Insurer sanctioned over payday lenders’ tactics
B.C. regulatory agencies have sanctioned insurance firm Western Life Assurance for failing to effectively oversee two payday lenders that used high-pressure tactics to sell credit insurance to clients.
In a joint announcement Wednesday, the Financial Institutions Commission, also known as Ficom, and Consumer Protection B.C. issued an order barring Western Life from selling the insurance through payday lenders until it can show Ficom it has established effective oversight.
Western Life was given 10 days to contact all clients who bought insurance, properly inform them about the terms of the insurance, and offer to cancel the policies and refund premiums.
The payday lenders, Venue Financial Ltd. and CashCo Financial Inc., were also ordered to stop selling the credit-protection loans until Ficom is satisfied Western Life has effective oversight of their tactics.
“Some may view the practices identified (in the investigation) as borderline predatory,” said Chris Carter, Ficom’s deputy superintendent of financial institutions.
Carter said the regulators investigate cases to identify harm to consumers and “in this instance,
we’ve taken action to put a stop to the practices we’ve identified.”
He said that the investigation is still open, with a possibility of further enforcement, including penalties.
According to Ficom’s order, investigators found Venue and CashCo used high-pressure tactics to sell the coverage, which should have been described up front as an optional purchase, to protect their debts in the case of unemployment, injury or death.
Instead, according to Ficom’s order, employees of the payday lenders were adding the insurance to loans without disclosing it and leaving it up to clients to object, or aggressively upselling the option with scripts that included persistent rebuttals.
“Never mention (insurance) during the transaction,” one lender’s training manual read. “The key to increasing our (insurance) percentage is to bury (it) in the lower (loan) costs.”
In another point, the manual, quoted in Ficom’s order, states employees should “assume they are taking their maximum and always add on loan protection (sic) unless they don’t qualify due to age restrictions.”
Taken together, the two companies operated 20 offices in locations from Esquimalt on Vancouver Island to Dawson Creek in the northeast.
Evidence collected in the investigation shows the revenue collected selling the optional insurance was considerable.
According to Ficom’s decision, Venue took in $399,215 over the year between June 1, 2015 and May 30, 2016. CashCo was shown to have collected $191,031 between Feb. 1, 2015 and Jan. 31, 2016.