What is it called when a bank requires a borrower to buy credit insurance from a specific company as a condition for a loan?

When a bank requires a borrower to purchase credit insurance from a specific company as a condition for obtaining a loan, this practice is known as coercion. Coercion refers to the act of compelling a person to act against their will by use of psychological pressure or threats. In the context of loans and insurance, this can manifest as the lender effectively forcing the borrower to buy insurance as a stipulation of the loan agreement, thereby limiting the borrower’s freedom to choose their insurance provider.

In Florida, such practices can raise concerns about regulatory compliance, as they may violate laws regarding consumer protection and fair lending practices. Banks are typically expected to give borrowers the option to select their insurance providers rather than mandating specific companies, allowing borrowers to find coverage that best meets their needs and personal circumstances.

The other terms listed, while related in some contexts, do not accurately capture the nuances of this specific situation. "Compulsion" suggests a forced action but does not evoke the same legal implications as coercion. "Mandatory purchasing" is not a defined legal term in this context, and "insurable interest" refers to a requirement in insurance law that a policyholder must have a legitimate interest in the insured item or person, which does not apply to the situation