Insurance Premium Finance Exemption—Missouri Commercial Finance Disclosure Legislation

Following the lead of other states, Missouri recently introduced its own version of Commercial Finance Disclosure Law legislation. With a similar law introduced last session, how does this new legislation differ from prior bills?

Read the full article.

About the authors
Joel L. Perrell Jr.
Eryn Brasovan

Transcript

 Welcome to Womble Perspectives, where we explore a wide range of topics, from the latest legal updates to industry trends to the business of law. Our team of lawyers, professionals and occasional outside guests will take you through the most pressing issues facing businesses today and provide practical and actionable advice to help you navigate the ever changing legal landscape.

With a focus on innovation, collaboration and client service. We are committed to delivering exceptional value to our clients and to the communities we serve. And now our latest episode.

Missouri recently introduced its version of Commercial Finance Disclosure Law legislation, following the lead of other states with laws requiring consumer-like disclosures in certain commercial loans, including California, Connecticut, Florida, Georgia, New York, Virginia, and Utah. With one exception, Missouri Senate Bill 7 53 is substantially similar to a bill introduced in the Missouri Senate in the prior legislative session and its current companion bill, Missouri House Bill 2063.

This legislative session, the sponsor of Senate Bill 7 53 proposes an additional exemption from the law’s application should it be enacted. The bill includes an exemption for, among other types of loan products, commercial financing transactions that are insurance premium finance loan agreements offered or entered into by a premium finance company registered to do business in the State of Missouri. Insurance premium financing loans are short-term, secured loans that enable businesses to purchase insurance coverage. Businesses of all sizes obtain commercial, property, casualty, and liability insurance policies to mitigate operational risk and to protect their interests and those of their customers. While some businesses may choose to pay insurance premiums in full at the time of purchase, others either do not have sufficient funds to pay the premium in full upfront or prefer to finance the premium by permitting other uses of their capital. The majority of states regulate insurance premium financing transactions, including Missouri.

This additional Commercial Finance Disclosure Law exemption appears appropriate. Insurance premium finance transactions are extensively regulated by the Missouri Division of Finance and are subject to laws that mandate the disclosure of financial terms in insurance premium finance loans. Current insurance premium finance law in Missouri requires the disclosure of loan-related information in the insurance premium finance agreement itself, including the following several examples: the total amount of the premium under the insurance policies purchased; the amount of the down payment made by the insured/ borrower;  the principal balance of the loan; the amount of the interest charged by the insurance premium finance lender; the balance payable by the insured/ borrower under the loan; and the number of installment payments required, the amount of each installment payment expressed in dollars, and the due date of the installment payments. 

Nearly all disclosures contemplated under the proposed Commercial Finance Disclosure Law are required under existing Missouri law regulating insurance premium finance loans. Imposing Commercial Finance Disclosure Law standards for insurance premium finance transactions, when already required by other Missouri law, appears redundant and unnecessary. Further, application of both disclosure laws could potentially present conflicting obligations for insurance premium finance companies and inconsistent information for borrowers when comparing insurance premium finance loans.

As of the date of this episode, the following states have proposed various forms of commercial financing disclosure bills this legislative session: Kansas, New Jersey, and Pennsylvania. Bills also remain pending from carry-over sessions in New Jersey, Illinois, North Carolina, and Kansas. Commercial financing disclosure bills also have been proposed at the federal level and remain pending.

We continue to closely monitor developments in this area and remain ready to assist clients navigate these laws and legislation.

This episode has been lightly edited for audio. For the full article please follow the link in the show notes.

Thank you for listening to Womble Perspectives. If you want to learn more about the topics discussed in this episode, please visit The Show Notes, where you can find links to related resources mentioned today. The Show Notes also have more information about our attorneys who provided today's insights, including ways to reach out to them.

Don't forget to subscribe via your podcast player of choice so that you never miss an episode. Thank you again for listening.