Debt Cancellation Contracts and Debt Suspension Agreements Coverage

A

The correct answer for this question is A. National banks that issue debt cancellation contracts and debt suspension agreements with borrowers in connection with loans for personal, family, or household purposes.

The Consumer Financial Protection Bureau (CFPB) issued a rule in 2016 that provides coverage for debt cancellation contracts (DCCs) and debt suspension agreements (DSAs) under Regulation Z, which implements the Truth in Lending Act (TILA). This coverage applies to national banks that issue DCCs and DSAs with borrowers in connection with loans for personal, family, or household purposes.

Debt cancellation contracts and debt suspension agreements are two types of credit insurance that borrowers can purchase to protect themselves against defaulting on their loans due to unforeseen circumstances, such as job loss, disability, or death. DCCs cancel the remaining balance of the loan if the borrower meets certain criteria, while DSAs suspend loan payments for a certain period of time if the borrower meets certain criteria.

Under the CFPB's rule, national banks must provide consumers with both short-form and long-form disclosures when soliciting DCCs and DSAs. The short-form disclosures must be provided orally at the time the bank first solicits the contract, while the long-form disclosures must be provided in writing before the customer completes the purchase of the contract. If the solicitation occurs in person, the long-form disclosures must be provided at that time.

In addition, national banks are prohibited from engaging in any practice, including advertising, which would cause a reasonable person to be misled with respect to DCCs and DSAs. This means that banks must be clear and transparent about the terms and conditions of these products and not misrepresent their benefits or costs to consumers.

In summary, national banks that issue DCCs and DSAs with borrowers for personal, family, or household purposes are subject to coverage under Regulation Z, which requires the provision of both short-form and long-form disclosures and prohibits misleading advertising practices.