Magazine article American Banker

N.Y. Seeks Ban on Force-Placed Insurance Kickbacks to Banks

Magazine article American Banker

N.Y. Seeks Ban on Force-Placed Insurance Kickbacks to Banks

Article excerpt

Byline: Chris Cumming

New York State regulators have proposed a sweeping set of rules to reform the force-placed insurance industry, in the latest sign that the government is taking steps to reform what critics call an abusive industry practice that overcharges homeowners.

The new rules would seek to lower rates, protect homeowners and eliminate the "kickback culture" in the force-placed industry, New York Governor Andrew Cuomo announced Thursday. The rules are an attempt by Cuomo and the New York State Department of Financial Services to apply to the entire industry a set of reforms it imposed through a settlement with major force-placed insurance providers earlier this year.

The rules would prevent New York insurers from paying commissions to banks or servicers, and would prevent insurers from issuing policies on properties serviced by affiliated companies, among other changes.

New York is the first state to propose comprehensive ban on force-placed insurance payments to banks. National regulators, including the Federal Housing Finance Agency and the department of Housing and Urban Development, have proposed their own changes.

"Two years ago, my administration launched an investigation of the force-placed insurance industry that revealed widespread abuses of consumers by banks and mortgage companies," Governor Cuomo said in the news release. "Today we are taking a major step in righting this injustice and reforming the industry by proposing tough new regulations to protect homeowners. …

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