Tuesday, Oct. 03, 2006, 08:00 PM UPDATED 11:59 AMBy Nick Zulovich
HUNT VALLEY, Md. -- Lee & Mason of Maryland Inc. is now offering auto lenders an innovative new program called Debt Protection that is designed to help increase loan contract volume, decrease delinquencies, increase fee income and more. Debt Protection can be added as an addendum to a loan contract.
Through the program, the lender has the opportunity to waive or cancel all or some portion of the borrower's debt in certain situations such as involuntary unemployment, disability, death, voluntary leave of absence, hospitalization, call to active duty and more, explained Scott Zucco, senior vice president of Lee & Mason.
Lee & Mason said it can work with auto lenders to create both dealer programs, as well as post-sale direct-marketed programs.
"The borrower pays an upfront fee calculated as a percentage of the monthly payment," Zucco said. "The customer signs an addendum to their original loan contract. The bank is incentivized by increased dealer volume and incremental fee income.
"The risk is the borrower's, not the lender's, even though the lender will benefit from reduced delinquencies," he continued. "The cost is driven by the desired coverage levels and typically runs between 4 to 6 percent of the monthly payment. These programs are designed and customized by the lender for the dealer. Normally, optional coverage packages are created."
He went to highlight the fact that Debt Protection is not an insurance product. This means no insurance licensing is required, nor are insurance audits or examinations needed, among other benefits. However, Zucco pointed out that state regulations vary.
"A handful of states still regard Debt Protection as an insurance product, therefore limiting its viability," he said. "Dealers and lenders can Lee & Mason directly to learn more specific information."
In addition to the program helping to reduce delinquencies, increase loan volume and drive additional fee income, Zucco said another benefit is that Debt Protection offers lenders a method to differentiate themselves from their competition.
"Debt Protection programs also allow the lender to layoff all or some portion of the risk," he pointed out. "This is done in the form of a 'CLIP,' or contractual liability policy."
As for the benefits to consumers, Debt Protection can give them the assurance that in some unforeseeable circumstances their auto payments will continue to be made; they will still have transportation; and their credit ratings will remain protected, Lee & Mason reported.
According to the company, the programs can be tailored so that there are no age limitations, no partial coverage due to term or loan amount and no health questions.
"This is a win-win-win opportunity for the lender, dealer and borrower. The dealer benefits from commissions and new product options. The lender benefits from increased volume and fee income, while providing the borrower with peace-of-mind coverage against life's unforeseen events," Zucco concluded.
Lee & Mason works with Assurant Solutions, who provides full administration capabilities and contractual liability policies for debt protection programs.
For more information on Debt Protection, Lee & Mason of Maryland Inc. at (410) 785-3800, or visit .