WO2014052416A2

WO2014052416A2 - Methods and systems for default protection in a payday loan program

Info

Publication number: WO2014052416A2
Application number: PCT/US2013/061621
Authority: WO
Inventors: Kevin Smart; Tod RUBLE
Original assignee: Kevin Smart; Ruble Tod
Priority date: 2012-09-25
Filing date: 2013-09-25
Publication date: 2014-04-03
Also published as: WO2014052416A3

Abstract

A computer-implemented method for preventing default of a loan comprises providing, by an insuring entity, a debt coverage instrument to a borrower having a payday loan from a lending entity in the event the borrower is unable to make at least one payment to the lending entity for the loan; receiving, from a computer of the lending entity, a periodic payment to the insuring entity for the insured borrower; receiving, by a computer of the insuring entity, a claim where the borrower is at risk for not making at least one payment to the lending entity for the loan; and initiating, by the computer of the insuring entity, a payment on behalf of the borrower to the lending entity, wherein the borrower does not default on the loan because of the payment by the insuring entity to the lending entity.

Description

METHODS AND SYSTEMS FOR DEFAULT PROTECTION IN A PAYDAY LOAN

PROGRAM

FIELD OF THE INVENTION

[0001] This invention is generally related to the preservation of loan accounts, and more particularly auto purchases, auto title loan accounts, and rent-to-own.

BACKGROUND

[0002] "Payday" loans are typically short-term, small-dollar, unsecured loans that can help people to manage cash flow difficulties between paychecks or other regular income payments, such as Social Security payments. These loans are often used by borrowers to cover unexpected urgent expenses or to pay bills on time and avoid late fees. Borrowers of these loans promise to repay the loan from the proceeds of their next paycheck or other income payment.

[0003] Conventionally, a loan borrower must provide the lender with a check or debit authorization for the amount of the loan plus the finance charge (e.g., interest rate, fees) for the loan. The lender will agree to defer presentment of the check until the borrower's next payday, at which time either the borrower can redeem the check by paying the loan amount plus the finance charge, or the lender can cash the borrower's check. In one example of a conventional "payday" loan, a borrower can refinance a loan and extend its maturity by paying a finance charge to the lending entity and tendering a new check for the total amount of the loan plus any new finance charge.

[0004] These types of loans are considered to be among the most high-risk types of lending, in part because payday loan underwriting requirements are substantially less rigorous than what is required for other types of consumer credit. Unlike many other types of loans, lenders typically do not obtain a credit check on a potential borrower before issuing a payday loan. Rather, in order for a person to obtain a payday loan, lenders typically only require proof of a documented regular income stream, a personal checking account, and a valid personal identification. Most other extensions of consumer credit require substantially more information about the potential borrower's credit risk profile, including the potential borrower's credit score and information about the potential borrower's income, employment history, bankruptcy history, and any prior credit problems.

[0005] In a conventional payday loan, when a borrower of a payday loan suffers a risk event (e.g., death, disability, unemployment, deportation), then the borrower may default on the payday loan. Typically, the borrower has a fixed amount of time within which to repay the payday loan amount and any fees. If the borrower does not repay the loan amount and fees within this time period, the lending entity can deposit the borrower's check or use the borrower's debit authorization to withdraw the loan amount plus any fees from borrower's account. If the borrower lacks sufficient funds to cover the check or the account debit, the borrower is responsible for paying the face amount of the check or debit, any fees associated with a non-sufficient funds check or account overdraft, and any fees charged by the payday lending entity, including costs for a returned check. A lending entity also may initiate collection proceedings against the borrower to recover unpaid funds.

[0006] When a borrower defaults on a payday loan, then the lender suffers a loss of the balance of the loan plus the fee charged for the loan. This loss reduces the amount of capital that the lending entity can extend to other consumers or spend or save for other purposes. This loss could also cause the lending entity to have a higher charge-off or default rate, which could make it more expensive and, therefore more difficult, for the lending entity to obtain financing.

[0007] Default on a payday loan could have significant negative consequences for a borrower. A borrower who defaults on a payday loan may lose access to additional payday lending from the lending entity or from other lending entities for a period of time. In some cases, the default by the borrower is reported by a lending entity into a database of payday borrower performance that can be used by lending entities and other lenders to consider whether or not to extend credit to a potential borrower. Default on a payday loan could also cause a borrower to suffer a negative impact to the borrower's business reputation or other perceptions of the borrower's creditworthiness. In some jurisdictions, when a borrower has insufficient funds to repay a payday loan and defaults, the check for insufficient funds may be considered a "hot check," which may be punishable by law.

[0008] Loans for the purchase of automobiles, also referred to herein as "auto loans," are designed to help consumers buy a new or used car. Auto loans can be provided by various types of lending entities, including the auto dealer that is selling the car, an affiliate of the dealer, a bank, or a non-bank lender.

[0009] An auto loan is a loan from a lending entity to a borrower for the purposes of the borrower's purchase of a car. A lending entity can be the dealer who is selling the car (a "dealer-financed auto loan") or a third party, such as a bank. An auto loan can be provided directly by the dealer to the car purchaser, or by an affiliate of the dealer, such as a captive finance company of the dealer. An auto loan can be provided to a borrower by a third party, such as a bank or other lender. Auto loans that have been originated can be sold or assigned by the originator to other companies, servicers, administrators, or lenders.

[0010] Conventionally, auto loans are structured as installment loans which must be repaid over a fixed period of time with a set number of scheduled payments. The duration of the loan, and the number, frequency, and amount of the scheduled payments can vary.

[0011] In a conventional auto loan, when the borrower of the loan suffers a risk event

(e.g., death, disability, unemployment), then the borrower may default on the loan. If the borrower defaults on the loan, then the lender or assignee of the loan may initiate proceedings to repossess the car that is the subject of the loan, or to seize and liquidate any collateral that secures the loan.

[0012] When a borrower defaults on an auto loan, both the lender and the borrower suffer severe negative consequences. The lender can lose all of the money from the remaining balance of the loan. The borrower can receive a lower credit rating and lose possession and use of the car. It is desirable to provide a solution for reducing the loss from the default of a debtor of an auto loan.

[0013] Rent-to-own (also known as rental-purchase) is a type of legally documented transaction under which tangible property, such as furniture, consumer electronics and home appliances, is leased to a consumer (lessee) in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement. A rent-to-own transaction differs from a traditional lease in that the lessee can purchase the leased item at any time during the agreement (in a traditional lease the lessee has no such right). The rent-to-own transaction also differs from an installment sale, in that the lessee can terminate the agreement by simply returning the property (in an installment sale, the lessee has a limited time, if any, to cancel the agreement). [0014] Rent-to-own agreements are based on a weekly or monthly rental term. In the structure of this type of transaction, the lessee, at the end of each week or month, can elect either to renew the lease on a weekly or monthly basis by making renewal payments, or to terminate the agreement with no further obligation by returning the tangible property. Though not obligated to do so, the consumer can choose to continue making interval payments on the merchandise for a pre-specified period of time, at which point they would own the good outright. An alternative purchase option is commonly provisioned for, allowing the consumer to pay off the remaining balance on the agreement at any point in time in order to obtain permanent ownership. In a conventional rent-to-own arrangement, when the lessee suffers a risk event (e.g., death, disability, unemployment), then the consumer may default on the agreement. If the consumer defaults, then the lessor or assignee may initiate proceedings to repossess the property that is the subject of the arrangement.

[0015] When a lessee defaults on a rent-to-own agreement, both the lessor and the lessee suffer severe negative consequences. The lessor can incur costs of repossessing the property, opportunity costs of the property no longer producing revenue, and costs for storing the repossessed property until it is rented again. The lessee can receive a lower credit rating and lose possession and use of the property.

SUMMARY

[0016] In a conventional loan account, when a debtor, borrower, or lessee of a loan

(e.g., payday loan, auto loan, rent-to-own) suffers a risk event (e.g., death, disability, unemployment, deportation), then the borrower or lessee may default on the loan or agreement. The systems and methods described herein attempt to provide a solution that prevents default of the loan to protect the interests of the borrower and/or the lender.

[0017] In one embodiment, a computer-implemented method for preventing default of an auto loan or a payday loan comprises providing, by an insuring entity, a debt coverage instrument to a borrower having an auto loan or a payday loan from a lending entity in the event the borrower is unable to make at least one payment to the lending entity for the auto loan or payday loan; receiving, from a computer of the lending entity, a periodic payment to the insuring entity for the insured borrower; receiving, by a computer of the insuring entity, a claim where the borrower is at risk for not making at least one payment to the lending entity for the auto loan or payday loan; and initiating, by the computer of the insuring entity, a payment on behalf of the borrower to the lending entity, wherein the borrower does not default on the auto loan or payday loan because of the payment by the insuring entity to the lending entity.

[0018] In another embodiment, a computer-implemented method for preventing default of an auto loan or payday loan comprises providing, by a lending entity, an option to a borrower having an auto loan or payday loan from the lending entity for a debt coverage instrument from a first insuring entity in the event the borrower is unable to make at least one payment to the lending entity for the auto loan or payday loan; receiving, by a computer of the lending entity, a message from the borrower that the borrower is opting-out of the debt coverage instrument provided by the first insuring entity; receiving, by the computer of the lending entity, a message from the borrower indicating that the borrower obtained an alternative debt coverage instrument from a second insuring entity, wherein the second insuring entity is responsible for making a payment on behalf of the borrower to the lending entity upon the occurrence of an event where the borrower is unable to make the payment; and tracking, by the computer of the lending entity, a status of the alternative debt coverage instrument between the second insuring entity and the borrower.

[0019] In another embodiment, a computer-implemented method for administering a premium, the method comprises providing a debt coverage instrument to a creditor or administrator of an auto loan or payday loan for a participating borrower, wherein the debt coverage instrument comprises an insurance policy, debt suspension agreement, or debt cancellation agreement, and wherein the debt coverage instrument insures or relieves the auto loan or payday loan of the participating borrower against nonrepayment in the event of occurrence of a risk event subjecting the auto loan or payday loan to potential default for non- repayment; calculating, by a computer, a fee for the debt coverage instrument based upon the outstanding balance of the auto loan or payday loan; calculating, by the computer, a repayment schedule for the auto loan or payday loan, wherein the repayment schedule reflects the fee to be charged on a periodic basis to an account of the participating borrower; and maintaining, by the computer, a data structure regarding the collection of the fee.

[0020] In another embodiment, a computer program product for preventing default of an auto loan or a payday loan, the computer program product having computer-readable instructions stored on a non-transitory computer-readable medium that are executed by a processor to perform the method comprises providing, by an insuring entity, a debt coverage instrument to a borrower having an auto loan or a payday loan from a lending entity in the event the borrower is unable to make at least one payment to the lending entity for the auto loan or payday loan; receiving, from a computer of the lending entity, a periodic payment to the insuring entity for the insured borrower; receiving, by a computer of the insuring entity, a claim where the borrower is at risk for not making at least one payment to the lending entity for the auto loan or payday loan; and initiating, by the computer of the insuring entity, a payment on behalf of the borrower to the lending entity, wherein the borrower does not default on the auto loan or payday loan because of the payment by the insuring entity to the lending entity.

[0021] In another embodiment, a system for preventing default of an auto loan or a payday loan, the system comprises a first server configured to provide a debt coverage instrument to a borrower having an auto loan or a payday loan from a lending entity in the event the borrower is unable to make at least one payment to the lending entity for the auto loan or payday loan; a second server configured to receive a periodic payment to the insuring entity for the insured borrower; a third server configured to receive by a computer of the insuring entity, a claim where the borrower is at risk for not making at least one payment to the lending entity for the auto loan or payday loan; and a fourth server configured to initiate a payment on behalf of the borrower to the lending entity, wherein the borrower does not default on the auto loan or payday loan because of the payment by the insuring entity to the lending entity.

[0022] In another embodiment, a computer-implemented method for preventing default of an rent-to-own agreement comprises providing, by an insuring entity, a debt coverage instrument to a lessee having a balance due to a lessor under a rent-to-own agreement in the event the lessee is unable to make at least one payment to the lessor; receiving, from a computer of the lessor, a periodic payment to the insuring entity for the insured lessee; receiving, by a computer of the insuring entity, a claim where the lessee is at risk for not making at least one payment to the lessor; and initiating, by the computer of the insuring entity, a payment on behalf of the lessee to the lessor, wherein the lessee does not default because of the payment by the insuring entity to the lessor.

[0023] In another embodiment, a computer-implemented method for preventing default of a payment in a rent-to-own agreement comprises providing, by a lessor, an option to a lessee having a balance due to the lessor pursuant to a rent-to-own agreement for a debt coverage instrument from a first insuring entity in the event the lessee is unable to make at least one payment to the lessor; receiving, by a computer of the lessor, a message from the lessee that the lessee is opting-out of the debt coverage instrument provided by the first insuring entity; receiving, by the computer of the lessor, a message from the lessee indicating that the lessee obtained an alternative debt coverage instrument from a second insuring entity, wherein the second insuring entity is responsible for making a payment on behalf of the lessee to the lessor upon the occurrence of an event where the lessee is unable to make the payment; and tracking, by the computer of the lessor, a status of the alternative debt coverage instrument between the second insuring entity and the lessee.

[0024] In another embodiment, a computer-implemented method for administering a premium, the method comprises providing a debt coverage instrument to a creditor or administrator of a rent-to-own agreement for a participating lessee, wherein the debt coverage instrument comprises an insurance policy, debt suspension agreement, or debt cancellation agreement, and wherein the debt coverage instrument insures or relieves an outstanding balance of the participating lessee against nonrepayment in the event of occurrence of a risk event subjecting the lessee to potential default for non-repayment; calculating, by a computer, a fee for the debt coverage instrument based upon the outstanding balance; calculating, by the computer, a repayment schedule for the outstanding balance, wherein the repayment schedule reflects the fee to be charged on a periodic basis to an account of the participating lessee; and maintaining, by the computer, a data structure regarding the collection of the fee.

[0025] In another embodiment, a computer program product for preventing default of a rent-to-own agreement, the computer program product having computer-readable instructions stored on a non-transitory computer-readable medium that are executed by a processor to perform the method comprises providing, by an insuring entity, a debt coverage instrument to a lessee having a rent-to-own agreement with a lessor in the event the lessee is unable to make at least one payment to the lessor; receiving, from a computer of the lessor, a periodic payment to the insuring entity for the insured lessee; receiving, by a computer of the insuring entity, a claim where the lessee is at risk for not making at least one payment to the lessor; and initiating, by the computer of the insuring entity, a payment on behalf of the lessee to the lessor, wherein the lessee does not default on the agreement because of the payment by the insuring entity to the lessor. [0026] In another embodiment, a system for preventing default of a rent-to-own agreement, the system comprises a first server configured to provide a debt coverage instrument to a lessee having a rent-to-own agreement from a lessor in the event the lessee is unable to make at least one payment to the lessor; a second server configured to receive a periodic payment to the insuring entity for the insured lessee; a third server configured to receive by a computer of the insuring entity, a claim where the lessee is at risk for not making at least one payment to the lessor; and a fourth server configured to initiate a payment on behalf of the lessee to the lessor, wherein the lessee does not default on the agreement because of the payment by the insuring entity to the lessor.

[0027] Additional features and advantages of an embodiment will be set forth in the description which follows, and in part will be apparent from the description. The objectives and other advantages of the invention will be realized and attained by the structure particularly pointed out in the exemplary embodiments in the written description and claims hereof as well as the appended drawings.

[0028] It is to be understood that both the foregoing general description and the following detailed description are exemplary and explanatory and are intended to provide further explanation of the invention as claimed.

BRIEF DESCRIPTION OF THE DRAWINGS

[0029] The preferred embodiments of the present invention are illustrated by way of example and not limited to the following figures:

[0030] Figure 1 shows a schematic overview according to an exemplary embodiment.

[0031] Figure 2 shows a system overview according to an exemplary embodiment.

[0032] Figure 3 shows a flow chart of a process according to an exemplary embodiment.

[0033] Figure 4 shows a schematic overview according to an exemplary embodiment.

[0034] Figure 5 shows a system overview according to an exemplary embodiment.

[0035] Figure 6 shows a flow chart of a process according to an exemplary embodiment. [0036] Figure 7 shows a schematic overview according to an exemplary embodiment.

[0037] Figure 8 shows a system overview according to an exemplary embodiment.

[0038] Figure 9 shows a flow chart of a process according to an exemplary embodiment.

[0039] Figure 10 shows a schematic overview of an insuring entity according to an exemplary embodiment.

[0040] Figure 11 shows an block diagram of an exemplary insuring entity server according to an exemplary embodiment.

DETAILED DESCRIPTION

[0041] Reference will now be made in detail to the preferred embodiments, examples of which are illustrated in the accompanying drawings. The embodiments described above are intended to be exemplary. One skilled in the art recognizes that numerous alternative components and embodiments may be substituted for the particular examples described herein and still fall within the scope of the invention.

[0042] In a conventional loan account, when a debtor, borrower, or lessee of a loan

(e.g., payday loan, auto loan, rent-to-own) suffers a risk event, then the borrower may default on the loan. The systems and methods described herein attempt to provide a solution that prevents default of the loan to protect the interests of the borrower and/or the lender.

[0043] In a payday loan, when a debtor or borrower of a payday loan (e.g., an individual, a consumer) suffers a risk event (e.g., unemployment, disability, death, deportation), then the borrower may default on the loan. As a result, the lender may initiate collection proceedings against the borrower. In accordance with the methods and systems described herein, a debt coverage instrument can ensure payment (e.g., periodic payments or the entire payment) of the payday loan in the occurrence of a risk event subjecting the payday loan to default and potential non-repayment by paying an amount equal to any unpaid balance to the payday loan account. The lending entity can better manage its risk by requiring the borrower to have the debt coverage instrument with the necessary loan disclosures and modifications. The debt coverage instrument can be required as a condition of credit, and a premium or a fee can be charged to the borrower or to the lending entity, who can incorporate the calculated premium or fee in the cost of the loan (e.g., reflected as a part of the finance charge or fee amount) to the borrower. If the debt coverage instrument is required, borrowers may be allowed to opt-out of the debt coverage policy arranged by the lending entity and obtain their own coverage (or use existing coverage), which would be collaterally assigned to the lending entity. The methods and systems described herein allow for the administration of enrollment of a borrower, benefits applied to the borrower, premiums or fees applied to a lending entity or borrower, and claims made against the debt coverage instrument in the occurrence of a risk event.

[0044] Referring to FIG. 1, a schematic overview is shown according to an exemplary embodiment. A lending entity 100 lends money to a borrower 110 to be repaid on a date certain. The lending entity 100 can be a creditor, administrator, originator, owner, servicer, and/or collector of payday loans, also referred to as deferred deposit advances, cash advance loans, and check advance loans. In one embodiment, the lending entity 100 can also administer or maintain loans on behalf of a bank 120, or the lending entity 100 may be a bank itself.

[0045] The borrower 110 can be an individual or an entity, another individual or entity borrowing on behalf of the individual or entity, or a combination of the individual and the other entity (e.g., a borrower and co -signing individual or entity). The debt protection described herein can be applied to any one or all of the types of payday loans or deferred deposit advances.

[0046] In an exemplary embodiment, a payday loan is a loan where a lending entity

100 extends funds to a borrower 110 in cash or by instrument at the direction of the borrower 110, and the borrower 110 provides to the lending entity 100 a check or debit authorization for the amount of the loan plus the finance charge for the loan. The check can be currently dated or future-dated to a time prescribed by the payday lending entity. The payday lending entity 100 may agree to defer presentment of the check until the borrower's next payday (e.g., day of or around the time that the borrower receives a payment from the borrower's employer) or some other time, at which time either the borrower 110 can redeem the check by paying the loan amount plus the finance charge, or the lending entity 100 can process and settle the borrower's check. On the predetermined date (e.g., payday), the lending entity 100 can deposit the check from the borrower or initiate a request for an ACH transaction to debit an account (e.g., checking account, savings account, retirement account, social security) of the borrower 110. In one alternative, the borrower 110 can request that the lending entity 100 extend the due date for payment. Each time the lending entity 100 extends the due date, the interest rate on the loan may increase.

[0047] An insuring entity 130, such as an insurance company, can insure the borrower

110 against a risk of default on the loan from the lending entity 100. The insuring entity 140 can include one insurance provider or a combination of insurance providers. The communications with the insuring entity 130 can be handled through a broker, administrator, or other representative.

[0048] A computer is used to implement aspects of the methods and system described herein, including administration of enrollment of a borrower, applying benefits to the borrower, and calculating and collecting premiums or fees to be applied to an insuring entity or a loan account. Each of the computer-implemented methods can be performed using one or more modules on a special purpose processor-based device. For example, a computer can calculate a premium or fee for the debt coverage instrument based upon the outstanding balance of the payday loan, a state of domicile of the borrower, and/or a state of the lending institution. The computer can calculate a repayment schedule for the loan, wherein the repayment schedule reflects the premium or fee to be charged on a periodic basis to an account of the participating borrower, based upon a choice by the creditor or administrator. The computer transmits the repayment schedule for collection of payments of the premium or fee. The computer can bill on a discounted single premium basis covering the loan balance until the payday loan is repaid in full or on a periodic premium collected during specific portions of the term of the loan, including deferrals, if any. The computer can collect the premium or fee and maintain a data structure regarding the collection of the premium for insurance or fees for debt suspension or cancellation agreements through the debt coverage instrument.

[0049] Referring to FIG. 2, a system overview is shown according to an exemplary embodiment. A lending entity 200 has at least one specially-programmed computer, such as a server, that can handle the requests, maintenance, and processing of the exemplary methods described herein. It is intended that actions described herein that can be performed by the lending entity 200 can be performed by the specially-programmed computer. The lending entity 200 can process a loan request from a computer of a borrower 210 and process an application, such as an application submitted online. The lending entity 200, such as a servicer or administrator of a payday loan, can calculate a finance charge (e.g., a fixed dollar amount, an interest percentage) and/or amount for the loan and term. The lending entity 200 is configured to automatically send invoices for payment, receive and process payments, calculate a repayment schedule, enroll the borrower in an automatic periodic payment, and enroll the borrower in loan payment program with a calculated date of repayment. The computer of the lending entity 200 can calculate the amount of the loan, calculate a finance charge associated with the loan, process any messages related to the enrollment of a borrower in a debt protection plan, and process any messages related to the default or potential default of a borrower. Alternatively, as the borrower 210 makes payments toward the loan, the lending entity 200 can calculate a balance of the loan, a new periodic payment owed by the borrower 210, and a revised schedule for repayment. The lending entity 200 can also monitor non-repayment and administer claims.

[0050] An insuring entity 220, described in further detail in FIGS. 10 and 11, can offer a debt coverage instrument, which can be a policy or an agreement, to the lending entity 200 on behalf of the borrower 210. The insuring entity 220 has at least one specially- programmed computer, such as a server, that can handle the requests, maintenance, and processing of the exemplary methods described herein. It is intended that the actions described herein that can be performed by the insuring entity 220 can be performed by the specially-programmed computer. The insuring entity 220 can issue, administer, and maintain the debt coverage instrument. The insuring entity 220 can transmit a certificate of insurance to the borrower 210 once the borrower 210 is enrolled in the debt coverage instrument. The insuring entity 220 can calculate the cost of the debt coverage instrument and process payments for a premium or other payment that can cover those costs. The insuring entity 220 issues the debt coverage instrument to the lending entity 200, which sends payment for the debt coverage instrument back to the insuring entity company 220. The payment can be transmitted using electronic funds transfer or other payment mechanisms.

[0051] In one optional configuration, the borrower 210 can opt-out of the debt coverage instrument, whereby the borrower 210 chooses not to be covered by the debt coverage instrument for the loan, subjecting the borrower 210 to potential default in the event of disability, death, or other risk event (e.g., unemployment, deportation). If the borrower 210 opts-out of the debt coverage instrument, the borrower may obtain another policy directly with the insuring entity 220 or another insuring entity to insure the risk of non-repayment due to death, disability, unemployment, or deportation. The computer of the lending entity 200 or an administrator can be used to monitor the alternative coverage policy, track the payments made to maintain the policy, and track the active status of the policy.

[0052] The borrower 210 has at least one specially-programmed computer, such as a personal computer, that can make payments, monitor, and process the exemplary methods described herein. It is intended that actions described herein that can be performed by the borrower 210 can be performed by the specially-programmed computer. The specially- programmed computer of the borrower 210, the specially-programmed computer of the lending entity 200, and the specially-programmed computer of the insuring entity can communicate over a network 230, such as the internet.

[0053] An exemplary method is as follows. A debt coverage instrument (also known as a debt protection product) is provided by an insuring entity for the benefit of a borrower receiving a payday loan from a lending entity (e.g., a creditor, an administrator, a bank, or other servicer of payday loans). The insuring entity can issue, administer, and maintain the debt coverage instrument using various computer-implemented methods and systems. The lending entity (e.g., creditor or administrator) can be an independent payday lending institution or it can be a payday lending institution that is affiliated with a bank or other financial company. The lending entity can be the holder of the debt coverage instrument. The borrower can hold a certificate of insurance evidencing coverage under the debt coverage instrument.

[0054] When the borrower is at risk of default upon the occurrence of a risk event

(e.g., death, disability, unemployment, or deportation), the payday loan debt can be discharged or canceled, but the lending entity also receives a payment or payments for the outstanding balance of the loan and any applicable charges or fees. As a result, the debt coverage instrument can include a contractual liability insurance policy ("CLIP"), whereby the insuring entity agrees to reimburse the lending entity for amounts that the borrower becomes liable to pay pursuant to a contract or agreement that the borrower has with the lending entity. A debt cancellation contract CLIP is where an insuring entity agrees to reimburse the lending entity for the amount of debt that the lending entity becomes liable to cancel pursuant to a debt cancellation contract. A debt suspension agreement CLIP is where an insuring entity agrees to reimburse the lending entity for the financial cost to the lending entity if the lending entity becomes liable to suspend the debt pursuant to a debt suspension agreement. The debt coverage instrument described herein can be a debt protection product such as a CLIP, including a debt cancellation contract and/or a debt suspension agreement.

[0055] Referring to FIG. 3, a flow chart of a process is shown according to an exemplary embodiment. The exemplary process described herein can be a computer program stored on a tangible computer-readable medium and executed by a processor of a specially- programmed computer. Each step can be performed by one module, multiple modules, or multiple steps can be performed by a single module of the computer program. Along each of the steps of this exemplary embodiment, the a computer of an insuring entity can manage and maintain records, issue coverage, determine premium amounts, process claims, and initiate payments.

[0056] In 300, a lending entity can issue a payday loan to a borrower. There are various methods for the borrower to repay the loan to the lending entity. The borrower can arrange for any type of repayment of a payday loan, including by presenting a check that the lender agrees not to cash before a date certain or by authorizing the lender to debit the borrower's checking account.

[0057] In 310, an insuring entity can provide a debt coverage instrument for the borrower in the event of occurrence of a risk event, such as death, disability, unemployment, or deportation, which would subject the payday loan to potential default for non-repayment. The debt coverage instrument can preserve the lender's assets should the borrower experience the risk event that would cause the borrower to be unable to pay the loan and possibly default on the payday loan. The debt coverage instrument can be purchased or collaterally assigned to the lending entity for the benefit of the payday loan account in the amount of the payday loan. The debt coverage instrument can include a group insurance policy or a state regulated group credit insurance policy. The credit insurance policy can be a group credit life only insurance policy, a group credit life and/or disability policy, a group insurance policy, or debt cancellation agreement. Debt cancellation, though not regulated as insurance, nevertheless falls within the scope of "debt coverage." Debt cancellation involves a waiver of a right to collect the outstanding loan balance upon occurrence of a risk event, in consideration of receipt of payments similar to an insurance premium.

[0058] The debt coverage instrument can be an insurance policy, a debt cancellation agreement, or self-insurance. The debt coverage instrument insures the payday loan of the borrower against non-repayment and can relieve the borrower in the event of occurrence of a risk event, e.g., death, disability, unemployment, or deportation, otherwise subjecting the payday loan to potential default for non-repayment. The debt coverage instrument can be structured as a credit enhancement to the payday loan. The debt coverage instrument can be an insurance policy, a credit insurance policy, an individual credit insurance policy, a group credit insurance policy, or a group insurance policy. The group credit insurance policy can include a group credit life insurance policy, a group credit disability insurance policy, a group credit life and disability insurance policy, or a credit unemployment insurance master policy. A record is updated to reflect the issuance of the policy, debt cancellation agreement, or self- insurance.

[0059] In 320, the premium, fee, one-time or periodic (e.g., 14-day) payment for the borrower to pay back the payday loan can be calculated and/or adjusted, by a computer, to account for the added cost of the debt coverage instrument. Although the debt coverage instrument may add to the cost of a loan, the protection here can prevent the lending entity from losing money on loans where a risk event occurs, thereby saving money and allowing for a lower finance charge or interest rate that attempts to cover for these types of losses. In one example, the fee may be assessed as part of a borrower's enrollment in the payday loan. Alternatively, the borrower does not have a premium, fee, or monthly payment allocated to the insuring entity. Instead, the lending entity can make payments to the insuring entity on the borrower's behalf. The lending entity may adjust the finance charge for the payday loan to account for the increased cost. However, the lending entity's savings in fewer defaults may offset the need for a higher finance charge. Because the debt coverage instrument covers the outstanding balance of the loan, the debt coverage instrument has less exposure as the loan is repaid. Accordingly, the payment to the insuring entity, whether from the lending entity or the borrower, can vary depending upon the balance of the loan or may decrease as the loan is repaid. The computer system herein can automatically generate and present a bill to the borrower, whether on behalf of the insuring entity or the lending entity, for payment of the premium or fee. Additionally, the computer system is configured to receive payment from the borrower or through a borrower's financial institution and update the borrower's electronic record to reflect receipt of the payment.

[0060] There may be taxes associated with the forgiveness of a payday loan debt.

When a borrower defaults on a payday loan, the borrower may owe taxes to the government based upon the payment from the insuring entity to the lending entity on behalf of the borrower for the balance of the loan. The systems and methods described herein can account for these taxes or similar taxes that could arise by forgiving a payday loan and paying the balance for the borrower. The amount of taxes can be included in a premium or fee paid by the borrower. So calculating the premium or fee can include adjusting the premium or fee to include the cost of paying taxes on behalf of the borrower. As a result, upon the occurrence of a risk event (e.g., death, disability, unemployment, deportation), the borrower will not owe additional taxes.

[0061] The cost of the debt coverage instrument can be calculated by a computer based upon numerous factors, including the likelihood of the borrower to experience a risk event. The cost of the debt coverage instrument can also be calculated based upon the balance of the payday loan. Based upon the amount of the loan or the outstanding balance of the loan, the cost of the debt coverage instrument may be less because the exposure (i.e., amount to pay to the lending entity in the event of a risk event) of the insuring entity is lowered. The cost of the debt coverage instrument can also depend upon the number of borrowers and the amounts owed by those borrowers.

[0062] The debt coverage instrument can be provided in response to a requirement for insurance covering a balance of the payday loan, or imposed as a pre-condition to making the loan in order to protect the funding source as well as the credit of the payday lender or borrower. In one embodiment, the borrower is auto-enrolled into the debt coverage instrument when agreeing to the payday loan with the lending entity. The auto-enrollment of the borrower may also include an option for the borrower to "opt-out" and secure their own protection. The borrower can arrange separately for a policy equal to or greater than the initial amount of the payday loan and collaterally assign the payday loan until the loan obligation is satisfied. The borrower can accept a group debt coverage instrument or separately arrange, on their own, insurance coverage for the payday loan, collaterally assigning that coverage to the lender for the benefit of the payday loan account. A computer can assist in verifying that the borrower's loan continues to be covered by the collaterally assigned insurance policy throughout the life of the payday loan preventing a potential dissipation of loan assets through a lapse of the assigned policy.

[0063] In one embodiment, the borrower can choose to opt-in to a debt coverage instrument as described herein. Before, during, or after the process of obtaining a loan from a lender, the borrower may secure the debt coverage instrument from an insuring entity. The borrower may use a computer of the borrower to visit a website of the insuring entity and select a debt coverage instrument according to preferred terms. A server of the insuring entity may process the selections and enroll the borrower in the debt coverage instrument. Upon enrollment, the insuring entity may transmit a notification to the lender that the borrower has secured a debt coverage instrument for a particular loan. The lender may or may not be involved in the process of the borrower selecting the debt coverage instrument. The lender may provide the coverage option or may allow the borrower to seek the debt coverage instrument elsewhere.

[0064] Before the payday loan is required to be repaid or repayment is otherwise expected to begin, some or all of the repayment or repayments can be deferred and the payday loan can be refinanced. Even though a debt coverage instrument may affect the timing for repayment of the payday loan, a risk event can occur during the deferral period, thereby subjecting the payday loan to default and potential non-repayment. As a result, a payday loan borrower may be required to make a premium payment during the deferral period. Alternatively, a partial, initial premium, down payment, to cover the deferral period can be paid in advance or included in the amount of the payday loan.

[0065] If the borrower requests that the lender extend the date of payment for the loan, the interest rate or other finance charge may increase for the loan. Upon this "rollover," the cost of the debt coverage instrument can be recalculated. The debt coverage instrument may cover a smaller loan amount if a portion of the loan has been repaid, or the debt coverage instrument may cover a larger amount if the loan has not been repaid and the finance charge increases. At the original due date or at another time agreeable to the lender and borrower, a computer of the lender can recalculate the amount due, and the insuring entity can recalculate the cost of the debt coverage instrument. In one embodiment, a borrower that opts-out of the debt coverage instrument may be auto-enrolled when choosing to rollover the loan.

[0066] In order to obtain a loan, the borrower may be required to obtain a debt coverage instrument, but the borrower is not required to enroll in the debt coverage instrument offered by the lending entity and insuring entity. In 330, the borrower can choose to opt-out of the debt coverage instrument. In 340, the borrower can obtain coverage directly from the insuring entity, another insuring entity, or apply existing coverage. In 350, the debt coverage instrument obtained by the borrower is collaterally assigned to the lending entity. The lending entity can track and monitor the status of the debt coverage instrument obtained by the borrower. The computer of the lending entity and the computer of the insuring entity can update their records of the borrower to reflect the opt-out and alternative coverage.

[0067] The individual insurance policies can be tracked by policy number and insurer.

All insurers with collateral assignments can make policy changes impairing the collateral assignment and are directed to a unique and specific address of the insurance administrator designed to capture impairment notices to the collateral assignments made to the payday loan. The impairments can be matched by a computer against a policy number, insurer, and insured, and then reported via e-mail and/or telephone to the funding source and their recordkeeper for the purpose of curing the potential default from the participating borrower with an unpaid loan balance. Any policy changes can be automatically transmitted to an insurance administrator of the lending entity.

[0068] In 360, a risk event occurs, such as the death, disability, unemployment, deportation, illness, relocation, or unpaid leaves of absence of a borrower. When a borrower defaults on a payday loan, the borrower's credit suffers, creditors will contact the borrower asking for payment, and the borrower's wages or other income payments can even be garnished. Lenders may offer forbearance, which is a period where repayment may be suspended without any penalty. During this time, finance charges or interest may still accrue. In the event the borrower dies, becomes disabled, or becomes unemployed, the borrower may default on the repayment of the payday loan, thereby causing significant and extended financial distress on the borrower.

[0069] The debt coverage instrument will prevent the default of the payday loan due to the non-repayment by the borrower should the borrower die, become disabled, or become unemployed, be deported due to immigration status, as defined by the terms of the debt coverage instrument. The debt coverage instrument is intended to insure the borrower against default, not just the lending entity. By enrolling in a debt coverage instrument, the borrower does not default, so the borrower's credit can be preserved. In 370, when the risk event occurs, the computer of the insuring entity receives a notification of the risk event. The computer of the insuring entity will process the notification as a claim and, if validated, can transmit a payment on behalf of the borrower to the lending entity.

[0070] In 380, the payday loan debt can be cancelled and no further debt is owed.

The payday loan is forgiven and the borrower does not owe any additional payments. As described above, the borrower may also not owe any additional taxes based upon a premium that incorporates the cost of such taxes.

[0071] In 390, the payday loan is paid in a single payment or in periodic payments

(e.g., bi-weekly payments) on the borrower's behalf for the outstanding balance of the loan, which may include interest or other lending fees. The use of periodic payments may be useful when the borrower is temporarily disabled and will be able to continue payments in the future. The payments from the insuring entity to the lending entity allow the loan to be discharged and can be covered by a CLIP between the lending entity and the insuring entity. Pursuant to the CLIP, a risk underwriter or insuring entity is guaranteeing that once the payday loan is canceled, there will be funds to pay the lending entity.

[0072] There are many outstanding and existing payday loans. The methods and systems described herein can be made retroactive for some of those outstanding loans. A change in the contract for these payday loans may not be allowed without some consideration.

[0073] The repayment of a payday loan has different considerations than other types of loans. For example, a mortgage is a loan secured by real property (i.e., the borrower's land), and a personal loan may be secured by personal property (e.g., bonds, jewelry, or other valuables). But a payday loan is not secured by any collateral. The repayment of loans, such as mortgages and personal loans, account for this collateral, and may even require a certain down payment to secure the loan. The loan to value ratio can affect the interest rate and who may qualify for the loans. In contrast, payday loans require no collateral, no down payment, and there are relatively few requirements for who may qualify for a payday loan.

[0074] Further, some mechanisms (e.g., private mortgage insurance) may allow for a borrower to finance or borrow a higher amount on a mortgage by paying an additional fee or higher interest rate, but these mechanisms are triggered by the amount of debt-to-equity on a loan for a purchase of real property. When a lender has an added risk in a high loan-to-value mortgage, the lender has some protection in the event of a default by the higher risk borrower. A private mortgage insurance will allow the borrower to obtain a mortgage with a lower down payment, and if the borrower defaults, the lender may have some protection, but the borrower does not. The debt coverage instrument described herein can be used to prevent a default on a payday loan by protecting the lender and the borrower in the occurrence of a risk event that may subject the loan to a possible default. [0075] In one embodiment, a computer-implemented method for preventing default of a payday loan comprises providing, by an insuring entity, a debt coverage instrument to a borrower having a payday loan from a lending entity in the event the borrower is unable to make at least one payment to the lending entity for the payday loan; receiving, from a computer of the lending entity, a periodic payment to the insuring entity for the insured borrower; receiving, by a computer of the insuring entity, a claim where the borrower is at risk for not making at least one payment to the lending entity for the payday loan; and initiating, by the computer of the insuring entity, a payment on behalf of the borrower to the lending entity, wherein the borrower does not default on the payday loan because of the payment by the insuring entity to the lending entity. The lending entity can calculate an interest rate or lending fee for the at least one payment to the lending entity for the payday loan, and can adjust the interest rate or lending fee of the at least one payment to the lending entity in view of the debt coverage instrument. The event may be the death, disability, unemployment, deportation of the borrower.

[0076] In another embodiment, a computer-implemented method for preventing default of a payday loan comprises providing, by a lending entity, an option to a borrower having a payday loan from the lending entity for a debt coverage instrument from a first insuring entity in the event the borrower is unable to make at least one payment to the lending entity for the payday loan; receiving, by a computer of the lending entity, a message from the borrower that the borrower is opting-out of the debt coverage instrument provided by the first insuring entity; receiving, by the computer of the lending entity, a message from the borrower indicating that the borrower obtained an alternative debt coverage instrument from a second insuring entity, wherein the second insuring entity is responsible for making a payment on behalf of the borrower to the lending entity upon the occurrence of an event where the borrower is unable to make the payment; and tracking, by the computer of the lending entity, a status of the alternative debt coverage instrument between the second insuring entity and the borrower. The lending entity can calculate an interest rate or lending fee for the at least one payment to the lending entity for the payday loan, and can adjust the interest rate or lending fee of the at least one payment to the lending entity in view of the debt coverage instrument. The event may be the death, disability, unemployment, or deportation of the borrower. The second insuring entity can receive a payment from the borrower for the debt coverage instrument. Tracking by the lending entity can include monitoring a payment from the borrower to the second insuring entity for the debt coverage instrument or receiving a confirmation that the debt coverage instrument is still active.

[0077] In yet another embodiment, a computer-implemented method for administering a premium comprises providing a debt coverage instrument to a creditor or administrator of a payday loan for a participating borrower, wherein the debt coverage instrument comprises an insurance policy, debt suspension agreement, or debt cancellation agreement, and wherein the debt coverage instrument insures or relieves the payday loan of the participating borrower against non-repayment in the event of occurrence of a risk event subjecting the payday loan to potential default for non-repayment; calculating, by a computer, a fee for the debt coverage instrument based upon the outstanding balance of the payday loan; calculating, by the computer, a repayment schedule for the loan, wherein the repayment schedule reflects the fee to be charged on a periodic basis to an account of the participating borrower; and maintaining, by the computer, a data structure regarding the collection of the fee. The process can further include billing, by a computer, on a discounted single premium basis covering the loan balance until the payday loan is repaid in full. An asset represented by the policy can preserved for the benefit of shareholders funding the payday loan, in the event of the risk event subjecting the payday loan to default and potential non-repayment. The debt coverage instrument can be structured as a credit enhancement to the payday loans. The debt coverage instrument can be an insurance policy, a credit insurance policy, an individual credit insurance policy, a group credit insurance policy, a group credit life insurance policy, a group credit disability insurance policy, a group credit life and disability insurance policy, a credit unemployment insurance master policy, a credit life insurance policy, or a credit life and disability insurance policy. The debt coverage instrument can be provided in response to a requirement for life insurance covering a balance of the payday loan, imposed as a pre-condition to making the payday loan in order to protect the funding source. Upon occurrence of the risk event, the debt coverage instrument can ensure payment, of an amount equal to any unpaid payday loan balance, to the payday loan account. A certificate of insurance can be issued that evidences coverage under the debt coverage instrument. The participating borrower may be permitted to arrange separately for a policy equal to or greater than the initial amount of the loan and collaterally assigned to the payday loan plan until the loan obligation is satisfied, and a computer may be used to verify that the borrower's payday loan continues to be covered by the collaterally assigned life insurance policy throughout the life of the loan preventing a potential dissipation of loan assets through a lapse of the assigned policy.

[0078] In a conventional auto loan, when a debtor or borrower of an auto loan suffers a risk event (e.g., unemployment, disability, death), then the borrower may default on the loan. As a result, the lending entity may lose all of the money from the remaining balance of the loan and the borrower may suffer a lower credit rating and lose possession and use of the car. In accordance with the methods and systems described herein, a debt coverage instrument can ensure payment (e.g., periodic payments or the entire payment) of the auto loan in the occurrence of a risk event subjecting the auto loan to default and potential non- repayment by paying an amount equal to any unpaid auto loan balance to the auto loan account. The lending entity can better fulfill its fiduciary role to its owners and/or shareholders by requiring the borrower to have the debt coverage instrument with the necessary loan disclosures and modifications. The debt coverage instrument can be required as a condition of credit, and a premium or a fee can be charged to the borrower or to the lending entity, who can incorporate the calculated premium or fee in the cost of the loan (e.g., reflected as a part of the annual percentage rate) to the borrower. If the debt coverage instrument is required, borrowers may be allowed to opt-out of the policy arranged by the lending entity and obtain their own coverage (or use existing coverage), which would be collaterally assigned to the lending entity. The methods and systems described herein allow for the administration of enrollment of a borrower, benefits applied to the borrower, premiums or fees applied to the lending entity or borrower, and claims made against the debt coverage instrument in the occurrence of a risk event.

[0079] Referring to FIG. 4, a schematic overview is shown according to an exemplary embodiment. A lending entity 400 lends money to a borrower 410 for the purposes of paying for the purchase of a car. The lending entity 400 can be a creditor, administrator, originator, owner, servicer, and/or collector of auto loans. The lending entity 400 can be an auto dealer, a bank, or a non-bank lender. The lending entity 400 can also administer or maintain loans on behalf of the auto dealer 420, a bank 430, or a non-bank lender 440.

[0080] The borrower 410 can be a consumer, another entity borrowing on behalf of the consumer, or a combination of the consumer and the other entity (e.g., a consumer and a co-signer). The borrower 410 can get a loan from an auto dealer 420, from a bank 430, or from a non-bank lender 440. The debt protection described herein can be applied to any one or all of the types of dealer-financed or third party (e.g., bank or non-bank lender) financed auto loans.

[0081] The lending entity 400 can be the dealer or a captive finance company or other affiliate of the dealer. A dealer can sell or assign a dealer-financed loan to a third party, who can be a financial institution, a servicer, an affiliate of the dealer or another entity or individual. The lending entity 400 can be a bank or other financial company. The lending entity can disperse the funds to the borrower directly or to the dealer/seller of the car. The bank can sell or assign the loan to a third party, who can be a financial institution, a servicer, an affiliate of the dealer or another entity or individual.

[0082] Various loan repayment methods can be available. Typically, an auto loan is structured as an installment loan from the dealer to the consumer/borrower. An installment loan must be repaid over a fixed period of time with a set number of scheduled payments.

[0083] An insuring entity 450, such as an insurance company, can insure the borrower

410 against a risk of default on the loan from the lending entity 400. The insuring entity 450 can include one insurance provider or a combination of insurance providers. The communications with the insuring entity 450 can be handled through a broker, administrator, or other representative.

[0084] A computer is used to implement aspects of the methods and system described herein, including administration of enrollment of a borrower (e.g., participating consumer or other debtor), applying benefits to the borrower, and calculating and collecting premiums or fees to be applied to an insuring entity or a loan account. Each of the computer-implemented methods can be performed using one or more modules on a special purpose processor-based device. For example, a computer can calculate a premium or fee for the debt coverage instrument based upon the outstanding balance of the auto loan, a state of domicile of the participating borrower, and/or a state of the auto dealer. The computer can calculate a repayment schedule for the loan, wherein the repayment schedule reflects the premium or fee to be charged on a periodic basis to an account of the participating borrower, based upon a choice by the creditor or administrator. The computer transmits the repayment schedule for collection of payments of the premium or fee. The computer can bill on a discounted single premium basis covering the loan balance until the auto loan is repaid in full or on a periodic premium collected during specific portions of the term of the loan, including deferrals, if any. The computer can collect the premium or fee and maintain a data structure regarding the collection of the premium for insurance or fees for debt suspension or cancellation agreements through the debt coverage instrument.

[0085] Referring to FIG. 5, a system overview is shown according to an exemplary embodiment. A lending entity 500 has at least one specially-programmed computer, such as a server, that can handle the requests, maintenance, and processing of the exemplary methods described herein. It is intended that actions described herein that can be performed by the lending entity 500 can be performed by the specially-programmed computer. The lending entity 500 can process a loan request from a borrower 510 and process an application, such as an application submitted online. The lending entity 500, such as a servicer or administrator of an auto loan, can calculate an interest percentage and/or amount for the loan and term. The lending entity 500 is configured to automatically send invoices for payment, receive and process payments, calculate a repayment schedule, and enroll the borrower in an automatic periodic payment. As the borrower 510 makes payments toward the loan, the lending entity 500 can calculate a balance of the loan, a new periodic payment owed by the borrower 510, and a revised schedule for repayment. The lending entity 500 can also monitor non- repayment and administer claims.

[0086] An insuring entity 520, described in further detail in FIGS. 10 and 11, can offer a debt coverage instrument, which can be a policy or an agreement, to the lending entity 500 on behalf of the borrower 510. The insuring entity 520 has at least one specially- programmed computer, such as a server, that can handle the requests, maintenance, and processing of the exemplary methods described herein. It is intended that the actions described herein that can be performed by the insuring entity 520 can be performed by the specially-programmed computer. The insuring entity 520 can issue, administer, and maintain the debt coverage instrument. The insuring entity 520 can transmit a certificate of insurance to the borrower 510 once the borrower 510 is enrolled in the debt coverage instrument. The insuring entity 520 can calculate the cost of the debt coverage instrument and process payments for a premium or other payment that can cover those costs. The insuring entity 520 issues the debt coverage instrument to the lending entity 500, which sends payment for the debt coverage instrument back to the insuring entity company 520. The payment can be transmitted using electronic funds transfer or other payment mechanisms known in the art. [0087] In one optional configuration, the borrower 510 can opt-out of the debt coverage instrument, whereby the borrower 510 chooses not to be covered by the debt coverage instrument for the loan, subjecting the borrower 510 to default in the event of disability or death. If the borrower 510 opts-out of the debt coverage instrument, the borrower may obtain another policy directly with the insuring entity 520 or another insuring entity to insure the risk of non-repayment due to death or disability. The lending entity 500 or an administrator can monitor the alternative coverage policy, track the payments made to maintain the policy, and track the active status of the policy.

[0088] The borrower 510 has at least one specially-programmed computer, such as a personal computer, that can handle the payments, monitoring, and processing of the exemplary methods described herein. It is intended that actions described herein that can be performed by the borrower 510 can be performed by the specially-programmed computer. The specially-programmed computer of the borrower 510, the specially-programmed computer of the lending entity 500, and the specially-programmed computer of the insuring entity can communicate over a network 530, such as the internet.

[0089] An exemplary method is as follows. A debt coverage instrument (also known as a debt protection product) is provided by an insuring entity for the benefit of a borrower (e.g., a consumer) taking an auto loan from a lending entity (e.g., a creditor, an administrator, or a servicer of auto loans). The auto loan can represent a personal obligation of the participating consumer. The insuring entity can issue, administer, and maintain the debt coverage instrument using various computer-implemented methods and systems. The lending entity (e.g., creditor or administrator) can be an auto dealer, a bank, or a non-bank lender. The lending entity can be the holder of the debt coverage instrument. The borrower (e.g., consumer) can hold a certificate of insurance evidencing coverage under the debt coverage instrument.

[0090] When the borrower is at risk of default upon the occurrence of a risk event

(e.g., death or disability), the auto loan debt can be discharged or canceled, but the lending entity also receives a payment or payments for the outstanding balance of the loan. As a result, the debt coverage instrument can include a contractual liability insurance policy ("CLIP"), whereby the insuring entity agrees to reimburse the lending entity for amounts that the borrower becomes liable to pay pursuant to a contract or agreement that the borrower has with the lending entity. A debt cancellation contract CLIP is where an insuring entity agrees to reimburse the lending entity for the amount of debt that the lending entity becomes liable to cancel pursuant to a debt cancellation contract. A debt suspension agreement CLIP is where an insuring entity agrees to reimburse the lending entity for the financial cost to the lending entity if the lending entity becomes liable to suspend the debt pursuant to a debt suspension agreement. The debt coverage instrument described herein can be a debt protection product such as a CLIP, including a debt cancellation contract and/or a debt suspension agreement.

[0091] Referring to FIG. 6, a flow chart of a process is shown according to an exemplary embodiment. The exemplary process described herein can be a computer program stored on a tangible computer-readable medium and executed by a processor of a specially- programmed computer. Each step can be performed by one module, multiple modules, or multiple steps can be performed by a single module of the computer program. Along each of the steps of this exemplary embodiment, the a computer of an insuring entity can manage and maintain records, issue coverage, determine premium amounts, process claims, and initiate payments.

[0092] In 600, a lending entity can issue an auto loan to a borrower. There are various methods for the borrower to repay the loan to the lending entity. The borrower can arrange to repay the loan over a fixed period of time with a set number of scheduled payments. The period of the loan can be of a variable length subject to the agreement of the lending entity and the borrower. The number, frequency, and amount of scheduled payments can also be variable subject to the agreement of the lending entity and the borrower.

[0093] In 610, an insuring entity can provide a debt coverage instrument for the borrower in the event of occurrence of a risk event subjecting the auto loan to potential default for non-repayment, thereby preserving the borrower's credit should the borrower experience an event that would subject the borrower to default of the auto loan. The debt coverage instrument can be purchased or collaterally assigned to the lending entity for the benefit of the auto loan account in the amount of the auto loan. The debt coverage instrument can include a group insurance policy or a state regulated group credit insurance policy. The credit insurance policy can be a group credit life only insurance policy, a group credit life and/or disability policy, a group insurance policy, or debt cancellation agreement. Debt cancellation, though not regulated as insurance, nevertheless falls within the scope of "debt coverage." Debt cancellation involves a waiver of a right to collect the outstanding loan balance upon occurrence of a risk event, in consideration of receipt of payments similar to an insurance premium.

[0094] The debt coverage instrument can be an insurance policy, a debt cancellation agreement, or self-insurance. The debt coverage instrument insures the auto loan of the participating borrower against non-repayment and can relieve the borrower in the event of occurrence of a risk event, e.g., death or disability, otherwise, subjecting the auto loan to potential default for non-repayment. The debt coverage instrument can be structured as a credit enhancement to the auto loan. The debt coverage instrument can be an insurance policy, a credit insurance policy, an individual credit insurance policy, a group credit insurance policy, or a group insurance policy. The group credit insurance policy can include a group credit life insurance policy, a group credit disability insurance policy, a group credit life and disability insurance policy, or a credit unemployment insurance master policy. A record is updated to reflect the issuance of the policy, debt cancellation agreement, or self- insurance.

[0095] In 620, the premium, fee, or periodic (e.g., monthly) payment for the borrower to pay back the auto loan can be adjusted to account for the added cost of the debt coverage instrument. Although the debt coverage instrument may add to the cost of a loan, the protection here prevents the lending entity from losing money on loans where a risk event occurs, thereby saving money and allowing for a lower interest rate that attempts to cover for these types of losses. In one example, the fee may be assessed as part of a borrower's automatic enrollment in the auto loan. Alternatively, the borrower does not have a premium, fee, or monthly payment allocated to the insuring entity. Instead, the lending entity can make payments to the insuring entity on the borrower's behalf. The lending entity may adjust the interest rate of the auto loan to account for the increased cost. However, the lending entity's savings in fewer defaults may offset the need for a higher interest rate. Because the debt coverage instrument covers the outstanding balance of the loan, the debt coverage instrument has less exposure as the loan is repaid. Accordingly, the payment to the insuring entity, whether from the lending entity or the borrower, can decrease as the loan is repaid. The computer system herein can automatically generate and present a bill to the borrower, whether on behalf of the insuring entity or the lending entity, for payment of the premium or fee. Additionally, the computer system is configured to receive payment from the borrower or through a borrower's financial institution and update the borrower's record to reflect receipt of the payment.

[0096] There may be taxes associated with the forgiveness of an auto loan debt.

When a borrower defaults on an auto loan, the borrower may owe taxes to the government based upon the payment from the insuring entity to the lending entity on behalf of the borrower for the balance of the loan. The systems and methods described herein can account for these taxes or similar taxes that could arise by forgiving an auto loan and paying the balance for the borrower. The amount of taxes can be included in a premium or fee paid by the borrower. So calculating the premium or fee can include adjusting the premium or fee to include the cost of paying taxes on behalf of the borrower. As a result, upon the occurrence of a risk event (e.g., death or disability), the borrower will not owe additional taxes.

[0097] The cost of the debt coverage instrument can be calculated by a computer based upon numerous factors, including the likelihood of the borrower to experience a risk event. The cost of the debt coverage instrument can also be based upon the balance of the auto loan. As the borrower pays down the auto loan, the cost of the debt coverage instrument is less because the exposure (i.e., amount to pay to the lending entity in the event of a risk event) of the insuring entity is lowered. The cost of the debt coverage instrument can also depend upon the number of borrowers and the amounts owed by those borrowers.

[0098] The debt coverage instrument can be provided in response to a requirement for life insurance covering a balance of the auto loan, imposed as a pre-condition to making the loan in order to protect the funding source as well as the credit of the borrower. The participating consumer/borrower (or other debtor on the consumer's behalf) can secure life insurance as an offer of a preselected group insurance policy through the funding source for participation in coverage under the policy by the participating consumer/borrower. In one embodiment, the borrower is automatically enrolled into the debt coverage instrument when agreeing to the auto loan provisions with the lending entity. The automatic enrollment of the borrower may also include an option for the borrower to "opt-out" and secure his own protection. The participating consumer/borrower (or other debtor on the consumer's behalf) can arrange separately for a policy equal to or greater than the initial amount of the auto loan and collaterally assign the auto loan until the loan obligation is satisfied. The participating borrower can accept a group debt coverage instrument or separately arrange, on his own, insurance coverage for the auto loan, collaterally assigning that coverage to the lender for the benefit of the auto loan account. A computer can assist in verifying that the participating borrower's loan continues to be covered by the collaterally assigned life insurance policy throughout the life of the auto loan preventing a potential dissipation of loan assets through a lapse of the assigned policy.

[0099] In one embodiment, the repayments due under an auto loan can be deferred.

Even though a debt coverage instrument may affect the repayment of the auto loan, a risk event can occur during the deferral period, thereby subjecting the auto loan to default and potential non-repayment. A borrower may be required to make a premium payment during the deferral period. Alternatively, a partial, initial premium, or down payment, to cover a deferral period can be paid in advance or included in the amount of the auto loan.

[00100] In another embodiment, the system and methods described herein can be implemented for a car title loan. This is a type of loan in which a borrower posts the title to a car as the collateral for a loan. Conventionally, the amount of a car title loan is less than the market value of the car that is posted as collateral for the loan. The length, interest rate, and other terms of a car title loan can vary. In the event of a default of a car title loan, the lending entity can execute on the collateral by taking possession of the car. The lending entity can also take other measures to ensure repayment of the balance of a car title loan. A borrower can obtain a debt coverage instrument to prevent default on the car title loan and thereby prevent the repossession of the car whose title has been posted as collateral for the loan.

[00101] In order to obtain a loan, the borrower may be required to obtain a debt coverage instrument, but the borrower is not required to enroll in the debt coverage instrument offered by the lending entity and insuring entity. In 630, the borrower can choose to opt-out of the debt coverage instrument. In 640, the borrower can obtain coverage directly from the insuring entity, another insuring entity, or apply existing coverage. In 650, the debt coverage instrument obtained by the borrower is collaterally assigned to the lending entity. The lending entity can track and monitor the status of the debt coverage instrument obtained by the borrower.

[00102] The individual life insurance policies can be tracked by policy number and insurer. All insurers with collateral assignments can make policy changes impairing the collateral assignment and are directed to a unique and specific address of the insurance administrator designed to capture impairment notices to the collateral assignments made to the auto loan. The impairments can be matched by a computer against a policy number, insurer, and insured, and then reported via e-mail and/or telephone to the funding source and their recordkeeper for the purpose of curing the potential default from the participating borrower with an unpaid loan balance. Any policy changes can be automatically transmitted to an insurance administrator of the lending entity.

[00103] In 660, a risk event occurs, such as the death, disability, unemployment, illness, relocation, deportation, or unpaid leaves of absence of a borrower. When a borrower defaults on an auto loan, the borrower's credit score suffers, creditors will contact the borrower asking for payment, the borrower's wages can be garnished, and the car at issue can even be repossessed. The lender may offer forbearance, which is a period where repayment may be suspended without any penalty. During this time, interest may still accrue. In the event the borrower dies, becomes disabled, or becomes unemployed, the borrower may default on the repayment of the auto loan, thereby causing significant and extended financial distress on the borrower and on the lending entity.

[00104] The debt coverage instrument will prevent the default of the auto loan due to the non-repayment by the borrower should the borrower die, become disabled, or become unemployed, as defined by the terms of the debt coverage instrument. The debt coverage instrument is intended to insure the borrower against default, not just the lending entity. By enrolling in a debt coverage instrument, the borrower does not default, so the borrower's credit rating can be preserved. In 670, the auto loan debt can be cancelled and no further debt is owed. The auto loan is forgiven and the borrower does not owe any additional payments. As described above, the borrower may also not owe any additional taxes based upon a premium that incorporates the cost of such taxes.

[00105] In 680, the auto loan is paid in a single payment or in periodic payments (e.g., monthly payments) on the borrower's behalf for the outstanding balance of the loan, which may include interest. The use of periodic payments may be useful when the borrower is temporarily disabled and will be able to continue payments in the future. The payments from the insuring entity to the lending entity allow the loan to be discharged and can be covered by a CLIP between the lending entity and the insuring entity. Pursuant to the CLIP, a risk underwriter or insuring entity is guaranteeing that once the auto loan is canceled, there will be funds to pay the lending entity.

[00106] The administration of a debt coverage instrument is described in U.S. Patent

No. 7,716,073, entitled "Methods for Administering Claims in a Pension Insurance Program," filed April 15, 2003, U.S. Patent No. 7,752,062, entitled "Pension Insurance Program Methods and Systems," filed April 15, 2003, U.S. Patent No. 7,848,939, entitled "Pension Insurance Methods and Systems, filed April 15, 2003, and U.S. Patent No. 7,912,738, entitled "Methods for Administering Loan Premiums in a Pension Insurance Program," filed April 15, 2003, all of which are incorporated by reference in their entirety.

[00107] There are many outstanding auto loans. The methods and systems described herein can be made retroactive for some of those outstanding loans. A change in the contract for these auto loans may not be allowed without some consideration. As a result, the lending entity may, as a creditor, lower the interest rate. Alternatively, the lending entity can take less in interest and apply those funds for coverage.

[00108] When a lessee defaults on a rent-to-own agreement, both the lessor and the lessee suffer severe negative consequences. The lessor can incur costs of repossessing the property, opportunity costs of the property no longer producing revenue, and costs for storing the repossessed property until it is rented again. The lessee can receive a lower credit rating and lose possession and use of the property. In accordance with the methods and systems described herein, a debt coverage instrument can ensure payment (e.g., periodic payments or the entire payment) of pursuant to the agreement in the occurrence of a risk event subjecting the lessee to default and potential non-repayment by paying an amount equal to any unpaid balance to the agreement. The lessor can better fulfill its fiduciary role to its owners and/or shareholders by requiring the lessee to have the debt coverage instrument with the necessary disclosures and modifications. The debt coverage instrument can be required as a condition of credit, and a premium or a fee can be charged to the lessee or to the lessor, who can incorporate the calculated premium or fee in the payment (e.g., reflected as a part of the annual percentage rate) to the lessee. If the debt coverage instrument is required, lessees may be allowed to opt-out of the policy arranged by the lending entity and obtain their own coverage (or use existing coverage), which would be collaterally assigned to the lessor. The methods and systems described herein allow for the administration of enrollment of a lessee, benefits applied to the lessee, premiums or fees applied to the lessor or lessee, and claims made against the debt coverage instrument in the occurrence of a risk event.

[00109] Referring to FIG. 7, a schematic overview is shown according to an exemplary embodiment. A lessor 700 enters into a rent-to-own agreement with a lessee 710 for the purposes of making payments for possessing certain property (e.g., products or services), with an option to later purchase that property. The property may include real property, furniture, consumer electronics, home appliances, or other products or services. The lessor 700 can be a merchant, vendor, rental agency, real estate developer, real estate agent, distributor, creditor, administrator, originator, owner, servicer, and/or collector of rent- to-own agreements. The lessor 700 can also administer or maintain loans on behalf of one of these entities.

[00110] The lessee 710 can be a consumer, another entity borrowing on behalf of the consumer, or a combination of the consumer and the other entity (e.g., a consumer and a cosigner). The lessee 710 can enter into a rent-to-own agreement with the lessor 700, a bank 720, or from a non-bank lender 730. The relationship between the bank 720 or the non-bank lender 730 and the lessee 710 may be conducted through the lessor 700. The debt protection described herein can be applied to any one or all of the types of a merchant-financed or third party (e.g., bank or non-bank lender) financed agreements.

[00111] The lessor 700 can be the merchant or a captive finance company or other affiliate of the merchant. A merchant can sell or assign a merchant-financed loan to a third party, who can be a financial institution, a servicer, an affiliate of the dealer or another entity or individual. The lessor 700 can be a bank or other financial company. The lessor can disperse the funds to the lessee directly or to the merchant/seller of the property. The bank can sell or assign the loan to a third party, who can be a financial institution, a servicer, an affiliate of the merchant or another entity or individual.

[00112] Various repayment methods can be available. Typically, the payments are structured like an installment loan from the lessor to the consumer/lessee. An installment loan must be repaid over a fixed period of time with a set number of scheduled payments. For a fixed period of time (e.g., one to three years), the lessee 710 makes periodic payments to the lessor 700 for a predetermined amount. Each payment has a portion that is allocated toward the balance of that predetermined amount. Also, a portion of the periodic payments may be allocated to a down payment on the property. At the end of the fixed period, the lessee 710 may purchase the property from the lessor 700. If the lessee 710 does not desire to purchase the property, the lessee 710 may continue to make payments to use or possess the property, or the lessor 700 may offer the property to another entity.

[00113] An insuring entity 740, such as an insurance company, can insure the lessee

710 against a risk of default on the payments to the lessor 700. The insuring entity 740 can include one insurance provider or a combination of insurance providers. The communications with the insuring entity 740 can be handled through a broker, administrator, or other representative.

[00114] A computer is used to implement aspects of the methods and system described herein, including administration of enrollment of a lessee (e.g., participating consumer or other debtor), applying benefits to the lessee, and calculating and collecting premiums or fees to be applied to an insuring entity or an account. Each of the computer-implemented methods can be performed using one or more modules on a special purpose processor-based device. For example, a computer can calculate a premium or fee for the debt coverage instrument based upon the outstanding balance, a state of domicile of the participating lessee, and/or a state of the lessor or other entity. The computer can calculate a repayment schedule, wherein the repayment schedule reflects the premium or fee to be charged on a periodic basis to an account of the participating lessee, based upon a choice by the creditor or administrator. The computer transmits the repayment schedule for collection of payments of the premium or fee. The computer can bill on a discounted single premium basis covering the balance until the balance is repaid in full or on a periodic premium collected during specific portions of the term of the agreement, including deferrals, if any. The computer can collect the premium or fee and maintain a data structure regarding the collection of the premium for insurance or fees for debt suspension or cancellation agreements through the debt coverage instrument.

[00115] Referring to FIG. 8, a system overview is shown according to an exemplary embodiment. A lessor 800 has at least one specially-programmed computer, such as a server, that can handle the requests, maintenance, and processing of the exemplary methods described herein. It is intended that actions described herein that can be performed by the lessor 800 can be performed by the specially-programmed computer. The lessor 800 can process a rent-to-own agreement request from a lessee 810 and process an application, such as an application submitted online. The lessor 800, such as a servicer or administrator of a property lease, can calculate an interest percentage and/or amount for the agreement and term. The lessor 800 is configured to automatically send invoices for payment, receive and process payments, calculate a repayment schedule, and enroll the lessee in an automatic periodic payment. As the lessee 810 makes payments toward the balance, the lessor 800 can calculate a new balance of the loan, a new periodic payment owed by the lessee 810, and a revised schedule for repayment. The lessor 800 can also monitor non-repayment and administer claims.

[00116] An insuring entity 820, described in further detail in FIGS. 10 and 11, can offer a debt coverage instrument, which can be a policy or an agreement, to the lessor 800 on behalf of the lessee 810. The insuring entity 820 has at least one specially-programmed computer, such as a server, that can handle the requests, maintenance, and processing of the exemplary methods described herein. It is intended that the actions described herein that can be performed by the insuring entity 820 can be performed by the specially-programmed computer. The insuring entity 820 can issue, administer, and maintain the debt coverage instrument. The insuring entity 820 can transmit a certificate of insurance to the lessee 810 once the lessee 810 is enrolled in the debt coverage instrument. The insuring entity 820 can calculate the cost of the debt coverage instrument and process payments for a premium or other payment that can cover those costs. The insuring entity 820 issues the debt coverage instrument to the lessor 800, which sends payment for the debt coverage instrument back to the insuring entity company 820. The payment can be transmitted using electronic funds transfer or other payment mechanisms known in the art.

[00117] In one optional configuration, the lessee 810 can opt-out of the debt coverage instrument, whereby the lessee 810 chooses not to be covered by the debt coverage instrument for the loan, subjecting the lessee 810 to default in the event of disability or death. If the lessee 810 opts-out of the debt coverage instrument, the borrower may obtain another policy directly with the insuring entity 820 or another insuring entity to insure the risk of non- repayment due to death or disability. The lessor 800 or an administrator can monitor the alternative coverage policy, track the payments made to maintain the policy, and track the active status of the policy.

[00118] The lessee 810 has at least one specially-programmed computer, such as a personal computer, that can handle the payments, monitoring, and processing of the exemplary methods described herein. It is intended that actions described herein that can be performed by the lessee 810 can be performed by the specially-programmed computer. The specially-programmed computer of the lessee 810, the specially-programmed computer of the lessor 800, and the specially-programmed computer of the insuring entity can communicate over a network 830, such as the internet. [00119] An exemplary method is as follows. A debt coverage instrument (also known as a debt protection product) is provided by an insuring entity for the benefit of a lessee (e.g., a consumer) entering into a rent-to-own agreement with a lessor. The agrement can represent a personal obligation of the participating consumer. The insuring entity can issue, administer, and maintain the debt coverage instrument using various computer-implemented methods and systems. The lessor (e.g., creditor or administrator) can be a merchant, a lender, a developer, a bank, or a non-bank lender. The lessor can be the holder of the debt coverage instrument. The lessee (e.g., consumer) can hold a certificate of insurance evidencing coverage under the debt coverage instrument.

[00120] When the lessee is at risk of default upon the occurrence of a risk event (e.g., death, disability, or unemployment), the debt can be discharged or canceled, but the lessor also receives a payment or payments for the outstanding balance of the agreement. As a result, the debt coverage instrument can include a contractual liability insurance policy ("CLIP"), whereby the insuring entity agrees to reimburse the lessor for amounts that the lessee becomes liable to pay pursuant to a contract or agreement that the lessee has with the lessor. A debt cancellation contract CLIP is where an insuring entity agrees to reimburse the lessor for the amount of debt that the lessor becomes liable to cancel pursuant to a debt cancellation contract. A debt suspension agreement CLIP is where an insuring entity agrees to reimburse the lessor for the financial cost to the lessor if the lessor becomes liable to suspend the debt pursuant to a debt suspension agreement. The debt coverage instrument described herein can be a debt protection product such as a CLIP, including a debt cancellation contract and/or a debt suspension agreement.

[00121] Referring to FIG. 9, a flow chart of a process is shown according to an exemplary embodiment. The exemplary process described herein can be a computer program stored on a tangible computer-readable medium and executed by a processor of a specially- programmed computer. Each step can be performed by one module, multiple modules, or multiple steps can be performed by a single module of the computer program. Along each of the steps of this exemplary embodiment, the a computer of an insuring entity can manage and maintain records, issue coverage, determine premium amounts, process claims, and initiate payments.

[00122] In 900, a lessor can issue a rent-to-own agreement to a lessee. There are various methods for the lessee to repay the outstanding balance to the lessor. The lessee can arrange to make payments over a fixed period of time with a set number of scheduled payments. The period of the payments can be of a variable length subject to the agreement of the lessor and the lessee. The number, frequency, and amount of scheduled payments can also be variable subject to the agreement of the lessor and the lessee.

[00123] In 910, an insuring entity can provide a debt coverage instrument for the lessee in the event of occurrence of a risk event subjecting the agreement to potential default for non-repayment, thereby preserving the lessee's credit should the borrower experience an event that would subject the lessee to default of the agreement. The debt coverage instrument can be purchased or collaterally assigned to the lessor for the benefit of the account in the amount of the agreement. The debt coverage instrument can include a group insurance policy or a state regulated group credit insurance policy. The credit insurance policy can be a group credit life only insurance policy, a group credit life and/or disability policy, a group insurance policy, or debt cancellation agreement. Debt cancellation, though not regulated as insurance, nevertheless falls within the scope of "debt coverage." Debt cancellation involves a waiver of a right to collect the outstanding loan balance upon occurrence of a risk event, in consideration of receipt of payments similar to an insurance premium.

[00124] The debt coverage instrument can be an insurance policy, a debt cancellation agreement, or self-insurance. The debt coverage instrument insures the agreement of the participating lessee against non-repayment and can relieve the lessee in the event of occurrence of a risk event, e.g., death or disability, otherwise, subjecting the auto loan to potential default for non-repayment. The debt coverage instrument can be structured as a credit enhancement to the auto loan. The debt coverage instrument can be an insurance policy, a credit insurance policy, an individual credit insurance policy, a group credit insurance policy, or a group insurance policy. The group credit insurance policy can include a group credit life insurance policy, a group credit disability insurance policy, a group credit life and disability insurance policy, or a credit unemployment insurance master policy. A record is updated to reflect the issuance of the policy, debt cancellation agreement, or self- insurance.

[00125] In 920, the premium, fee, or periodic (e.g., monthly) payment for the lessee can be adjusted to account for the added cost of the debt coverage instrument. Although the debt coverage instrument may add to the cost of an agreement, the protection here prevents the lessor from losing money where a risk event occurs, thereby saving money and allowing for a lower interest rate that attempts to cover for these types of losses. In one example, the fee may be assessed as part of a borrower's automatic enrollment in the agreement. Alternatively, the lessee does not have a premium, fee, or monthly payment allocated to the insuring entity. Instead, the lessor can make payments to the insuring entity on the lessee's behalf. The lessor may adjust the interest rate to account for the increased cost. However, the lessor's savings in fewer defaults may offset the need for a higher interest rate. Because the debt coverage instrument covers the outstanding balance, the debt coverage instrument has less exposure as the payments are made. Accordingly, the payment to the insuring entity, whether from the lessor or the lessee, can decrease as the payments are made. The computer system herein can automatically generate and present a bill to the lessee, whether on behalf of the insuring entity or the lessor, for payment of the premium or fee. Additionally, the computer system is configured to receive payment from the lessee or through a lessee's financial institution and update the lessee's record to reflect receipt of the payment.

[00126] There may be taxes associated with the forgiveness of a debt. When a lessee defaults, the lessee may owe taxes to the government based upon the payment from the insuring entity to the lessor on behalf of the lessee for the balance. The systems and methods described herein can account for these taxes or similar taxes that could arise by forgiving the balance and paying the balance for the lessee. The amount of taxes can be included in a premium or fee paid by the lessee. So calculating the premium or fee can include adjusting the premium or fee to include the cost of paying taxes on behalf of the lessee. As a result, upon the occurrence of a risk event (e.g., death or disability), the lessee will not owe additional taxes.

[00127] The cost of the debt coverage instrument can be calculated by a computer based upon numerous factors, including the likelihood of the lessee to experience a risk event. The cost of the debt coverage instrument can also be based upon the balance. As the lessee pays down the balance, the cost of the debt coverage instrument is less because the exposure (i.e., amount to pay to the lessor in the event of a risk event) of the insuring entity is lowered. The cost of the debt coverage instrument can also depend upon the number of lessees and the amounts owed by those lessees.

[00128] The debt coverage instrument can be provided in response to a requirement for life insurance covering a balance of the agreement amount, imposed as a pre-condition to making the agreement in order to protect the funding source as well as the credit of the lessee. The participating consumer/lessee (or other debtor on the consumer's behalf) can secure life insurance as an offer of a preselected group insurance policy through the funding source for participation in coverage under the policy by the participating consumer/lessee. In one embodiment, the lessee is automatically enrolled into the debt coverage instrument when agreeing to the agreement provisions with the lessor. The automatic enrollment of the lessee may also include an option for the borrower to "opt-out" and secure his own protection. The participating consumer/lessee (or other debtor on the consumer's behalf) can arrange separately for a policy equal to or greater than the initial amount of the balance and collaterally assign the agreement until the obligation is satisfied. The participating lessee can accept a group debt coverage instrument or separately arrange, on his own, insurance coverage for the agreement, collaterally assigning that coverage to the lessor for the benefit of the account. A computer can assist in verifying that the participating lessee's balance continues to be covered by the collaterally assigned life insurance policy throughout the life of the agreement preventing a potential dissipation of assets through a lapse of the assigned policy.

[00129] In one embodiment, the repayments due under an agreement can be deferred.

Even though a debt coverage instrument may affect the repayment of the balance, a risk event can occur during the deferral period, thereby subjecting the repayment of the balance to default and potential non-repayment. A lessee may be required to make a premium payment during the deferral period. Alternatively, a partial, initial premium, or down payment, to cover a deferral period can be paid in advance or included in the amount of the balance.

[00130] In order to obtain a loan, the lessee may be required to obtain a debt coverage instrument, but the lessee is not required to enroll in the debt coverage instrument offered by the lessor and insuring entity. In 930, the lessee can choose to opt-out of the debt coverage instrument. In 940, the lessee can obtain coverage directly from the insuring entity, another insuring entity, or apply existing coverage. In 950, the debt coverage instrument obtained by the lessee is collaterally assigned to the lessor. The lessor can track and monitor the status of the debt coverage instrument obtained by the lessee.

[00131] The individual life insurance policies can be tracked by policy number and insurer. All insurers with collateral assignments can make policy changes impairing the collateral assignment and are directed to a unique and specific address of the insurance administrator designed to capture impairment notices to the collateral assignments made to the auto loan. The impairments can be matched by a computer against a policy number, insurer, and insured, and then reported via e-mail and/or telephone to the funding source and their recordkeeper for the purpose of curing the potential default from the participating borrower with an unpaid loan balance. Any policy changes can be automatically transmitted to an insurance administrator of the lessor.

[00132] In 960, a risk event occurs, such as the death, disability, unemployment, illness, relocation, deportation, or unpaid leaves of absence of a lessee. When a lessee defaults, the lessee's credit score suffers, creditors will contact the lessee asking for payment, the lessee's wages can be garnished, and the property at issue can even be repossessed. The lessor may offer forbearance, which is a period where repayment may be suspended without any penalty. During this time, interest may still accrue. In the event the lessee dies, becomes disabled, or becomes unemployed, the lessee may default on the repayment, thereby causing significant and extended financial distress on the lessee and on the lessor.

[00133] The debt coverage instrument will prevent the default due to the non- repayment by the lessee should the lessee die, become disabled, or become unemployed, as defined by the terms of the debt coverage instrument. The debt coverage instrument is intended to insure the lessee against default, not just the lessor. By enrolling in a debt coverage instrument, the lessee does not default, so the lessee's credit rating can be preserved. In 970, the debt can be cancelled and no further debt is owed. The outstanding balance is forgiven and the lessee does not owe any additional payments. As described above, the lessee may also not owe any additional taxes based upon a premium that incorporates the cost of such taxes.

[00134] In 980, the balance is paid in a single payment or in periodic payments (e.g., monthly payments) on the lessee's behalf for the outstanding balance, which may include interest. The use of periodic payments may be useful when the lessee is temporarily disabled and will be able to continue payments in the future. The payments from the insuring entity to the lessor allow the balance to be discharged and can be covered by a CLIP between the lessor and the insuring entity. Pursuant to the CLIP, a risk underwriter or insuring entity is guaranteeing that once the outstanding balance is canceled, there will be funds to pay the lessor.

[00135] The administration of a debt coverage instrument is described in U.S. Patent

[00136] There are many outstanding rent-to-own agreements. The methods and systems described herein can be made retroactive for some of those outstanding agreements. A change in the contract for these agreements may not be allowed without some consideration. As a result, the lessor may, as a creditor, lower the interest rate. Alternatively, the lessor can take less in interest and apply those funds for coverage.

[00137] Referring to FIG. 10, the insuring entity described in the exemplary embodiments above has a borrower/lessee server 1010, a lending entity/lessor server 1020, a premium calculation server 1030, and a claims server 1040. The borrower/lessee server 1010 can store, manage, and process changes to records of borrowers or lessees, including but not limited to name, contact information, policy number, account number, outstanding balance, payment due date, last payment, payment account information, loan term, policy indicator, policy provider, premium amount, premium outstanding balance, whether the borrower or lessee opted out, and whether the borrower or lessee obtained alternative coverage. The borrower/lessee server 1010 has an associated database 1015 to store records. The server 1010 may operate or communicate with multiple storage units or a single storage unit that includes multiple databases. The server 1010 can also provide or issue coverage described herein to borrowers or lessees.

[00138] The lending entity/lessor server 1020 can store, manage, and process changes to records of lending entities or lessors, including but not limited to name, contact information, policy number, outstanding balance, payment due date, last payment, premium amount, premium outstanding balance, policy indicator, and loan term. The lending entity/lessor server 1020 has an associated database 1025 to store records. The server 1020 may operate or communicate with multiple storage units or a single storage unit that includes multiple databases.

[00139] The payment calculation server 1030 can calculate a premium amount or an amount to prevent default of a loan or agreement, and can include records for policy number, account number, outstanding balance, payment due date, loan term. The payment calculation server 1030 has an associated database 1035 to store records. The server 1030 may operate or communicate with multiple storage units or a single storage unit that includes multiple databases.

[00140] The claims server 1040 can process and administer claims, including receiving claims, determining validity of claims, determining whether the borrower or lessee has coverage, determining whether to make one or more payments, and initiating payment of a claim. The claims server 1040 has an associated database 1045 to store records. The server 1040 may operate or communicate with multiple storage units or a single storage unit that includes multiple databases.

[00141] An administrator 1050 associated with the insuring entity uses a workstation or terminal to communicate with the borrower/lessee server 1010, lending entity/lessor server 1020, premium calculation server 1030, claims server 1040.

[00142] Referring to FIG. 11, a block diagram of an exemplary insuring entity server

1100 is shown. The insuring entity server represents an exemplary configuration of one or more of the servers 1010, 1020, 1030, 1040 in FIG. 10. The server 1100 includes a processor unit 1110 that executes software 1120. The processor unit 1110 may include one or more processors that operate to execute the software 1120 to perform a variety of functions for an administrator, such as those functions and modules described herein. In addition to the modules described in the exemplary embodiments, the software 1120 may include a graphical user interface module to manage a graphical user interface and operations performed thereon, a database manager module to manage one or more databases and functions performed thereon, and a communications manager module to manage communications to and from the server 1100. The server 1100 further includes a memory 1130, an input/output (I/O) unit 1140, and storage unit 1150 to which the processing unit 1110 communicates. The memory 1130 may be utilized, for example, to store protection information, entity information, payment information, or claims information. The I/O unit 1140 may be utilized to communicate with other insuring entity servers as well as other entities, such as a borrower, lender, lessee, lessor, bank, non-bank, merchant, vendor, dealer, distributor, or other entity. The I/O unit 1140 may be used for communicating information over a network, such as the internet, local area network (LAN), or other area network. The storage unit 1150 may be configured to store one or more databases 1160a, 1160b that store information described herein. [00143] In implementing these systems and methods to be performed by a suitably programmed computer, it is intended that the computer have a processor and a computer readable medium, wherein the computer readable medium has program code. The program code can be made of one or more modules that carry out instructions for implementing the systems and methods herein. The processor can execute the instructions as programmed in the modules of the program code.

[00144] The systems and methods described can be implemented as a computer program product having a computer readable medium having a computer readable program code embodied therein, the computer readable program code adapted to be executed to implement a method for performing the methods described above. Each step or aspect can be performed by a different module, or a single module can perform more than a single step.

[00145] The systems and methods described herein as software can be executed on at least one server, though it is understood that they can be configured in other ways and retain its functionality. The above-described technology can be implemented on known devices such as a personal computer, a special purpose computer, cellular telephone, personal digital assistant (PDA), a programmed microprocessor or microcontroller and peripheral integrated circuit element(s), and ASIC or other integrated circuit, a digital signal processor, a hardwired electronic or logic circuit such as a discrete element circuit, a programmable logic device such as a PLD, PLA, FPGA, PAL, or the like. In general, any device capable of implementing the processes described herein can be used to implement the systems and techniques according to this invention.

[00146] It is to be appreciated that the various components of the technology can be located at distant portions of a distributed network and/or the Internet, or within a dedicated secure, unsecured and/or encrypted system. Thus, it should be appreciated that the components of the system can be combined into one or more devices or co-located on a particular node of a distributed network, such as a telecommunications network. As will be appreciated from the description, and for reasons of computational efficiency, the components of the system can be arranged at any location within a distributed network without affecting the operation of the system. Moreover, the components could be embedded in a dedicated machine.

[00147] Furthermore, it should be appreciated that the various links connecting the elements can be wired or wireless links, or any combination thereof, or any other known or later developed element(s) that is capable of supplying and/or communicating data to and from the connected elements. The term module as used herein can refer to any known or later developed hardware, software, firmware, or combination thereof that is capable of performing the functionality associated with that element. The terms determine, calculate and compute, and variations thereof, as used herein are used interchangeably and include any type of methodology, process, mathematical operation or technique.

[00148] Moreover, the disclosed methods may be readily implemented in software, e.g., as a computer program product having one or more modules each adapted for one or more functions of the software, executed on a programmed general purpose computer, cellular telephone, PDA, a special purpose computer, a microprocessor, or the like. In these instances, the systems and methods of this invention can be implemented as a program embedded on a personal computer such as a JAVA®, CGI or Perl script, as a resource residing on a server or graphics workstation, as a routine embedded in a dedicated image system, or the like. The systems and methods of this invention can also be implemented by physically incorporating this system and method into a software and/or hardware system, such as the hardware and software systems of a computer. Such computer program products and systems can be distributed and employ a client-server architecture.

[00149] The embodiments described above are intended to be exemplary. One skilled in the art recognizes that numerous alternative components and embodiments that may be substituted for the particular examples described herein and still fall within the scope of the invention.

Claims

What is claimed is:

1. A computer-implemented method for preventing default of an auto loan or a payday loan comprising:

providing, by an insuring entity, a debt coverage instrument to a borrower having an auto loan or a payday loan from a lending entity in the event the borrower is unable to make at least one payment to the lending entity for the auto loan or payday loan;

receiving, from a computer of the lending entity, a periodic payment to the insuring entity for the insured borrower;

receiving, by a computer of the insuring entity, a claim where the borrower is at risk for not making at least one payment to the lending entity for the auto loan or payday loan; and

initiating, by the computer of the insuring entity, a payment on behalf of the borrower to the lending entity,

wherein the borrower does not default on the auto loan or payday loan because of the payment by the insuring entity to the lending entity.

2. The method according to claim 1, further comprising

calculating, by a computer of the lending entity, an interest rate for the at least one payment to the lending entity for the auto loan or payday loan; and

adjusting the interest rate of the at least one payment to the lending entity in view of the debt coverage instrument.

3. The method according to claim 1, wherein the event is where the borrower dies, becomes disabled, becomes unemployed, or is deported.

4. The method according to claim 1, further comprising receiving, by the lending entity, a payment from the borrower for the debt coverage instrument.

5. The method according to claim 1, wherein initiating the payment comprises a periodic transfer of funds to the lending entity on behalf of the borrower.

6. The method according to claim 1, wherein initiating the payment comprises a single payment for the entire balance of the auto loan or payday loan on behalf of the borrower.

7. The method according to claim 6, wherein initiating the payment further comprises an additional payment for interest.

8. The method according to claim 1, further comprising, calculating, by the computer of the insuring entity, a fee for the debt coverage instrument based upon an outstanding balance of the auto loan or payday loan.

9. The method according to claim 8, further comprising, adjusting, by the computer of the insuring entity, the fee based upon the outstanding balance of the auto loan or payday loan.

10. The method according to claim 1, wherein the lending entity is selected from the group consisting of an auto dealer, a bank, or a non-bank lender.

11. A computer-implemented method for preventing default of an auto loan or payday loan comprising:

providing, by a lending entity, an option to a borrower having an auto loan or payday loan from the lending entity for a debt coverage instrument from a first insuring entity in the event the borrower is unable to make at least one payment to the lending entity for the auto loan or payday loan;

receiving, by a computer of the lending entity, a message from the borrower that the borrower is opting-out of the debt coverage instrument provided by the first insuring entity; receiving, by the computer of the lending entity, a message from the borrower indicating that the borrower obtained an alternative debt coverage instrument from a second insuring entity, wherein the second insuring entity is responsible for making a payment on behalf of the borrower to the lending entity upon the occurrence of an event where the borrower is unable to make the payment; and

tracking, by the computer of the lending entity, a status of the alternative debt coverage instrument between the second insuring entity and the borrower.

12. The method according to claim 11, further comprising receiving, by the second insuring entity, a payment from the borrower for the debt coverage instrument.

13. The method according to claim 11, wherein tracking further comprises monitoring a payment from the borrower to the second insuring entity for the debt coverage instrument.

14. The method according to claim 11, wherein tracking further comprises receiving, by the computer of the lending entity, a confirmation that the debt coverage instrument is still active.

15. The method according to claim 11, wherein the event is where the borrower dies or becomes disabled.

16. The method according to claim 11, wherein upon the occurrence of the event, a computer of the second insuring entity initiates at least one payment to the lending entity on behalf of the borrower.

17. The method according to claim 16, wherein initiating the payment further comprises an additional payment for interest.

18. The method according to claim 11, further comprising, calculating, by the computer of the second insuring entity, a fee to be paid by the borrower for the debt coverage instrument based upon an outstanding balance of the auto loan or payday loan.

19. The method according to claim 18, further comprising, adjusting, by the computer of the insuring entity, the fee based upon the outstanding balance of the auto loan or payday loan.

20. The method according to claim 11, wherein the lending entity is selected from the group consisting of the auto dealer, a bank, or a non-bank lender.

21. A computer-implemented method for administering a premium, the method comprising:

providing a debt coverage instrument to a creditor or administrator of an auto loan or payday loan for a participating borrower,

wherein the debt coverage instrument comprises an insurance policy, debt suspension agreement, or debt cancellation agreement, and

wherein the debt coverage instrument insures or relieves the auto loan or payday loan of the participating borrower against nonrepayment in the event of occurrence of a risk event subjecting the auto loan or payday loan to potential default for non-repayment;

calculating, by a computer, a fee for the debt coverage instrument based upon the outstanding balance of the auto loan or payday loan;

calculating, by the computer, a repayment schedule for the auto loan or payday loan, wherein the repayment schedule reflects the fee to be charged on a periodic basis to an account of the participating borrower; and

maintaining, by the computer, a data structure regarding the collection of the fee.

22. The method according to claim 21, further comprising billing, by a computer, on a discounted single premium basis covering the loan balance until the auto loan or payday loan is repaid in full.

23. The method according to claim 21, wherein an asset represented by the policy is preserved for the benefit of the entity funding the auto loan or payday loan, in the event of the risk event subjecting the auto loan or payday loan to default and potential non-repayment.

24. The method according to claim 21, wherein the creditor or the administrator is an auto dealer, a bank, or another company.

25. The method according to claim 21, wherein the debt coverage instrument is structured as a credit enhancement to the auto loan or payday loan.

26. The method according to claim 21, wherein the auto loan or payday loan represents a personal obligation.

27. The method according to claim 21, wherein the debt coverage instrument comprises an insurance policy.

28. The method according to claim 21, wherein the debt coverage instrument comprises a credit insurance policy.

29. The method according to claim 21, wherein the debt coverage instrument comprises an individual credit insurance policy.

30. The method according to claim 21, wherein the debt coverage instrument comprises a group credit insurance policy.

31. The method according to claim 30, wherein the group credit insurance policy comprises a group credit life insurance policy.

32. The method according to claim 30, wherein the group credit insurance policy comprises a group credit disability insurance policy.

33. The method according to claim 30, wherein the group credit insurance policy comprises a group credit life and disability insurance policy.

34. The method according to claim 30, wherein the group credit insurance policy comprises a credit unemployment insurance master policy.

35. The method according to claim 21, wherein the debt coverage instrument is provided in response to a requirement for life insurance covering a balance of the auto loan or payday loan, imposed as a pre-condition to making the auto loan in order to protect the funding source.

36. The method according to claim 21, further comprising, upon occurrence of the risk event, ensuring payment, of an amount equal to any unpaid auto loan balance, to the auto loan or payday loan account.

37. The method according to claim 21, further comprising effecting payment of the auto loan or payday loan on behalf of the borrower in upon the occurrence of the risk event.

38. The method according to claim 21, wherein the risk event comprises death of the participating borrower.

39. The method according to claim 21, wherein the risk event comprises disability of the participating borrower.

40. The method according to claim 21, wherein the risk event comprises unemployment of the participating borrower.

41. The method according to claim 21, wherein the risk event comprises deportation of the borrower.

42. The method according to claim 21, further comprising issuing a certificate of insurance evidencing coverage under the debt coverage instrument.

43. The method according to claim 21, further comprising permitting the participating borrower to arrange separately for a policy equal to or greater than the initial amount of the auto loan or payday loan and collaterally assigned to the auto loan or payday loan plan until the auto loan or payday loan obligation is satisfied; and verifying, by a computer, that the borrower's auto loan or payday loan continues to be covered by the collaterally assigned life insurance policy throughout the life of the auto loan preventing a potential dissipation of loan assets through a lapse of the assigned policy.

44. The method according to claim 21, wherein the group insurance policy comprises a credit life insurance policy.

45. The method according to claim 21, wherein the group insurance policy comprises a credit life and disability insurance policy.

46. A computer program product for preventing default of an auto loan or a payday loan, the computer program product having computer-readable instructions stored on a non- transitory computer-readable medium that are executed by a processor to perform the method comprising:

47. A system for preventing default of an auto loan or a payday loan, the system comprising:

a first server configured to provide a debt coverage instrument to a borrower having an auto loan or a payday loan from a lending entity in the event the borrower is unable to make at least one payment to the lending entity for the auto loan or payday loan;

a second server configured to receive a periodic payment to the insuring entity for the insured borrower;

a third server configured to receive by a computer of the insuring entity, a claim where the borrower is at risk for not making at least one payment to the lending entity for the auto loan or payday loan; and a fourth server configured to initiate a payment on behalf of the borrower to the lending entity,

48. A computer-implemented method for preventing default of an rent-to-own agreement comprising:

providing, by an insuring entity, a debt coverage instrument to a lessee having a balance due to a lessor under a rent-to-own agreement in the event the lessee is unable to make at least one payment to the lessor;

receiving, from a computer of the lessor, a periodic payment to the insuring entity for the insured lessee;

receiving, by a computer of the insuring entity, a claim where the lessee is at risk for not making at least one payment to the lessor; and

initiating, by the computer of the insuring entity, a payment on behalf of the lessee to the lessor,

wherein the lessee does not default because of the payment by the insuring entity to the lessor.

49. The method according to claim 48, further comprising

calculating, by a computer of the lessor, an interest rate for the at least one payment to the lessor; and

adjusting the interest rate of the at least one payment to the lessor in view of the debt coverage instrument.

50. The method according to claim 48, wherein the event is where the lessee dies, becomes disabled, becomes unemployed, or is deported.

51. The method according to claim 48, further comprising receiving, by the lessor, a payment from the lessee for the debt coverage instrument.

52. The method according to claim 48, wherein initiating the payment comprises a periodic transfer of funds to the lessor on behalf of the lessee.

53. The method according to claim 48, wherein initiating the payment comprises a single payment for the entire balance on behalf of the lessee.

54. The method according to claim 53, wherein initiating the payment further comprises an additional payment for interest.

55. The method according to claim 48, further comprising, calculating, by the computer of the insuring entity, a fee for the debt coverage instrument based upon an outstanding balance.

56. The method according to claim 55, further comprising, adjusting, by the computer of the insuring entity, the fee based upon the outstanding balance.

57. The method according to claim 48, wherein the lessor is selected from the group consisting of a merchant, a vendor, a dealer, a bank, or a non-bank lender.

58. A computer-implemented method for preventing default of a payment in a rent-to- own agreement comprising:

providing, by a lessor, an option to a lessee having a balance due to the lessor pursuant to a rent-to-own agreement for a debt coverage instrument from a first insuring entity in the event the lessee is unable to make at least one payment to the lessor;

receiving, by a computer of the lessor, a message from the lessee that the lessee is opting-out of the debt coverage instrument provided by the first insuring entity;

receiving, by the computer of the lessor, a message from the lessee indicating that the lessee obtained an alternative debt coverage instrument from a second insuring entity, wherein the second insuring entity is responsible for making a payment on behalf of the lessee to the lessor upon the occurrence of an event where the lessee is unable to make the payment; and tracking, by the computer of the lessor, a status of the alternative debt coverage instrument between the second insuring entity and the lessee.

59. The method according to claim 58, further comprising receiving, by the second insuring entity, a payment from the lessee for the debt coverage instrument.

60. The method according to claim 58, wherein tracking further comprises monitoring a payment from the lessee to the second insuring entity for the debt coverage instrument.

61. The method according to claim 58, wherein tracking further comprises receiving, by the computer of the lessor, a confirmation that the debt coverage instrument is still active.

62. The method according to claim 58, wherein the event is where the lessee dies, becomes disabled, becomes unemployed, or is deported.

63. The method according to claim 58, wherein upon the occurrence of the event, a computer of the second insuring entity initiates at least one payment to the lessor on behalf of the lessee.

64. The method according to claim 63, wherein initiating the payment further comprises an additional payment for interest.

65. The method according to claim 58, further comprising, calculating, by the computer of the second insuring entity, a fee to be paid by the lessee for the debt coverage instrument based upon an outstanding balance.

66. The method according to claim 65, further comprising, adjusting, by the computer of the insuring entity, the fee based upon the outstanding balance.

67. The method according to claim 58, wherein the lessor is selected from the group consisting of a dealer, a merchant, a bank, or a non-bank lender.

68. A computer-implemented method for administering a premium, the method comprising:

providing a debt coverage instrument to a creditor or administrator of a rent-to-own agreement for a participating lessee,

wherein the debt coverage instrument insures or relieves an outstanding balance of the participating lessee against nonrepayment in the event of occurrence of a risk event subjecting the lessee to potential default for non-repayment;

calculating, by a computer, a fee for the debt coverage instrument based upon the outstanding balance;

calculating, by the computer, a repayment schedule for the outstanding balance, wherein the repayment schedule reflects the fee to be charged on a periodic basis to an account of the participating lessee; and

69. The method according to claim 68, further comprising billing, by a computer, on a discounted single premium basis covering the balance balance is repaid in full.

70. The method according to claim 68, wherein an asset represented by the policy is preserved for the benefit of the entity funding the agreement, in the event of the risk event subjecting the lessee to default and potential non-repayment.

71. The method according to claim 68, wherein the creditor or the administrator is a dealer, a merchant, a bank, or another company.

72. The method according to claim 68, wherein the debt coverage instrument is structured as a credit enhancement to the agreement.

73. The method according to claim 68, wherein the auto loan or payday loan represents a personal obligation.

74. The method according to claim 68, wherein the debt coverage instrument comprises an insurance policy.

75. The method according to claim 68, wherein the debt coverage instrument comprises a credit insurance policy.

76. The method according to claim 68, wherein the debt coverage instrument comprises an individual credit insurance policy.

77. The method according to claim 68, wherein the debt coverage instrument comprises a group credit insurance policy.

78. The method according to claim 77, wherein the group credit insurance policy comprises a group credit life insurance policy.

79. The method according to claim 77, wherein the group credit insurance policy comprises a group credit disability insurance policy.

80. The method according to claim 77, wherein the group credit insurance policy comprises a group credit life and disability insurance policy.

82. The method according to claim 77, wherein the group credit insurance policy comprises a credit unemployment insurance master policy.

83. The method according to claim 68, wherein the debt coverage instrument is provided in response to a requirement for life insurance covering the balance, imposed as a precondition to making the auto loan in order to protect the funding source.

84. The method according to claim 68, further comprising, upon occurrence of the risk event, ensuring payment of an amount equal to any unpaid balance to the lessor.

85. The method according to claim 68, further comprising effecting payment on behalf of the lessee in upon the occurrence of the risk event.

86. The method according to claim 68, wherein the risk event comprises death of the participating lessee.

87. The method according to claim 68, wherein the risk event comprises disability of the participating lessee.

88. The method according to claim 68, wherein the risk event comprises unemployment of the participating lessee.

89. The method according to claim 68, wherein the risk event comprises deportation of the lessee.

90. The method according to claim 68, further comprising issuing a certificate of insurance evidencing coverage under the debt coverage instrument.

91. The method according to claim 68, further comprising permitting the participating lessee to arrange separately for a policy equal to or greater than the initial amount of the agreement and collaterally assigned to the agreement until an obligation is satisfied; and verifying, by a computer, that the lessee's agreement continues to be covered by the collaterally assigned life insurance policy throughout the life of the agreement preventing a potential dissipation of the agreement through a lapse of the assigned policy.

92. The method according to claim 68, wherein the group insurance policy comprises a credit life insurance policy.

93. The method according to claim 68, wherein the group insurance policy comprises a credit life and disability insurance policy.

94. A computer program product for preventing default of a rent-to-own agreement, the computer program product having computer-readable instructions stored on a non-transitory computer-readable medium that are executed by a processor to perform the method comprising:

providing, by an insuring entity, a debt coverage instrument to a lessee having a rent- to-own agreement with a lessor in the event the lessee is unable to make at least one payment to the lessor;

wherein the lessee does not default on the agreement because of the payment by the insuring entity to the lessor.

95. A system for preventing default of a rent-to-own agreement, the system comprising: a first server configured to provide a debt coverage instrument to a lessee having a rent-to-own agreement from a lessor in the event the lessee is unable to make at least one payment to the lessor;

a second server configured to receive a periodic payment to the insuring entity for the insured lessee;

a third server configured to receive by a computer of the insuring entity, a claim where the lessee is at risk for not making at least one payment to the lessor; and

a fourth server configured to initiate a payment on behalf of the lessee to the lessor, wherein the lessee does not default on the agreement because of the payment by the insuring entity to the lessor.