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1.3.9 Force-Placed Automobile Insurance

When consumers do not obtain physical damage insurance on their cars, their lender may purchase force-placed insurance, which is insurance selected by the lender to cover the risk of loss to the car, but which is paid for by the consumer. Such transactions have obvious potential for abuse as the lender may purchase the insurance from the company that promises the most money or other benefits to the lender, even if the consumer is forced to pay an outrageous amount for the product—which is of little benefit to the consumer in any case. This issue is examined in NCLC’s Unfair and Deceptive Acts and Practices.27 An increasing number of finance companies use vendor single interest (VSI) policies and blanket policies rather than force-placed insurance. Issues related to these policies are discussed in Consumer Credit Regulation.28

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