State RegulationsCO specificDifficulty 2/5
A Denver lender requires a borrower to insure the loan collateral. Which practice by the lender violates Colorado's coercion-of-debtors law?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
C.R.S. § 10-3-1105 allows a lender to require insurance as a condition of a loan, but it forbids requiring the borrower to place the coverage with a particular insurer or agent, unreasonably disapproving the policy the borrower chooses, and charging a separate handling fee for the required insurance. The handling fee is the violation here.
Why the other options are wrong
- A) Keeping the required coverage in force for the life of the loan is a lawful condition.
- C) Demanding proof that the required coverage exists is ordinary and permitted lending practice.
- D) Requiring insurance on the collateral is expressly allowed; the statute polices how the coverage is placed and charged, not whether it is required.
Memory hook
Lenders can demand coverage, but not the agency, the disapproval, or the extra fee.