No, we do not believe you need to send an updated coupon book after force-placing collateral protection insurance for an automobile loan that will be repaid as a balloon payment at the end of the loan term.

The Collateral Protection Act provides that pursuant to the terms of a credit agreement, creditors may require borrowers to repay the costs of force-placed collateral protection insurance through: (1) full payment within thirty days after the date of notification of placement of insurance, (2) a final balloon payment within thirty days after the last scheduled payment required by the credit agreement, or (3) full amortization over the term of the credit transaction, the term of the collateral protection insurance policy, or the term for which amortization is used by the creditor.

Section 20 of the Act states that “if any form of amortization is used by the creditor and a coupon book was sent to the debtor at the inception of the credit transaction, the creditor shall send” either a reprinted or supplemental coupon book that takes the amortization into account. Since you are not amortizing the costs of collateral protection insurance, we do not believe you need to send a reprinted or supplemental coupon book.

We note that the Collateral Protection Act provides a safe harbor for mortgage servicers that force-place collateral protection insurance “in substantial compliance” with Regulation X’s requirements for force placing hazard insurance. However, this safe harbor would not apply to an automobile loan.

For resources related to our guidance, please see:

• Collateral Protection Act, 815 ILCS 180/15(b) (“The terms for repayment of the costs of the collateral protection insurance, which shall include interest and any other charges imposed by the creditor in connection with the placement of the collateral protection insurance, shall include one or more of the following:

(1) full payment within 30 days after the date of the Notice of Placement of Insurance;

(2) a final balloon payment within 30 days after the last scheduled payment required by the credit agreement; or

(3) full amortization over the term of the credit transaction, the term of the collateral protection insurance policy, or the term for which amortization is used by the creditor.”)

• Collateral Protection Act, 815 ILCS 180/20 (“If any form of amortization is used by the creditor and a coupon book was sent to the debtor at the inception of the credit transaction, the creditor shall send to the debtor either:

(1) a reprinted coupon book with revised calculations of the debtor’s payments that includes the amortized costs of the collateral protection insurance

(2) a supplemental coupon book with calculations of the debtor’s additional payments based upon the amortized costs of the collateral protection insurance, for use by the debtor in addition to the original coupon book.”)