38.2-3735 - Disclosure and readability.
§ 38.2-3735. Disclosure and readability.
A. If a creditor makes available to the debtors more than one plan of creditlife insurance or more than one plan of credit accident and sicknessinsurance, all debtors must be informed of all such plans for which they areeligible. In the case of credit life insurance:
1. If a creditor offers a plan of insurance that insures the actual amount ofunpaid indebtedness, the creditor shall also offer to the debtor a plan ofinsurance that insures only the actual amount of indebtedness less anyunearned interest or finance charges; and
2. In the event that a plan of insurance that insures the actual amount ofunpaid indebtedness is offered, the creditor shall provide to each debtor adisclosure form which shall clearly disclose the difference in premiumscharged for a contract wherein the gross indebtedness is insured versus acontract wherein only the net indebtedness is insured. This disclosure shallinclude the differences between the amount financed, the monthly payment andthe total charge for each type of insurance. The form shall be signed anddated by the debtor and the agent, if any, soliciting the application or thecreditor's representative, if any, soliciting the enrollment request. A copyof this disclosure shall be given to the debtor, and a copy shall be made apart of the creditor's loan file.
Nothing contained in this subsection shall be construed to prohibit thecreditor from combining such disclosure, in order to avoid redundancy, withother forms of disclosure required under state or federal law.
B. When elective credit insurance is offered, the borrower must be givenwritten disclosure that purchase of credit insurance is not required and isnot a factor in granting credit. The disclosure shall also include noticethat the borrower has the right to use alternative coverage or to buyinsurance elsewhere.
C. If the debtor is given a contract which includes a single premium paymentto be charged for elective credit insurance, the debtor must be given:
1. A contract which does not include the elective credit insurance premium; or
2. A disclosure form which shall clearly disclose the difference in premiumscharged for a contract with credit insurance and one without creditinsurance. This disclosure shall include the difference between the amountfinanced, the monthly payment and the charge for each kind of insurance. Theform shall be signed and dated by the debtor and the agent, if any,soliciting the application or the creditor's representative, if any,soliciting the enrollment request. A copy of this disclosure shall be givento the debtor and a copy shall be made a part of the creditor's loan file.
Nothing contained in this subsection shall be construed to prohibit thecreditor from combining such disclosure, in order to avoid redundancy, withother forms of disclosure required under state or federal law.
D. If credit life insurance or credit accident and sickness insurance isrequired as security for any indebtedness, the debtor shall have the optionof (i) furnishing the required amount of insurance through existing policiesof insurance owned or controlled by him or (ii) procuring and furnishing therequired coverage through any insurer authorized to transact insurance inthis Commonwealth. The creditor shall inform the debtor of this option inwriting and shall obtain the debtor's signature acknowledging that heunderstands this option. Nothing contained in this subsection shall beconstrued to prohibit the creditor from combining such disclosure, in orderto avoid redundancy, with other forms of disclosure required under state orfederal law.
E. No contract of insurance upon a debtor paid in advance or by a singlepremium shall be made or effectuated unless, at the time of the contract, thedebtor is provided with a notice prominently disclosing his rights to arefund of premium in the event the insurance is terminated prior to itsscheduled maturity date or the insured indebtedness is terminated or paid offearly, and of the obligation of the debtor to provide notification to theinsurer under subdivision D 8 of § 38.2-3724. This notice shall be signed anddated by the debtor and the agent, if any, soliciting the application or thecreditor's representative, if any, soliciting the enrollment request. A copyof the signed notice shall be given to the debtor and a copy shall be madepart of the insurer's file.
F. Readability. - The Commission shall not approve any form unless the policyor certificate is written in nontechnical, readily understandable language,using words of common everyday usage.
A form shall be deemed acceptable under this section if the insurer certifiesthat the form achieves a Flesch Readability Score of forty or more, using theFlesch Readability Formula as set forth in Rudolf Flesch, The Art of ReadableWriting (1949, as revised 1974), and certifies compliance with the guidelinesset forth in this section.
(1992, c. 586; 1999, c. 586; 2009, c. 643; 2010, c. 211.)