Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) Insurance on motor vehicles (including
motorcycles, and other vehicles licensed by the Department of Motor Vehicles),
mobile homes (registered by the Department of Housing and Community
Development), boats and aircraft is subject to the following limitations:
(1) A finance company shall not require or
solicit in a manner which may lead a prospective borrower to believe that
collision insurance is required when the amount of the annual premium is more
than one-third of the principal amount of the loan exclusive of any insurance
premium or one-third of the reasonable value of the security for the loan. A
finance company may require and sell collision insurance with a $50 or more
deductible clause, and fire, theft and/or comprehensive insurance.
(2) A finance company may sell, but not
require, property damage, public liability, uninsured motorist, towing and
labor, and medical payments insurance provided such insurance has not been
disapproved by the commissioner. The sale of such insurance must be supported
by a statement, signed by the borrower that the insurance was not a
prerequisite to obtaining the loan and that the insurance was purchased at the
option of the borrower only.
(3)
Insurance for periods of more or less than one year will ordinarily be
considered unreasonable, except that the insurance for periods of less than one
year will not be considered unreasonable if the premium is a pro-rata portion
of the annual premium.
(b) Insurance on household goods, business
equipment, and other types of tangible personal property is subject to the
following limitations:
(1) A finance company
may require and sell fire insurance.
(2) A finance company may sell, but not
require, other types of insurance such as theft, flood damage, etc., in
compliance with applicable law.
(3)
Insurance which exceeds the term of the loan shall not be required or sold,
except that a one-year term may be provided for a fractional part of a
year.
(c) Insurance on
real property is subject to the following limitations:
(1) A finance company may require title
insurance and may require and sell fire insurance, and other types of coverage
that comply with applicable law and protect against damage to the real property
securing the loan. However, before material damage insurance may be sold,
documentary proof must be obtained from any and all lenders holding any prior
encumbrances or liens that sufficient insurance does not exist. The documents
shall be maintained in the borrower's loan file.
(2) A finance company may sell, but not
require, homeowner liability insurance provided such insurance complies with
applicable law. The sale of such insurance must be supported by a statement,
signed by the borrower, to the effect that the insurance was not a prerequisite
to obtaining the loan and that the insurance was purchased at the option of the
borrower only.
(3) Insurance for
periods which extend for more than that which is customarily sold may not be
required nor sold. Where the term of the loan is less than this customary
period, however, insurance shall not exceed the term of the loan. However, a
one-year term may be provided for a fractional part of a
year.
1. Amendment
filed 12-29-83; effective thirtieth day thereafter (Register 83, No.
53).
2. Amendment of subsection (b)(3) filed 6-18-87; operative
7-18-87 (Register 87, No. 25).
3. Change without regulatory effect
amending NOTE filed 6-14-95 pursuant to section
100, title 1, California Code of
Regulations (Register 95, No. 24).
4. Amendment of subsections
(a)-(a)(2), (b)(3) and (c)(1) filed 8-4-98; operative 9-3-98 (Register 98, No.
32).
Note: Authority cited: Section
22150,
Financial Code. Reference: Sections
22150,
22311,
22312 and
22313,
Financial Code.
