Collateral insurance protection (CPI) is a type of insurance arrangement that requires the borrower to maintain enough insurance to protect the lender’s interest in the collateral. This usually applies to vehicle insurance. For instance, if the borrower’s insurance lapses or changes during the life of the loan, the lender may be allowed to:
- Purchase CPI and add the premiums to the initial loan balance
- Increase loan payments to cover the costs of the CPI
These types of arrangements are generally included in the initial loan agreement or documents. Consumers should be made fully aware of these types of arrangements, as they can be costly for the borrower in the long run. Note that the CPI only cover’s the lender’s ownership interest in the collateral, not the borrower’s interests.
What is Collateral Insurance Protection Fraud?
Collateral insurance protection fraud occurs when the CPI terms are forced upon the borrower, or are inserted into the loan arrangement without their knowledge. It can also involve the use of misrepresentation or deceit to place the insurance demands on the borrower. Due to this aspect of forcing the consumer to take the loan, it is often called “force-placed” insurance fraud.
In other instances, the dispute may revolve around the costs of the CPI- in many cases, the CPI can be very expensive and may actually violate various insurance and consumer fraud laws (for example, if the interest rates are excessively high).
Lastly, collateral insurance protection fraud has also involved cases where the lender has required CPI payments even when the lender has provided evidence that they don’t really require it.
Are There Any Legal Consequences of Consumer Insurance Protection Fraud?
Like other types of insurance fraud, consumer insurance protection fraud can lead to legal action. This can sometimes result in various legal consequences, such as a damages award to the victim of the fraud. This will usually cover the amounts that the consumer was required to pay in relation to the CPI. It can also cover other costs and losses associated with the insurance issues. In some cases, an insurance agent or the lender can face legal penalties as well. CPI fraud claims are also the subject of several major class action lawsuits wherein many consumers were affected by the same issue.
Should I Hire an Attorney for Assistance with a Collateral Insurance Protection Fraud Claim?
Collateral insurance protection fraud claims can be complex and may be different from case to case. You may need to hire an attorney in your area if you need any type of assistance with a collateral insurance protection claim. Your lawyer can research the laws in your area to help determine what your legal rights are, and what options you have in terms of recovery. Also, if you need to appear in court for a hearing or meeting, your attorney can represent you during those times as well.