In most states,  VSI insurance can be directly disclosed and fully passed on to your borrower without affecting your Annual Percentage Rate (APR). Unitas Financial Services's VSI policy covers your financial institution for damage losses that you sustain from uninsured repossessions or skip losses where your borrower and/or collateral cannot be located (along with other coverages).  By having the coverage, you are also relieved of the responsibility of tracking insurance documents on the covered collateral. Federal Truth in Lending law allows the fee to be disclosed and not impact the finance charge. Our policy is designed to follow these guidelines with the following disclosure on your loan contract:

Single Interest Insurance:  I may obtain single interest insurance from anyone I want that is acceptable to you.  If I obtain the insurance from or through you, I agree to pay $_____ for ____ months of coverage.

Regulation Z commentary specifically states that “the creditor need not ascertain whether the consumer is able to purchase the insurance from someone else”.  Federal law specifically carved out protection for the VSI product due to its average low one-time cost and the large benefits that the product brings.

Read our related blog post: The Truth about Reg Z and VSI or Blanket Single Interest

If you are disclosing the VSI premium and passing it on to the borrower, please ensure that ALL of your loan contracts, (including all indirect auto dealer contracts) have the wording shown in bold above.  We have discovered that some auto dealer contracts simply said, “VSI insurance” and not the proper disclosure which is shown above.  If you haven’t reviewed your loan contracts and dealer contracts recently, we highly recommend doing so to ensure full compliance.

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Please call your Unitas Financial Services team with any questions regarding the VSI product or how to properly pass the fee on to consumers.