A soup of subjects
May 2, 2010
By Jerry Kopel
A mélange of subjects, from the "Rule of 78" on credit insurance,
Sunrise on medical marijuana dispensaries, to ghost committees.
I really thought the "Rule of 78" had been abolished at least as to
merchants and not to banks. No so. If you look at the 35 pages of
regulations regarding credit insurance by statute presently delegated to
Insurance Commissioner Marcy Morrison to approve, delete, or amend.
If it meets her belief that it fits within the bounds of the credit
insurance language, arising from CRS 10-10-109 and 110, I believe she
could permit credit insurance sales under the Rule of 78.
"Credit insurance" means insurance to replace non-payment by the debtor
for a loan. The Rule of 78 Refund Method is a way to calculate a credit
insurance refund based on the original amount of the premium paid
When you borrow money to pay for credit insurance, the Rule of 78 gives
the creditor your money at a faster rate than an exact equal monthly
payment. And if you pay off your debt early, you do not get back an
unused portion of credit insurance you would have received if payments
had been used up at a same amount each month.
Assume you have a one year contract to buy and pay for a TV for $1000.
The creditor suggests you buy a $100 insurance policy in case you are no
longer able to make the TV payments based on your health problems
interfering with your ability to work.
Turn the money around and the first month is called "12". Working
backwards from 12 you go down to "11", then "10" until you reach "one."
Add all the numbers up and you have "78". The first month you owe 12.78
percent of $100 credit insurance debt or $15.38 just on the insurance,
not the TV acquisition. The second month is 11.78 percent or $14.19 due.
The third month is 10.78 percent or $12.82.
If the credit life insurance policy debt had been equaled out, your
payment for the first three months would have been slightly under $25.
Instead you paid $42.31 of the $100 debt. If payment on this debt had
equaled out after half the year had passed, you would only had used up
$50 instead of $73.08.
That is actually a rather large early payment. After a year, the amount
paid would have been the same total, but the creditor had use of a
larger portion of your payment early on.
According to a recent report in the Denver Post seven Insurance Division
employees have to pass yearly on 14,000 filings on insurance rates or
About two dozen states copy Colorado's approach of not having a board or
commission that approve the proposals rather than the head of the
department. The Rule of 78 does not provide consumer protection and is
listed in regulations regarding refunds under "alternative methods in
How to get a conclusion on a marijuana dispensary system that
legitimates the occupation? The system is not part of the state
constitutional references to marijuana. That should have opened the door
to CRS 24-34-104.1, Colorado's Sunrise review of new occupations.
Not just anyone will be allowed to run such a dispensary. The Dept. of
Regulatory Agencies has an experienced staff available to decide
"whether the unregulated practice of the occupation or profession
clearly harms or endangers the health, safety, or welfare of the public
and whether the potential for harm is easily recognizable and not remote
or dependent upon tenuous argument" and "whether the public can be
adequately protected by other means in a cost-effective manner."
Perhaps I missed a news story, but I don't recall when these experienced
staffers were asked to present their view on licensing this new
* * *
There has to be a special heaven for advisory committees than never were
and never will be. Such as the High Technology Scholarship Program
Advisory Committee existing in the statutes with the mandate to
establish guidelines for Higher Education to use in awarding
scholarships through the program.
The seven member board would get necessary expenses for attending
meetings. The committee never met and it made no proposals because no
members were appointed. Scholarships were to be funded by private
donations but none were ever received.
Sponsors of HB 1256 repealing the statute's language, Rep. Frank
McNulty, R-Douglas and Sen. Michael Johnston, D-Denver, might consider
asking Legal Services to review similar committees that can be removed
without having to wait ten years to do away with a shadow of a law. The
"single subject" concept is met by wiping out wisps. Even though the
committee was never created, there had to be a bill to do away with the
Rep. Randy Baumgardner, R-Grand County, and Sen. Bruce Whitehead,
D-Archuleta, carried HB 1223 to repeal the forest advisory board created
to help the Division of Forestry establish policy. The committee was
established in 2000 but stopped meeting in 2001.
Gov. Bill Ritter established his own advisory board under executive
order in 2008 which has more power to shape policy including framing
short and long term action plans for forest management. The entire cost
is under the executive branch with no funding from the legislative
(Jerry Kopel served 22 years in the Colorado House.)