What is the term for a bank requiring a borrower to purchase credit insurance from a specific company as a loan condition?

The term that describes a bank requiring a borrower to purchase credit insurance from a specific company as a condition of the loan is known as coercion. Coercion in this context refers to the practice of pressuring or forcing an individual to follow certain conditions that they may not have otherwise accepted. In the banking and insurance realms, this often reflects an imbalance of power where the lender dictates terms that could limit the borrower's choice and freedom.

In situations like this, borrowers may feel obligated to comply with the demand to purchase insurance from a particular provider, potentially leading to a conflict of interest where the lender may benefit financially from the arrangement. Awareness of such tactics is essential for borrowers to protect their rights and make informed decisions.

This practice raises ethical concerns related to fairness in lending, competition among insurance providers, and the overall transparency of loan conditions. In many jurisdictions, regulations exist to prevent such practices, ensuring that borrowers can choose insurance providers freely without undue pressure from lenders.