Tennessee

The relevant statue is the Tennessee Creditor-Placed Insurance Act, Tenn. Code Ann. 56-49-101 et seq. (TN-CPI).

A. Actions creditor may take: TN-CPI §§56-49-103(8), 56-49-111(a) - Creditor may unilaterally purchase insurance, after the date of the credit transaction, providing coverage against loss, expense or damage to the vehicle as a result of fire, theft, collision or other risks that would impair creditor's interests. This insurance must be purchased according to the terms of the agreement after a failure by creditor to insure the vehicle, with the costs of coverage being charged to buyer. It may be either single interest or limited dual-interest insurance.

B. Notices required: TN-CPI §56-49-113 - Creditor may impose insurance charges on buyer for creditor-placed insurance as long as adequate disclosures are made and reasonable efforts to notify buyer of the requirement to maintain insurance.

(1) Adequate disclosure is if the credit agreement sets forth buyer's requirement to maintain insurance;

(2) Reasonable efforts to notify are as follows:

(i) creditor mails notice to buyer by first-class mail, to buyer's last known address stating creditor's intent to charge debtor for creditor-placed insurance if buyer fails to provide evidence of coverage;

(ii) creditor must allow debtor 20 days to respond and provide evidence of insurance; and

(iii) creditor sends final notice by first-class mail to debtor's last known address at least 10 day prior to charging creditor-placed insurance to buyer. Proof of mailing the final notice must be retained for 3 years. Following termination of the insurance, the form for final notice is set forth in TN-CPI §56-49-113(d).

(3) TN-CPI §56-49-113(d): [in at least 12 point type]

“FINAL NOTICE

Your credit agreement with us requires you to have property insurance on the collateral until you pay off your loan. You have not given us proof you have insurance on the property. You can ask your insurance company or agent to give us proof of insurance or you can send us proof you have property insurance within ten (10) calendar days after the date this letter was postmarked. If you do not, we will buy the insurance and charge the cost to you.

You must pay for the property insurance we buy. It may cost more than insurance you can buy on your own. The cost of the insurance we buy may be added to your loan balance and we may charge you interest on it. If we do, you will pay interest at the same rate you pay on your loan.

The insurance we buy will pay claims to us (the creditor) for physical damage to your property. It will not pay any claims made against you (and it may not pay you for any claims you make [delete if limited dual interest coverage]). The insurance we buy will not give you any liability insurance coverage and will not meet the requirements of a state’s financial responsibility law.

We may receive compensation for placing this insurance, which is added in the cost of coverage charged to you.

The property coverage we buy will start on the date shown in the policy or certificate, which may go back to the date of the loan or the date your prior coverage stopped. We will cancel the insurance we bought for you and give you a refund or credit of unearned charges if you give us proof you have bought property insurance somewhere else or if you have paid off the loan.”

(4) TN-CPI §56-49-113(e) - All creditor-placed insurance shall be set forth in an individual policy or certificate of insurance. Not earlier than the sending of the final notice nor 15 days after a charge is made to the debtor for creditor-placed insurance coverage, the creditor shall cause a copy of the individual policy, certificate or other evidence of insurance coverage evidencing the creditor-placed insurance coverage to be sent, first class mail, to the debtor’s last known address.

C. Charges permitted: TN-CPI §56-49-113(b) - Charges may not be imposed earlier than 10 days after sending the final notice.

D. Finance charge allowed on creditor's payment: TN-CPI §56-49-113(a) - Finance charges are allowed if creditor follows the notice procedures set forth in B., above.

Click here to view relevant Tennessee Code and Regulations.