Regulatory Alerts1997-10-01
Alabama Consumer Credit Act Refunds
The Alabama Department of Finance, acting under the Consumer Credit Act, mandates that creditors cancel and refund unearned insurance premiums when a debt is prepaid, renewed, or refinanced. These refunds must align with regulations set by the Commissioner of Insurance, with the specific exception that credit life insurance premiums are considered fully earned upon the borrower's death. The regulation further stipulates that no refund is required for any single insurance coverage where the amount is less than one dollar.
155-2-2-.13 Refunds – Alabama Consumer Credit Act
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When any debt is prepaid in full, renewed, or refinanced, all insurance provided by a creditor, either as seller, lessor, lender or assignee, (such as credit life, accident and health, involuntary unemployment insurance, single interest or modified single interest auto and property) shall be canceled as of the date of prepayment, renewal or refinancing with such termination to be without prejudice to any claim. Refund of unearned premiums, except the premium for credit life insurance which shall be deemed fully earned as of the date of death, shall be made at that time by the creditor to whom payments are made and shall be in accordance with the refund regulations as determined by the Commissioner of Insurance for the State of Alabama.
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No refund of less than $1.00 need be made on any single insurance coverage.
Author: Scott Corscadden, General Counsel Statutory Authority: Code of Alabama 1975, §5-19-4, §5-19-20, §5-19-21 History: Effective October 1, 1997