The consumer finance industry enjoys ample returns on high-interest loans that are often stuffed with expensive fees. But now lenders in North Carolina are trying to squeeze more out of borrowers who are already struggling to make ends meet.
The industry succeeded late in the last legislative session in adding a provision to an unrelated dental insurance bill that will expand the types of products that consumer finance companies can sell credit property insurance on in conjunction with a loan. Premiums for the insurance are often folded into the loan amount and consumers rarely use the insurance that covers property used to secure a loan. Often the property is already covered by homeowners and renters insurance.
The credit property insurance is “junk insurance” that merely adds to the cost of borrowing. In North Carolina, less than $9 is paid in claims for every $100 borrowers pay in premiums.
The exploitative aim of the amendment is bad enough, but the way it passed the General Assembly also abused the legislative process. The advocacy group Democracy North Carolina reports that the change was backed by heavy political contributions. In a news release, Democracy Now says, “about two dozen consumer lenders and their two PACs gave at least $530,000 to state politicians and party committees from January 2013 to December 2016.”
A top recipient of that largess was state senate leader Phil Berger, R-Eden, who took in $48,250. Berger let the amendment expanding credit property insurance be added in the last days of the session, and it passed with little debate.
If legislators won’t protect consumers from lenders, Gov. Roy Cooper should. He should veto this effort to further squeeze borrowers that slid through the legislature with the help of well-targeted contributions.