Consumers pay high fees and see limited benefits from debt-protection offers that suspend credit card payments when borrowers become unemployed or disabled, government auditors say.
For every dollar that consumers spend on fees for debt protection, banks pay out only 21 cents in claims, according to a report Friday from the Government Accountability Office. The costs of the product often exceed 10 percent of borrowers’ monthly balances, the GAO said.
“A relatively small proportion of the fees consumers pay for debt protection products is returned to them in tangible financial benefits,’’ the GAO said. It said the nine top card issuers collected $2.4 billion in fees for the products in 2009, but paid out only $518 million in monetary benefits. ...
Companies have stepped up their marketing of debt protection in recent years, using recorded messages on customer-service hotlines, direct mail, e-mail, and telemarketing, the study says.
--Daniel Wagner, Associated Press, on an insurance rip-off