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News & Press: US Bribery/Kickbacks

Banks Said to Face New York Inquiry Over Home Insurance

Thursday, January 12, 2012   (0 Comments)
Posted by: Wendy Wellman
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January 12, 2012, 6:48 AM EST

(Updates with bank comments in seventh paragraph.)

Jan. 11 (Bloomberg) -- Banks and insurers are being investigated by New York’s insurance regulator over the prices charged to mortgage borrowers for home insurance, a person familiar with the matter said.

The Department of Financial Services is looking into whether homeowners were burdened with overpriced so-called force-placed insurance, said the person, who didn’t have authority to speak publicly about the matter and declined to be identified.

The insurance is issued to protect the property securing a mortgage loan when a homeowner’s original coverage lapses. The Department of Financial Services is looking into pricing practices, relationships between the companies involved and whether kickbacks are being paid, the person said.

Ron Klug, a spokesman for the Department of Financial Services, which regulates banks and insurers in New York state, declined to comment on the investigation.

The investigation was reported earlier by the Wall Street Journal.

The department, headed by Superintendent Benjamin Lawsky, has issued subpoenas or demands for information to 31 companies, including Zurich American Insurance Co., Assurant Inc. and affiliates of Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., according to the person.

Regulated Entity

Shawn Kahle, a spokeswoman for New York-based Assurant, said in an e-mailed statement that the company will cooperate with the department and that as a regulated entity it receives "requests of this nature on a routine basis.”

Citigroup complied with the requests made by the state and is working with the department, Mark Rodgers, a spokesman for the New York-based company, said in an e-mail. San Francisco- based Wells Fargo provided the requested information and is cooperating, Kathryn Ellis, a bank spokeswoman, said by e-mail.

Representatives of Charlotte, North Carolina-based Bank of America and New York-based Zurich American didn’t immediately respond to requests for comment on the investigation.

--Editors: Andrew Dunn, Glenn Holdcraft

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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