Image provided by: SEIU Local 503; Salem, OR
About The Oregon public employe. (Salem, Oregon) 1981-???? | View Entire Issue (March 1, 1981)
CONSUM ER Credit insurance not a good idea Consumers who buy on the in stallment plan or borrow from loan companies or banks often find themselves paying “ hidden” credit insurance charges along with the customary interest payments. According to recent congres sional subcom m ittee hearings, these insurance charges fall heavily on young buyers who are not aware that, under the federal truth-in lending law, credit insurance is op tional. Witnesses testified that some finance companies, car dealers and banks put pressure on borrowers to buy credit life or disability in surance — the type of insurance which pays off your remaining debt if you should die or become dis abled. A blind couple, among others, told the Senate investigators that they had been led to believe that they had to take the insurance as a condition for getting a loan. Since credit life insurance is almost always sold at the same rate to borrowers regardless of age (up to 65), "a 25-year-old pays the same as a 55-year-old who is eight times more likely to benefit from it,” ac cording to James A. Hunt, a con sulting actuary from Concord, N.H. Hunt testified at hearings held by the contract a fee for credit life in surance that would repay the dealer if he dies. When he told the dealer that he didn't want the insurance, he was told, “ You don’t have any choice." Although the cost of credit life in surance does not loom large when spread over 36 payments, it is nearly always overpriced for the small policy you get. In one case, the buyer of a $15,000 mobile home was charged an additional $3,500 for credit insurance. A random survey last year show ed that one out of four finance com panies urged customers to take the insurance if they want the loan. A survey by the Federal Reserve Board among buyers of credit insurance from banks, dealers or loan com panies found that more than one out of three thought that it was either re quired or strongly recommended. Still another study found that one out of three who had insurance covering credit-card debts to stores did not know they had bought it. Hunt, former state rating director for the Massachusetts Division of Insurance, said: “ Creditors like to sell credit Insurance because they make money on the sale of in surance, and because they virtually assure themselves of no bad debts the Senate subcom m ittee on Anti- when T ru st and M o n o p o ly h ea d e d by Sen. d is a b le d .” custom ers Howard Metzenbaum (D-Ohio). With young people -applying for consumer credit in increasing numbers, and the average age of those seeking loans declining, these “ hidden insurance charges” result in windfall profits for many large creditors, Hunt said. Young consumers continue to buy the overpriced insurance, studies show, because they are poorly informed of the necessity for it. “ A young couple w ill be thinking only about their brand new .car, for example, and w ill simply sign anything the finance company asks them to sign,” Hunt said. A New Jersey resident found that the car dealer who had arranged a loan for him had simply typed into Many of the larger lenders include an insurance company within their corporate structure. More often, ac cording to Consumer Reports magazine, the bank, finance com pany or dealer acts, in effect, as an agent for an insurance company. The substantial commission for the sale of the insurance is often 25 to 30 percent of the premium, though it can run as high as 50 percent in some states. Thus, the charge for credit in surance obtained through a loan company or car dealer is often twice as much as similar coverage would cost if bought directly from an in surance company as part of a con ventional insurance policy. W ATCH THUMDERBIRD Motor Lodge 1015 South Riverside Medford, Oregon FOR RENT Short Walking Distance from Capitol Area $4 Two bedroom units, carpeting, range, refrigerator, dishwasher, disposal, drapes. Utility room. Adults. No Pets. Bus at corner. Discount $235.00. to OSEA Members Call after 5:30 p.m. 362-9885 or 364-1494 $23/night single occupancy 2 blocks off 1-5 Adjacent to OPEU RENT FROM A FELLOW STATE EMPLOYE. R yan w (Formerly Holiday Inn) 745 Commercial St. SE, Salem, 363-2451 A ll n e w m e n u — L u n c h e o n s p e c ia ls — M o n . th u r Fri. N ig h tly L o u n g e E n te rta in m e n t M o n . th ru S a t. ✓ B e a u tifu l M o te l U n its w ith a S ta te ra te a v a ila b le . L a rg e b a n q u e t f a c ilit ie s fo r d in in g or m e e tin g s . ALL OF THESE AND MORE AT OUR OTHER INNS. PIERPOINT INN — Florence, Oregon Lodging, Dining and Entertainment with a beautiful Bay View. SWEPTWING MOTEL AND RESTAURANT — Albany, Oregon Drive In or fly in. Meetings and Banquets our specialty. die or become “LOOK” TO YOUR CREDIT UNION FOR FINANCIAL NEEDS! If you’re not a MEMBER — NOW IS THE TIME TO JOIN! If you are a MEMBER — use your CREDIT UNION for all Its worth. No Cost Services Watts Line Notary Public Traveler’s Checks Consumer Information New and used R.V. and Auto Guides $5,000.00 Life Insurance on your loan $2,000.00 Term Life Insurance on your share account SAVINGS A variety of programs to choose from. LOANS For all productive purposes. ALL STATE EMPLOYEES AND THEIR FAMILIES ARE ELIGIBLE TO BE MEMBERS BEA PEPPER CATCH THAT PEPSI SPIRIT EACH MEMBER ACCOUNT INSURED TO $100,000. BY ADMINISTRATOR, NATIONAL CREDIT UNION ADMINISTRATION. FOR YOUR FINANCIAL NEEDS, CALL YOUR CREDIT UNION. C o m p le te S e r v ic e F o r Parties — Picnics — Special Events — Vending "where to call" P e p s i-C o la — D r P e p p e r B o ttlin g C o . 3011 Silverton Rd., N.E., Salem, Oregon Phone 363- 9221 STATE EMPLOYEES CREDIT UNION 1550 State Street Salem, Oregon 97308 585-7084 Outside Salem: 1-800-452-7816 Page 9
