As recognized in important restrictions on banks and credit unions that engage in insurance operations, it is contrary to the public interest for consumers obtaining a loan to be subject to pressure, tied selling, and, potentially, the purchase of insurance that is not in their best interest.
Following our initial discussions with the Financial and Consumer Affairs Authority (FCAA) , IBAS understood that credit-granting institutions also selling insurance would be allowed to require the borrower buy insurance, but would need to advise borrowers they are free to buy that insurance where they choose. Regulation 7-3 was then passed, however, without that protection. It states the lender must not require that insurance be purchased from the lender, although it is a hollow protection unless the borrower knows that he or she has a choice.
IBAS is calling on the Province to amend the Act regulations so that credit-granting institutions selling insurance must be required to inform the consumer he or she can seek licensed advice and purchase coverage wherever that individual chooses.