Section 2502. Designation of particular insurer, agent or broker in property financing transactions and other unfair practices

(a)(1)  No  person,  firm,  or  corporation engaged in the business of financing the
  purchase of real or personal property, lending  money  on  the  security
  thereof,  or  servicing  a  mortgage  thereon, and none of its trustees,
  directors, officers, agents or other  employees,  shall  require,  as  a
  condition  precedent  to  financing any such purchase or making any such
  loan or renewing or extending any such loan or  mortgage  or  performing
  any  other  act  in  connection  therewith,  that  the  person,  firm or
  corporation for whom the transaction is undertaken negotiate any  policy
  of  insurance  or  renewal  thereof  covering  such  property  through a
  particular insurance company, agent or broker.
    (2) State  chartered  banking  institutions  and  federally  chartered
  banking  institutions shall not extend credit, lease or sell property of
  any kind, or furnish any services, or fix or vary the consideration  for
  any  of the foregoing, on the condition or requirement that the customer
  obtain insurance from such institution, its affiliate or subsidiary,  or
  a  particular  insurer,  agent  or  broker, provided, however, that this
  prohibition shall not prevent such  institution  from  engaging  in  any
  activity  described  in  this subdivision that would not violate section
  106 of the Bank Holding Company Act Amendments of 1970,  as  interpreted
  by   the  Board  of  Governors  of  the  Federal  Reserve  System.  This
  prohibition shall not prevent a state chartered banking  institution  or
  federally  chartered  banking institution from informing a customer that
  insurance is required in order to obtain a loan or credit, that loan  or
  credit  approval  is  contingent  upon  the  customer's  procurement  of
  acceptable  insurance,  or  that  insurance  is  available   from   such
  institution;   provided,  however,  that  the  state  chartered  banking
  institution or the federally chartered banking  institution  shall  also
  inform  the  customer  in  writing  that  his or her choice of insurance
  provider shall not affect the institution's credit  decision  or  credit
  terms in any way. Such disclosure shall be given prior to or at the time
  that  any  such  institution or person selling insurance on the premises
  thereof solicits the purchase of any insurance from a customer  who  has
  applied for a loan or extension of credit.
    (b)  This  section  shall  not  prevent  the  exercise of any right to
  approve or disapprove of the insurance company  selected  to  underwrite
  the insurance, except that in exercising such right, whether pursuant to
  this section or any other law, such person, firm, or corporation and its
  trustees, directors, officers, agents and employees shall not:
    (1) discriminate against an insurance company which issues a policy of
  insurance  that  is non-assessable as to any designated mortgagee or any
  secured creditor designated as a loss payee  because  of  the  insurer's
  type of organization, or
    (2) refuse to accept an insurance policy because it was not negotiated
  through a particular insurance company, agent or broker.
    (c)  No  such  person,  firm  or corporation shall, in connection with
  compliance with a covenant to insure, require that the person,  firm  or
  corporation for whom the purchase of the property is financed or to whom
  a  mortgage  loan  is  made  or who owns the property shall pay a fee or
  other charge as a condition to accepting, during the unexpired term of a
  policy then held, another policy of insurance in substitution  therefor.
  No  state  chartered  banking institution or federally chartered banking
  institution shall require a  debtor,  insurer,  or  insurance  agent  or
  broker  to  pay  a  separate  charge  in connection with the handling of
  insurance that is required in connection with a loan or other  extension
  of credit or the provision of another traditional banking product solely
  because  the insurance is being provided by an insurance agent or broker

  which is not  the  state  chartered  banking  institution  or  federally
  chartered banking institution or any subsidiary or affiliate thereof.
    (d)  Except  with  respect  to  a  flood  insurance policy or a credit
  unemployment insurance policy, group credit  life  insurance  policy,  a
  group  credit  health,  group credit accident or group credit health and
  accident policy, or similar group credit insurance covering  the  person
  of  the  insured,  when  a  customer obtains insurance and credit from a
  state chartered  banking  institution  or  federally  chartered  banking
  institution,  then  the  credit  and  insurance  transactions  shall  be
  completed through separate documents. The expense of insurance  premiums
  may  not  be  included  in  the  primary  credit transaction without the
  express written consent of the customer.
    (e) Any state chartered banking  institution  or  federally  chartered
  banking  institution  and  any  subsidiary or affiliate thereof which is
  licensed to sell insurance in this state  shall  maintain  separate  and
  distinct  books  and  records  relating  to  its insurance transactions,
  including all files relating to and reflecting consumer complaints,  and
  such  insurance  books  and  records  shall  be  made  available  to the
  superintendent for inspection upon reasonable notice.
    (f) For the purposes of  this  section,  the  terms  "state  chartered
  banking institution" and "federally chartered banking institution" shall
  have  the  same  meanings  as  set  forth  in subdivision one of section
  twelve-a of the banking law.
    * NB Effective until September 10, 2011