Can a North Carolina consumer-finance company sell new types of credit insurance to its borrowers, including joint accident and health policies and single or dual interest motor vehicle physical damage coverage?

Plain-English summary

The AG answered two questions about insurance sales by Consumer Finance Act licensees. The first concerned credit joint accident and health insurance. The second concerned single or dual interest motor vehicle physical damage insurance sold on the same premises as the licensee's lending business.

For joint accident and health insurance, the opinion answered yes. G.S. § 53-189(a) permitted Consumer Finance Act licensees to sell credit accident and health insurance. Another statute defined joint coverage as that insurance covering two or more debtors. A licensee with the required Department of Insurance accident and health license could therefore sell the joint form, subject to Article 57's conditions.

For motor vehicle physical damage insurance, the opinion answered no unless the Commissioner of Banks authorized the sales. That category was absent from G.S. § 53-189(a)'s list. G.S. § 53-178 barred other insurance commissions unless the Consumer Finance Act or the Commissioner under G.S. § 53-172 allowed them. The Commissioner could authorize other business at the lending premises in writing after determining that it was not contrary to the borrowing public's best interests. The seller also needed an appropriate license from the Department of Insurance.

The AG rejected an argument that G.S. § 58-57-100(a) itself authorized those motor vehicle insurance sales. It imposed terms and limits on sales; the authority to sell insurance originally came from Department of Insurance licensing, while a Consumer Finance Act licensee needed the separate Banks authorization for this product at its lending premises. The opinion did not analyze a move to a separate office as an alternative to that authorization.

Currency note

This opinion applied the 1993 Consumer Finance Act and insurance licensing provisions. Check current statutes and regulator requirements before planning insurance sales today.

Background and statutory framework

G.S. § 53-189(a), as described in the opinion, listed the credit insurance categories Consumer Finance Act licensees could sell. G.S. § 53-178 limited other charges and insurance commissions, while G.S. § 53-172 restricted other business at a lending office and allowed written authorization by the Commissioner of Banks. Department of Insurance licensing under Article 33 of Chapter 58 was also required to sell insurance.

The opinion treated joint accident and health coverage as a form of a listed category. It treated single or dual interest motor vehicle physical damage insurance as a different product requiring Commissioner of Banks authorization for sales at the lending premises. Article 57 of Chapter 58 supplied conditions on the sale but did not itself grant the authority to sell.

Common questions

May a licensed consumer finance company sell joint credit accident and health insurance?

The opinion said yes if it already held the appropriate Department of Insurance accident and health license. Joint coverage fell within the credit accident and health category listed in G.S. § 53-189(a).

What approvals did the opinion require for motor vehicle physical damage insurance at a lending office?

It required Commissioner of Banks authorization under G.S. § 53-172(b) and an appropriate Department of Insurance license. The opinion said G.S. § 58-57-100(a) governed the sale's terms and did not grant selling authority by itself.

Did it approve selling the product from a separate office instead?

No. The question and answer concerned sales on consumer finance premises. The opinion did not decide whether a separate office, staff, or accounting arrangement would change the statutory analysis.

Citations

• G.S. § 53-172 (other business on consumer finance premises)
• G.S. § 53-172(b) (Commissioner of Banks' authority to permit other business)
• G.S. § 53-178 (limits on charges and insurance commissions)
• G.S. § 53-189(a) (credit insurance categories licensees may sell)
• G.S. § 58-33-1 (scope of agent-licensing Article)
• G.S. § 58-33-25(c) (license categories)
• G.S. § 58-33-25(c)(7) (automobile physical damage insurance license)
• G.S. § 58-57-5(7a) (definition of joint accident and health coverage)
• G.S. § 58-57-100(a) (single or dual interest motor vehicle physical damage insurance)
• Article 57 of Chapter 58 of the General Statutes (credit insurance)
• Session Laws 1993, Chapter 226 (Consumer Finance Act and credit insurance amendments)
• Session Laws 1993, Chapter 409, § 1.1 (license amendments)
• Session Laws 1993, Chapter 504, § 22 (license amendments)

Source

• Landing page: https://ncdoj.gov/opinions/consumer-finance-act-authority-of-act-licensees-to-sell-certain-types-of-insurance/

Original opinion text

• (1)
• Whether a licensee under the Consumer Finance Act may sell credit joint accident and health insurance, as defined in G.S. § 58-57-5(7a); and
• (2)
• Whether a licensee under the Consumer Finance Act may sell credit single or dual interest motor vehicle physical damage insurance on nonfleet private passenger motor vehicles on the same premises where the licensee makes consumer finance loans, without first having obtained authorization of the Commissioner of Banks to conduct other business on the consumer finance premises under G.S. § 53-172(b)?

We have received a copy of the letter to you from Commissioner of Insurance Jim Long, dated October 5, 1993, in which he responds to questions posed by you regarding the two types of insurance referred to above. We have also consulted with Assistant Attorney General Fran DiPasquantonio, who is this Office's resident expert in insurance matters. Mr. DiPasquantonio, in turn, consulted with several members of the staff of the Department of Insurance. The opinions set out in this letter are consistent with the information received from Commissioner Long, the Department of Insurance, and Mr. DiPasquantonio.

I. Credit Joint Accident and Health Insurance

It is our opinion that licensees under the Consumer Finance Act (the Act) have statutory authority to sell credit joint accident and health insurance. Licensees are authorized by G.S. § 53-189(a), as amended by Session Laws 1993, chapter 226, section 14, to sell, among other things, credit accident and health insurance. In order to sell such insurance, licensees under the Act must first obtain a license from the Department of Insurance to sell accident and health insurance pursuant to G.S. § 58-33-25(c). Licensees under the insurance laws who have obtained a license to sell accident and health insurance may sell credit accident and health insurance subject to the provisions of Article 57, General Statutes Chapter 58. In G.S. § 58-57-5, as amended by Session Laws 1993, chapter 226, section 2, new subsection (7a) defines "joint accident and health coverage" as, in pertinent part, "credit accident and health insurance covering two or more debtors…." Commissioner Long advises that credit joint accident and health insurance is simply another form of accident and health insurance and that "[a]ll licensees currently authorized by license issued by the Department of Insurance to sell credit accident and health insurance will be able to solicit and sell joint credit and health (disability)." (Letter of Commissioner Long to Commissioner Graham, dated October 5, 1993.) It follows, therefore, that licensees under the Act who are currently licensed to sell credit accident and health insurance will also be authorized to sell credit joint accident and health insurance.

II. Single or Dual Interest Motor Vehicle Physical Damage Insurance

The issue is whether licensees under the Consumer Finance Act may sell, on the premises where they conduct a consumer finance business, single or dual interest motor vehicle physical damage insurance on nonfleet private motor vehicles, pursuant to G.S. § 58-57-100(a), without first having obtained authorization from the Commissioner of Banks pursuant to G.S. § 53-172(b) (1992 Cumulative Supplement). It is our opinion that they may not.

The types of insurance which licensees under the Act may sell are limited to "[c]redit life, credit accident and health, credit unemployment, and credit property insurance" which "may be written in accordance with the provisions of Article 57 of Chapter 58 of the General Statutes." G.S. § 53-189(a), as amended by 1993 Session Laws, chapter 226, section 14. It is provided by G.S. § 53-178 (1992 Cumulative Supplement), inter alia, that:

No further or other charges or insurance commissions shall be directly or indirectly contracted for or received by any licensee except those specifically authorized by this Article or by the Commissioner [of Banks] under G.S. 53-172.

G.S. § 53-172 provides, in pertinent part:

(a) No licensee shall conduct the business of making loans under this Article within any office, suite, room, or place of business in which any other business is solicited or transacted…. (b) Notwithstanding subsection (a) of this section, the Commissioner [of Banks] may authorize in writing the solicitation and transaction of other business in any office, suite, room, or place of business in which a licensee is conducting the business of making loans if the Commissioner [of Banks] determines that the other business would not be contrary to the best interests of the borrowing public.

It is our opinion, therefore, that since single or dual interest motor vehicle physical damage insurance is not mentioned in G.S. § 53-189(a), and since insurance that may be sold under the Act is limited by G.S. § 53-178 to that set out in G.S. § 53-189(a) unless the sale of other insurance is authorized by the Commissioner of Banks pursuant to G.S. § 53-172(b), a licensee under the Act may not sell single or dual interest motor vehicle physical damage insurance unless so authorized by the Commissioner of Banks.

An inquiry has been made whether the provisions of G.S. § 58-57-100(a) authorize licensees under the Act to sell single or dual interest motor vehicle physical damage insurance. In our opinion, it does not. Authority to sell insurance derives, originally, from a license issued by the Department of Insurance pursuant to Article 33 of Chapter 58, which Article governs the qualifications and procedures for the licensing of agents, brokers, limited representatives, adjusters, and motor vehicle damage appraisers. This Article applies to any and all kinds of insurance and insurers under Articles 1 through 67 of this Chapter. G.S. § 58-33-1. An automobile physical damage insurance license may be obtained pursuant to G.S. § 58-33-25(c)(7), as amended by Session Laws 1993, chapter 504, section 22 and chapter 409, section 1.1.

Sales of various forms of credit insurance under a license issued by the Department of Insurance must be made under the terms, conditions, and limitations specified in Article 57 of Chapter 58. We construe the provisions of G.S. § 58-57-100, therefore, as imposing terms, conditions, and limitations on the sale of credit single or dual interest motor vehicle physical damage insurance, rather than as authorizing the sale of such insurance. Licensees under the Act who wish to sell credit single or dual interest motor vehicle physical damage insurance on the premises in which they operate their consumer finance business may do so only pursuant to authority granted by the Commissioner of Banks under G.S. § 53-172(b), not under authority of G.S. § 58-57-100; and such sales must be made under the terms, conditions, and limitations imposed by the latter statute, after the seller has obtained the appropriate license from the Department of Insurance.

We hope that this fully responds to the issues set out in your September 24 letter, but if you have any questions, please contact us.

Ann Reed Senior Deputy Attorney General

Henry T. Rosser Special Deputy Attorney General