(a) A company licensed to make small loans under article 9 of the Banking Law inquired whether, in connection with a single loan having more than one obligor, the lender could require several obligors to be insured and bear the cost of such insurance, so long as a single amount was charged for the joint or multiple risk rather than a charge which is the sum of the premiums for each individual risk.

(b) Section 357-a of the Banking Law states that when a licensed lender provides credit life or credit accident and health insurance, or both, with respect to one or more borrowers, the licensee may collect from the borrower otherwise legal premiums or charges, and further states that “(o)nly one such amount may be collected in connection with any loan contract irrespective of the number of obligors and only one obligor need be insured.”

(c) The department in response adhered to its long-standing interpretation of the statute as permitting the imposition of insurance charges only in the amount necessary to cover one obligor. The department recognized that several obligors can be insured more economically on a joint rather than a several basis. However, in the department's view it has not been demonstrated that insurance of more than one obligor is necessary to protect the licensee's investment or that it adds significantly to the protection afforded by insuring one obligor. Furthermore, there is nothing in the legislative history of section 357-a which would indicate legislative sanction for insurance of more than one obligor.