium assessments on over-limit revolving accounts (i.e., book the premium even though it would be denied through the authorization process)?

  5. Does the bank satisfactorily track and analyze the subsequent performance of the following populations for at least twelve months:

    • Accounts denied claims?

    • Accounts that failed to complete claims?

    • Accounts following benefit expiration?

  6. If the default experience of the bank’s retail loans is significantly worse than that of the population as a whole, is this information incorporated into the allowance analysis?

  7. How does the bank compute the interest and fees associated with accounts in claims status? Specifically, since interest and fees for revolving accounts are generally suspended, how does the bank determine the associated interest and fees that would have been due on a month-to-month basis?

  8. What is the bank’s process for reserving for benefit claims? Is it sufficient to cover the total of existing approved claims, claims in process and reasonably expected to be approved, and an estimate of claims not yet submitted by accounts in which an event has occurred?

  9. If participating loans are securitized and the bank is responsible for making payments to the trust, are the trust reimbursements accurate and made monthly?

  10. Is the bank’s MIS sufficient to generate the information needed to establish and maintain an adequate reserve?

  11. Is the bank’s MIS sufficient to monitor and manage the various debt suspension/cancellation products?

  12. Is the bank’s pricing based on a valid cost analysis (considering all associated costs)?

  13. Does the bank periodically evaluate cost/benefit from the consumer’s perspective? Is that analysis reasonable and reflected in the pricing?

  14. Is flat rate pricing, if any, appropriate for low dollar loan amounts? Please explain.

  15. How many written consumer complaints has the bank received regarding these products year-to-date and in the prior full year?

  16. Is the bank planning to offer additional debt suspension/cancellation products or significant product (coverage, pricing, etc.) or marketing (channel, emphasis) changes? If so, please describe.

Product Name:

Offered Since:

Retail Credit Product(s) Covered:

Provider (bank, affiliate, third party):

Administrator (bank, affiliate, third party):

Responsible Bank Officer:

Benefits Unemploy-ment Disability Leave of Absence Death
Coverage – specify maximum number of months, N/A if not included, or yes/no for death:
Cost (e.g., statement balance X .0069)
  Individual
  Joint
Benefit
  Interest and Fees
  Principal
  Limits, if any (e.g., limited to # of months premiums paid prior to event)
Offered to self-employed customers?
Penetration:

# of accounts paying premiums

% of portfolio

Claims rate [21] (# of claims submitted/# of accounts paying premiums), YTD and prior year
Approval rate (# of claims approved/# of claims initiated), YTD and prior year
Denial rate (# of claims denied/# of claims initiated), YTD and prior year
Fallout rate (# of incomplete claims/# of claims initiated), YTD and prior year
Bank income generated from premiums:

Year-to-date amount (percent)

of total business line revenue

of total business line pre-tax net income

Prior year (percent)

of total business line revenue

of total business line pre-tax net income

Cancellation policy, including refund policy
Cancellation rate (# of cancellations/# of accounts paying premiums pre-cancellation), YTD and prior year

Attach a copy of the product terms and conditions.

21.
Approval, denial, and fallout rates should balance to claims rate.
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