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Inactive Financial Institution Letters


[Federal Register: August 21, 2000 (Volume 65, Number 162)]
[Proposed Rules]               
[Page 50881-50902]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21au00-37]                         


[[Page 50881]]

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Part VII





Department of the Treasury





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Office of the Comptroller of the Currency



Office of Thrift Supervision



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Federal Reserve System

Federal Deposit Insurance Corporation





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12 CFR Part 14, et al.



Consumer Protections for Depository Institution Sales of Insurance; 
Proposed Rule


[[Page 50882]]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 14

[Docket No. 00-16]
RIN 1557-AB81

FEDERAL RESERVE SYSTEM

12 CFR Part 208

[Docket No. R-1079]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 343

RIN 3064-AC37

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 536

[Docket No. 2000-68]
RIN 1550-AB34

 
Consumer Protections for Depository Institution Sales of 
Insurance

AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of 
Governors of the Federal Reserve System; Federal Deposit Insurance 
Corporation; and Office of Thrift Supervision, Treasury.

ACTION: Joint notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency, Board of 
Governors of the Federal Reserve System, Federal Deposit Insurance 
Corporation, and the Office of Thrift Supervision, (collectively, the 
Agencies) are requesting comment on proposed insurance consumer 
protection rules. These rules are published pursuant to section 47 of 
the Federal Deposit Insurance Act (FDIA), which was added by section 
305 of the Gramm-Leach-Bliley Act (the G-L-B Act or Act). Section 47 
directs the Agencies jointly to prescribe and publish consumer 
protection regulations that apply to retail sales practices, 
solicitations, advertising, or offers of any insurance product by a 
depository institution \1\ or any person that is engaged in such 
activities at an office of the institution or on behalf of the 
institution.
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    \1\ ``Depository institution'' means national banks in the case 
of institutions supervised by the OCC, state member banks in the 
case of the Board, state nonmember banks in the case of the FDIC, 
and savings associations in the case of the OTS.

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DATES: Comments must be received by October 5, 2000.

ADDRESSES: Comments should be directed to:
    Office of the Comptroller of the Currency (OCC): Communications 
Division, Office of the Comptroller of the Currency, 250 E Street, SW., 
Third Floor, Washington, DC 20219, Attention: Docket No. 00-16; FAX 
number (202) 874-5274 or Internet address: regs.comments@occ.treas.gov. 
Comments may be inspected and photocopied at the OCC's Public Reference 
Room, 250 E Street, SW., Washington, DC, between 9 a.m. and 5 p.m. on 
business days. You can make an appointment to inspect the comments by 
calling (202) 874-5043.
    Board of Governors of the Federal Reserve System (Board): Comments, 
which should refer to Docket No. R-1079, may be mailed to Jennifer J. 
Johnson, Secretary, Board of Governors of the Federal Reserve System, 
20th and C Streets, NW., Washington, DC 20551 or mailed electronically 
to regs.comments@federalreserve.gov. Comments addressed to Ms. Johnson 
also may be delivered to the Board's mail room between 8:45 a.m. and 
5:15 p.m. and to the security control room outside of those hours. Both 
the mail room and the security control room are accessible from the 
courtyard entrance on 20th Street between Constitution Avenue and C 
Street, NW. Comments may be inspected in Room MP-500 between 9 a.m. and 
5 p.m., pursuant to Sec. 261.12, except as provided in Sec. 261.14, of 
the Board's Rules Regarding the Availability of Information, 12 CFR 
261.12 and 261.14.
    Federal Deposit Insurance Corporation (FDIC): Send written comments 
to Robert E. Feldman, Executive Secretary, Attention: Comments/OES, 
Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429. Comments may be hand delivered to the guard 
station at the rear of the 17th Street building (located on F Street) 
on business days between 7 a.m. and 5 p.m. (Fax number (202) 898-3838). 
Comments may be inspected and photocopied in the FDIC Public 
Information Center, Room 100, 801 17th Street, NW., Washington, DC 
20429, between 9 a.m. and 4:30 p.m. on business days.
    Office of Thrift Supervision (OTS): Send comments to Manager, 
Dissemination Branch, Information Management & Services Division, 
Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention Docket No. 2000-68. Hand deliver comments to the Guard's 
Desk, East Lobby Entrance, 1700 G Street, NW., from 9 a.m. to 4 p.m. on 
business days. Send facsimile transmissions to FAX Number (202) 906-
7755 or (202) 906-6956 (if the comment is over 25 pages). Send e-mails 
to public.info@ots.treas.gov and include your name and telephone 
number. Interested persons may inspect comments at the Public Reference 
Room, 1700 G Street, NW., from 10 a.m. until 4 p.m. on Tuesdays and 
Thursdays. Comments will also be posted on the OTS Internet Site at 
ots.treas.gov.

FOR FURTHER INFORMATION CONTACT: OCC: Stuart Feldstein, Assistant 
Director, or Michele Meyer, Senior Attorney, Legislative and Regulatory 
Activities Division, (202) 874-5090; Asa Chamberlayne, Senior Attorney, 
Securities and Corporate Practices Division, (202) 874-5210; Stephanie 
Boccio, Asset Management, (202) 874-4447; Barbara Washington, Core 
Policy Development (202) 874-6037, Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Richard M. Ashton, Associate General Counsel, Legal 
Division, (202) 452-3750; Angela Desmond, Special Counsel, Division of 
Banking Supervision and Regulation, (202) 452-3497; David A. Stein, 
Attorney, Division of Consumer and Community Affairs, (202) 452-3667, 
Board of Governors of the Federal Reserve System, 20th and C Streets, 
NW, Washington, DC 20551. For the hearing impaired only, 
Telecommunications Device for the Deaf (TDD), contact Janice Simms, 
(202) 872-4984.
    FDIC: Keith A. Ligon, Chief, Policy Unit, Division of Supervision, 
(202) 898-3618; Michael B. Phillips, Counsel, Supervision and 
Legislation Branch, Legal Division, (202) 898-3581; Jason C. Cave, 
Senior Capital Markets Specialist, (202) 898-3548, Federal Deposit 
Insurance Corporation, 550 17th Street, NW, Washington, DC 20429.
    OTS: Robyn Dennis, Manager, Supervision Policy, (202) 906-5751; 
Richard Bennett, Counsel (Banking and Finance), (202) 906-7409; Mary 
Jane Cleary, Insurance Risk Management Specialist, (202) 906-7048, 
Office of Thrift Supervision, 1700 G Street, NW., Washington DC 20552.

SUPPLEMENTARY INFORMATION:

Background

    On November 12, 1999, President Clinton signed the G-L-B Act into 
law.

[[Page 50883]]

Section 305 of the Act \2\ added new section 47 to the FDIA, captioned 
``Insurance Customer Protections.'' This section requires the Agencies 
jointly to prescribe and publish in final form, by November 12, 2000, 
consumer protection regulations that apply to retail sales practices, 
solicitations, advertising, or offers of insurance products by 
depository institutions or persons engaged in these activities at an 
office of the institution or on behalf of the institution. Section 47 
directs the Agencies to include specific provisions relating to sales 
practices, disclosures and advertising, the physical separation of 
banking and nonbanking activities, and domestic violence 
discrimination.
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    \2\ Pub. L. 106-102, sec. 305, 113 Stat. 1338, 1410-15 (to be 
codified at 12 U.S.C. 1831x).
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    Section 47 also requires the Agencies to consult with the State 
insurance regulators, as appropriate. The Agencies circulated a working 
draft of this proposal to the National Association of Insurance 
Commissioners (NAIC) and, on June 29, 2000, met with NAIC 
representatives to discuss the proposal. These proposed rules reflect 
certain comments received from the NAIC in that meeting.
    The texts of the Agencies' proposed rules are substantially 
identical. Any differences in style or terms are not intended to create 
substantive differences in the requirements imposed by the regulations. 
The Agencies request comment on all aspects of the proposed rules and 
on the specific provisions and issues highlighted in the section-by-
section analysis.

Section-by-Section Analysis

    The discussion that follows applies to each of the Agencies' 
proposed rules. Given that each agency will assign a different part to 
its insurance consumer protection rule, the citations are to sections 
only, leaving citations to part numbers blank.\3\
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    \3\ The Board's proposed rule would be a new subpart of the 
Board's existing Regulation H, and not a separate regulation. 
Accordingly, the sections of the Board's proposed rule are numbered 
consecutively.
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Section ____.10 Purpose and Scope

    These proposed rules establish consumer protections in connection 
with retail sales of insurance products and annuities \4\ to consumers 
by any depository institution or by any person that is engaged in such 
activities at an office of the institution or on behalf of the 
institution.\5\ A number of issues that clarify the scope of the rule 
are addressed through specific definitions discussed below.
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    \4\ These proposed rules are not intended to have any effect on 
whether annuities are considered to be insurance products for 
purposes of any other section of the G-L-B Act or other laws. That 
question depends on the terms and purposes of those laws, as 
interpreted by the courts and the appropriate agency.
    \5\ The Agencies note that other State consumer protection rules 
also may apply to bank and thrift insurance sales.
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    For example, section 47 gives the Agencies discretion to determine 
whether the Act's consumer protections should extend to a depository 
institution's subsidiary in other circumstances. The Agencies have 
determined to apply the proposed rules to subsidiaries only if they are 
selling insurance products or annuities at an office of the institution 
or acting ``on behalf of'' the depository institution as defined in the 
rules.\6\ A more complete discussion of when a person is engaged in 
insurance activities ``on behalf'' of the depository institution is set 
forth below in the definition of ``covered person.'' In addition, the 
Agencies intend to cover insurance and annuities sales activities on 
the institution's Internet web site and other forms of electronic 
media.
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    \6\ OTS does not intend the requirements of this part to apply 
to other savings association operating subsidiaries or service 
corporations by effect of 12 CFR 559.3(h). OCC does not intend the 
requirements of this part to apply to other national bank operating 
subsidiaries by effect of 12 CFR 5.34(e)(3).
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Section ____.20 Definitions

    a. Affiliate. The proposed rules use the definition of 
``affiliate'' that is used in section 3 of the Federal Deposit 
Insurance Act (FDIA),\7\ which, in turn, refers to section 2(k) of the 
Bank Holding Company Act of 1956 (BHCA).\8\ Companies are affiliates if 
one company controls, is controlled by, or is under common control with 
another company.
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    \7\ 12 U.S.C. 1813(w)(6).
    \8\ 12 U.S.C. 1841(k).
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    b. Company. The proposed rules use the definition of ``company'' 
that is used in section 3 of the FDIA,\9\ which, in turn, refers to 
section 2(b) of the BHCA.\10\ A ``company'' includes corporations, 
partnerships, business trusts, associations and similar organizations.
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    \9\ 12 U.S.C. 1813(w)(7).
    \10\ 12 U.S.C. 1841(b).
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    c. Consumer. The proposed rules define ``consumer'' as an 
individual who obtains, applies for, or is solicited to obtain 
insurance products or annuities from a covered person. Section 47 uses 
the terms ``consumer'' and ``customer'' interchangeably and without 
appearing to draw distinction between the two terms. These proposed 
rules use the term ``consumer.'' The Agencies request comment on 
whether the definition of ``consumer'' should be expanded to encompass 
all retail customers, including small businesses. The Agencies also 
seek comment on whether to limit the definition of consumer to 
individuals who obtain or apply for insurance products or annuities 
primarily for personal, family, or household purposes.
    d. Control. The proposed rules use the definition of ``control'' 
used in section 3(w)(5) of the FDIA,\11\ which, in turn, refers to 
section 2 of the BHCA.\12\ Under this definition, which is used to 
determine when companies are affiliates, a company has control over 
another company if:
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    \11\ 12 U.S.C. 1813(w)(5).
    \12\ 12 U.S.C. 1841.
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    (1) The company directly or indirectly controls 25 percent or more 
of any class of the company's voting securities;
    (2) The company controls in any manner the election of a majority 
of the directors or trustees of the company; or
    (3) The Board determines that the company exercises, directly or 
indirectly, a controlling influence over the management or policies of 
the company.\13\ For purposes of the definition of ``control'' in these 
rules, the reference in section 2 of the BHCA to the ``Board'' means 
the ``appropriate Federal banking agency,'' as defined in section 3(q) 
of the FDIA.\14\
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    \13\ 12 U.S.C. 1841(a)(2).
    \14\ 12 U.S.C. 1813(q).
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    e. Covered person or you. The term ``covered person,'' or ``you,'' 
is critical in determining to whom the requirements in these proposed 
rules will apply. As defined in the proposed rules, a covered person 
means any depository institution or any other person selling, 
soliciting, advertising, or offering insurance products or annuities to 
a consumer at an office of the institution or on behalf of the 
institution. A ``covered person'' may include any person, including an 
affiliate, if the person or one of its employees engages in such 
activities at an office of an institution or on behalf of an 
institution.
    For purposes of this definition, a person's activities are ``on 
behalf of'' a depository institution if:
    (1) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the institution;
    (2) The depository institution receives commissions or fees, in 
whole or in part, derived from the sale of an insurance product or 
annuity as a result of cross-marketing or referrals by the institution 
or an affiliate;

[[Page 50884]]

    (3) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the 
institution or use its corporate logo or corporate name; or
    (4) The sale, solicitation, advertising, or offer of an insurance 
product or annuity takes place at an off-premises site, such as a 
kiosk, that identifies or refers to the institution or uses its 
corporate logo or corporate name.
    The Agencies note that the second prong of the ``on behalf of'' 
test--the receipt of commissions or fees--does not include situations 
in which the institution receives a fee solely for performing a 
separate service or function that may relate to an insurance sale (such 
as processing a credit card charge for the insurance premium, or 
performing recordkeeping or payment functions on behalf of the 
affiliate) where the fee is based on that service or function and is 
not a share of the commissions or fees derived from the insurance 
product or annuity sale.
    The Agencies seek comment on the proposed definition of covered 
person and specifically on those activities that would cause a person 
to be considered to be acting ``on behalf of'' an institution. The 
Agencies also invite comment on whether the following should be 
considered an activity on behalf of the institution:

     The use of the name or corporate logo of the holding 
company or other affiliate, as opposed to the name or corporate logo 
of the depository institution in documents evidencing the sale, 
solicitation, advertising, or offer of an insurance product or 
annuity.
     The sale, solicitation, advertising, or offer of an 
insurance product or annuity at an off-premises site that identifies 
or refers to the holding company or other affiliate, as opposed to 
the depository institution, or uses the name or corporate logo of 
the holding company or other affiliate.

    The agencies recognize that when electronic media are used, special 
issues arise. For example, a depository institution's web site may link 
or refer a consumer to a separate insurance agency, which may be 
operated by the institution or an affiliate of the institution or may 
be unaffiliated. In this kind of transaction, although the depository 
institution is identified to the consumer through its web site, the 
mandatory disclosures and other protections of the proposed rules may 
not be necessary. There may be instances where a depository institution 
is not engaged in the sale or solicitation of an insurance product or 
annuity, but instead acting as a finder by providing consumers web 
links to providers of insurance products and annuities. Comment is 
solicited on whether, and under what circumstances, additional 
disclosures should be required for sales or solicitations by electronic 
media in order to alleviate any potential confusion as to the identity 
of source of the insurance, such as a disclosure informing consumers 
when they are leaving the institution's web site. Also, comment is 
solicited on whether additional or alternative disclosures might be 
needed in instances where the depository institution acts as finder by 
electronic media.
    f. Domestic violence. The statute also contains a provision 
prohibiting the consideration of a person's status as a victim of 
domestic violence or provider of services to victims of domestic 
violence in connection with certain insurance activities. Accordingly, 
the proposed rules prohibit a covered person, with regard to any 
insurance underwriting, pricing, renewal, or scope of coverage 
decision, or payment of insurance claim, on a life or health insurance 
product from considering as a criterion the status of the person 
applying for the insurance, or the person who is insured, as a victim 
of domestic violence or a provider of services to domestic violence 
victims, except as required or expressly permitted under state law. See 
proposed Sec. ____.30(c). The proposed rules adopt the definition of 
``domestic violence'' set forth in section 47 of the FDIA.
    g. Electronic media. Section 47 permits the Agencies to make 
adjustments to the Act's requirements for sales conducted in person, by 
telephone, or by electronic media to provide for the most appropriate 
and complete form of disclosure and consumer acknowledgment of the 
receipt of such disclosures. The proposed rules set forth special rules 
for electronic disclosures and consumer acknowledgments and for 
telephone sales. See proposed Sec. ____.40. The Agencies recognize that 
methods of electronic communication are rapidly changing and have 
attempted to provide flexibility in these proposed rules to accommodate 
such changes. Thus, the proposed rules define ``electronic media'' 
broadly to include any means for transmitting messages electronically 
between a covered person and a consumer in a format that allows visual 
text to be displayed on equipment, such as a personal computer. The 
reference to personal computers is illustrative only and the reference 
to equipment includes other electronic devices that meet the 
definition.
    The Agencies invite comment on the proposed definition of 
``electronic media'' and whether a more expansive definition would be 
consistent with the G-L-B Act's requirement that disclosures be both 
written and oral.
    h. Office. The proposed rules define ``office'' as the premises of 
an institution where retail deposits are accepted from the public.
    i. Subsidiary. The proposed rules use the definition of subsidiary 
in section 3(w)(4) of the FDIA.\15\ Thus, ``subsidiary'' means any 
company that is owned or controlled directly or indirectly by another 
company and includes any service corporation owned in whole or in part 
by an insured depository institution or any subsidiary of such a 
service corporation.
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    \15\ 12 U.S.C. 1813(w)(4).
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    The proposed rules do not define the term ``insurance product.'' 
The Agencies recognize that there is no single standard for defining 
the term ``insurance'' and that its definition may vary significantly 
depending on the context in which it is used. For example, section 302 
of GLBA lists certain types of products that may constitute insurance 
for purposes of determining when a national bank may underwrite, rather 
than sell, insurance. Thus, the Agencies will look to a variety of 
sources in determining whether a given product is covered by the 
proposed rules. In addition to section 302(c), the Agencies will look 
to common usage, conventional definitions, judicial interpretations, 
and other Federal laws. The Agencies invite comment on these and other 
sources for determining whether a product comes within the scope of the 
proposed rules, or, alternatively, whether the rule should include a 
specific definition of the term ``insurance.''

Section ____.30 Prohibited Practices

    The G-L-B Act directs the Agencies to include in the implementing 
regulations specific prohibited practices. Under section 47(b) of the 
FDIA, a covered person may not engage in any practice that would lead a 
consumer to believe that an extension of credit, in violation of the 
anti-tying provisions of section 106(b) of the Bank Holding Company Act 
Amendments of 1970,\16\ is conditional upon either:
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    \16\ 12 U.S.C. 1972. Section 106(b) of the Bank Holding Company 
Act Amendments of 1970 does not apply to savings associations. Those 
institutions are, however, subject to comparable prohibitions on 
tying and coercion, under section 5(q) of the Home Owners' Loan Act 
(HOLA), 12 U.S.C. 1464(q). Accordingly, OTS's proposed rule cites 
the HOLA provision.
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    (1) The purchase of an insurance product or annuity from the 
depository institution or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the

[[Page 50885]]

consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity. These prohibitions on tying and coercion are set 
forth in proposed Sec. ____.30(a).
    Section 47(c)(2) of the FDIA also prohibits a covered person from 
engaging in any practice at any office of, or on behalf of, a 
depository institution or a subsidiary of a depository institution that 
could mislead any person or otherwise cause a reasonable person to 
reach an erroneous belief with respect to:
    (1) The uninsured nature of any insurance product or annuity 
offered for sale by the covered person or subsidiary;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the investment risk associated with any such product; 
or
    (3) The fact that the approval of an extension of credit to a 
consumer by the institution or subsidiary may not be conditioned on the 
purchase of an insurance product or annuity from the institution or 
subsidiary, and that the consumer is free to purchase the insurance 
product or annuity from another source. These prohibitions on 
misrepresentations are set forth in proposed Sec. ____.30(b).
    Finally, proposed Sec. ____.30(c) implements section 47(e) of the 
FDIA, which, as already noted, prohibits a covered person from 
considering a person's status as a victim of domestic violence or a 
provider of services to domestic violence victims in making decisions 
regarding certain types of insurance products.

Section ____.40 What a Covered Person Must Disclose

    In addition to prohibiting the misrepresentations outlined above, 
section 47(c) of the FDIA requires a covered person to make affirmative 
disclosures in connection with the initial purchase of an insurance 
product or annuity. The proposed rules require the following 
disclosures:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the depository institution or (if 
applicable) an affiliate;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, the depository institution, or (if applicable) an affiliate;
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value; and
    (4) The depository institution may not condition an extension of 
credit on either the consumer's purchase of an insurance product or 
annuity from the depository institution or any of its affiliates or the 
consumer's agreement not to obtain, or a prohibition on the consumer 
from obtaining, an insurance product or annuity from an unaffiliated 
entity.
Timing and Method of Disclosures
    Under proposed Sec. ____.40(b)(1), a covered person must provide 
the disclosures described in Sec. ____.40(a) orally and in writing 
before the completion of the sale of an insurance product or annuity to 
a consumer. The disclosures concerning the prohibition on tying an 
extension of credit to an insurance product or annuity purchase 
(Sec. ____.40(a)(4)) must also be made orally and in writing at the 
time the consumer applies for an extension of credit in connection with 
which an insurance product or annuity will be solicited, offered, or 
sold.
Electronic and Telephone Disclosures
    Section 47 of the FDIA authorizes the Agencies to make necessary 
adjustments to the G-L-B Act's requirements for sales conducted by 
telephone or by electronic media. Proposed Secs. ____.40(b)(2) sets 
forth special timing and method of disclosure rules for electronic and 
telephone disclosures. Under Sec. ____.40(b)(2)(i), where the consumer 
affirmatively consents, a covered person may provide the written 
disclosures required by Sec. ____.40(a) through electronic media 
instead of on paper, if they are provided in a format that the consumer 
may retain or obtain later, for example, by printing or storing 
electronically, such as by downloading. Under Sec. ____.40(b)(2)(ii), 
if the sale of an insurance product or annuity is conducted entirely 
through the use of electronic media and written disclosures are 
provided electronically, a covered person is not required to provide 
disclosures orally. A covered person must also comply with all other 
requirements imposed by law or regulation for providing disclosures 
electronically.
    If a covered person takes an application for credit by telephone, 
Sec. ____.40(b)(1) provides that the covered person may provide the 
written disclosure required by paragraph (a)(4) by mail, provided the 
covered person mails it to the consumer within three days, excluding 
Sundays and the legal public holidays specified in 5 U.S.C. 6103(a). 
Nevertheless, disclosures under Sec. ____.40(a)(1)-(4) must be made in 
writing before completion of the initial sale. The Agencies invite 
comment on the proposed rules for electronic and telephone disclosures. 
Specifically, the Agencies request comment on whether the rules are 
flexible enough to permit future technological innovation and whether 
the format and timing requirements are sufficient to provide consumers 
with the type of protections envisioned by section 47 of the FDIA.
    The Agencies note that new legislation addressing the use of 
electronic signatures and electronic records may affect institutions 
that provide disclosures and obtain acknowledgments electronically. The 
Electronic Signatures in Global and National Commerce Act (the E-Sign 
Act) \17\ contains, among other things, Federal rules governing the use 
of electronic records for providing required information to consumers. 
A legal requirement that consumer disclosures be in writing may be 
satisfied by an electronic disclosure if the consumer affirmatively 
consents and if certain other requirements of the E-Sign Act are met. 
For example, the E-Sign Act requires that, before a consumer consents 
to receive electronically information that is otherwise legally 
required to be provided in writing, the consumer must receive a ``clear 
and conspicuous statement'' containing certain information prescribed 
by the statute.\18\ The statute authorizes Federal regulatory agencies 
to exempt specified categories or types of records from the E-Sign Act 
requirements relating to consumer consent only if an exemption is 
necessary to eliminate a substantial burden on electronic commerce and 
will not increase the material risk of harm to consumers.\19\ The 
Agencies invite comment on whether--and, if so, how--they should 
address the requirements of the E-Sign Act in the context of these 
proposed rules.
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    \17\ Pub. L. 106-229, 114 Stat. 464 (June 30, 2000). The E-Sign 
Act generally takes effect on October 1, 2000, although there are 
delayed effective dates for provisions other than those discussed in 
the text.
    \18\ See Pub. L. 106-229, sec. 101(c)(1).
    \19\ Id. at Sec. 104(d)(1).
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Disclosures Must Be Readily Understandable, Designed To Call Attention 
to the Information, and Meaningful
    Section 47 of the FDIA requires the Agencies to promulgate 
regulations encouraging the use of disclosures that are conspicuous, 
simple, direct, and readily understandable. Proposed Sec. ____.40(b)(4) 
contains this requirement and further requires that the disclosures 
must also be designed to call attention to the nature and significance 
of the

[[Page 50886]]

information provided. For example, a covered person may use the 
following short-form disclosures as may be appropriate:

 Not a Deposit
 Not FDIC-Insured
 Not insured by any Federal Government Agency
 Not Guaranteed by the Bank [or Savings Association]
 May Go Down in Value

    The Agencies invite comment on whether the final rule should 
provide specific methods of calling attention to the material contained 
in the disclosures. For example, the final rule could provide that the 
disclosures are designed to call attention to the nature and 
significance of the information provided if they use:
     A plain-language heading to call attention to the 
disclosures;
     A typeface and font or type size that are easy to read;
     Wide margins and ample line spacing;
     Boldface or italics for key words; and
     Distinctive type or font size, style, and graphic devices, 
such as shading or sidebars, when the disclosures are combined with 
other information.
    Further, as provided in proposed Sec. ____.40(b)(4), a disclosure 
generally is not ``meaningfully'' provided if a covered person merely 
tells the consumer that the disclosures are available in printed 
material without also providing the material and orally disclosing the 
information to the consumer. Similarly, a disclosure made through 
electronic media is not meaningfully provided if the consumer may 
bypass the visual text of the disclosure before purchasing an insurance 
product or annuity.
    The Agencies invite comment on whether these standards will 
adequately address situations where disclosures are made through 
electronic media. For example, the Federal Trade Commission (FTC) 
recently released guidance on online advertising and sales reiterating 
that many of the general principles of advertising law apply to 
Internet advertisements, but recognizing that developing technology 
raises new issues.\20\ The FTC guidance describes information 
businesses should consider when developing their online advertisements 
to ensure compliance with consumer protection laws with a particular 
focus on providing clear and conspicuous disclosures in Internet 
advertisements and sales. The FTC guidance establishes several key 
factors to consider when evaluating the clarity and conspicuousness of 
Internet disclosures including:
---------------------------------------------------------------------------

    \20\ The FTC's guidance, Dot Com Disclosures: Information about 
Online Advertising is available at www.ftc.gov/bcp/conline/pubs/
buspubs/dotcom/index.html.
---------------------------------------------------------------------------

    (1) The placement of the disclosures in the advertisement and the 
disclosures' proximity to the relevant claim;
    (2) The prominence of the disclosure and whether other features in 
the advertisement distract attention from the disclosure;
    (3) How often the disclosures should be repeated relative to the 
length of the advertisement; and
    (4) Whether audio disclosures are presented in an adequate volume 
and cadence that consumers can hear and understand. The guidance also 
suggests evaluating whether visual disclosures appear for a sufficient 
duration appropriate for consumers to notice, read and understand. The 
Agencies seek comment on whether the type of detail provided in the FTC 
guidance is necessary in these proposed rules.
Consumer Acknowledgment
    Under proposed Sec. ____.40(b)(5), a covered person must obtain 
from the consumer, at the time the consumer receives the disclosures 
set forth in proposed Sec. ____.40(a), a written acknowledgment by the 
consumer that the consumer received the disclosures. In keeping with 
the allowance under section 47 for adjustments to the 
G-L-B Act's requirements for sales conducted by electronic media and 
the E-Sign Act, proposed Sec. ____.40(b)(5) further provides that a 
consumer who has received disclosures through electronic media may 
acknowledge receipt of the disclosures electronically or in paper form.
Advertisements and Other Promotional Material
    In accordance with section 47(c)(1)(C) of the FDIA, proposed 
Sec. ____.40(c) clarifies that the disclosures required by proposed 
Sec. ____.40 are not required in advertisements of a general nature 
describing or listing the services or products offered by the 
depository institution.

Section ____.50 Where Insurance Activities May Take Place

    Section 47(d)(1) of the FDIA requires that the Agencies' 
regulations include provisions to ensure that the routine acceptance of 
deposits is kept, to the extent practicable, physically segregated from 
insurance product activity. Proposed Sec. ____.50(a) sets forth this 
general rule. It further requires that, to the extent practicable, a 
depository institution identify areas where insurance product or 
annuity sales activities occur and clearly delineate and distinguish 
them from the areas where the institution's retail deposit-taking 
activities occur, in accordance with section 47(d)(2)(A) of the FDIA.
    Proposed Sec. ____.50(b) implements section 47(d)(2)(B) of the 
FDIA, concerning referrals to insurance and annuity sales personnel by 
a person who accepts deposits from the public. Any person who accepts 
deposits from the public in an area where such transactions are 
routinely conducted in a depository institution may refer a consumer 
who seeks to purchase an insurance product or annuity to a qualified 
person who sells that product. The person making the referral may only 
receive a one-time, nominal fee of a fixed dollar amount for each 
referral. The fee may not depend on whether the referral results in a 
transaction.

Section ____.60 Qualification and Licensing Requirements for Insurance 
Sales Personnel

    Section 47(d)(2)(C) of the FDIA requires that the Agencies' 
regulations prohibit any depository institution from permitting any 
person to sell or offer for sale any insurance product in any part of 
any office of the institution, or on behalf of the institution, unless 
such person is appropriately qualified and licensed. Thus, under 
proposed Sec. ____.60, a depository institution may not permit any 
person to sell or offer for sale any insurance product or annuity in 
any part of its office or on its behalf, unless the person is at all 
times appropriately qualified and licensed under applicable State 
insurance licensing standards with regard to the specific products 
being sold or recommended.

Appendix--Consumer Grievance Process

    Section 47(f) of the FDIA requires that the Agencies jointly 
establish a consumer complaint mechanism for addressing consumer 
complaints alleging violations of these proposed rules. Each agency has 
procedures in place to handle consumer complaints. The Agencies will 
apply those procedures to complaints involving these proposed rules. 
The Appendix to each agency's proposed rule contains the name and 
address of each agency's consumer complaint office. Any consumer who 
believes that a depository institution or any other person selling, 
soliciting, advertising, or offering insurance products or annuities to 
the consumer at an office of the institution or on behalf of the 
institution

[[Page 50887]]

has violated the requirements of these proposed rules should contact 
the consumer complaint office listed in the Appendix. Each agency 
already has entered into, or is developing, agreements with State 
insurance commissioners regarding the sharing of consumer complaints. 
Consumer complaints alleging violations of these proposed rules that 
raise issues under State and local law will be shared with State 
regulators pursuant to those agreements.

Effect on Other Authority

    Section 47(g) sets forth a general framework for determining the 
effect of these proposed rules on State law. Under that framework, the 
Agencies' insurance consumer protection rules will not apply in a State 
where the State has in effect statutes, regulations, orders, or 
interpretations that are inconsistent with or contrary to the 
provisions of the Agencies' rules. If the Board, FDIC and OCC jointly 
determine, however, that the protection afforded by a provision of 
these proposed rules is greater than the protection provided by 
comparable state law or rulings, these proposed rules shall preempt the 
contrary or inconsistent State law or ruling. Prior to making this 
determination, the Board, FDIC and OCC must notify the appropriate 
State regulatory authority in writing, and the Board, FDIC and OCC will 
consider comments submitted by the appropriate State regulatory 
authorities. If the Board, FDIC and OCC determine that a provision of 
these proposed rules affords greater protection than State provisions, 
the Board, FDIC and OCC will send a written preemption notice to the 
appropriate State insurance authority that the provision of these 
proposed rules will be applicable unless the State adopts legislation 
within three years to override the preemption notice.
    The Board, FDIC and OCC invite comment on whether it would be 
helpful to include a second appendix restating these statutory 
requirements or whether such a restatement would be confusing absent a 
determination regarding the applicability of specific State laws.

Regulatory Analysis

A. Paperwork Reduction Act

    The Agencies invite comment on:
    (1) Whether the collections of information contained in this notice 
of proposed rulemaking are necessary for the proper performance of each 
Agency's functions, including whether the information has practical 
utility;
    (2) The accuracy of each Agency's estimate of the burden of the 
proposed information collections;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (4) Ways to minimize the burden of the information collections on 
respondents, including the use of automated collection techniques or 
other forms of information technology; and
    (5) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchases of services to provide information.
    Respondents are not required to respond to these collections of 
information unless they display a currently valid Office of Management 
and Budget (OMB) control number. The Agencies are currently requesting 
their respective control numbers for these information collections from 
OMB.
    This proposed regulation contains requirements to make disclosure 
at two different times. The respondents must prepare and provide 
certain disclosures to consumers: (1) Before the completion of the 
initial sale of an insurance product or annuity to a consumer; and (2) 
at the time of application for the extension of credit (if insurance 
products or annuities are solicited, offered or sold in connection with 
an extension of credit) (proposed Sec. ____.40(b)(1)). The Agencies 
request public comment on all aspects of the collections of information 
contained in these proposed rules.
    OCC: The collection of information requirements contained in this 
notice of proposed rulemaking will be submitted to the Office of 
Management and Budget for review in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections 
of information should be sent to Jessie Dunaway, Legislative and 
Regulatory Activities Division, Office of the Comptroller of the 
Currency, 250 E Street, SW, Washington, DC 20219, with a copy to the 
Office of Management and Budget, Paperwork Reduction Project (1557-to 
be assigned), Washington, DC 20503.
    The likely respondents are national banks, District of Columbia 
banks, and Federal branches and agencies of foreign banks and any other 
persons selling, soliciting, advertising, or offering insurance 
products or annuities at an office of a national bank or on behalf of a 
national bank. The proposal would impose two types of information 
collection requirements on national banks. The first is the requirement 
that printed disclosure materials be modified to conform to the 
requirements of the regulation. The OCC estimates the burden associated 
with this start-up requirement as follows:
    Estimated number of respondents: 1,949.
    Estimated number of responses: 1,949.
    Estimated burden hours per response: 10.
    Estimated total burden: 19,490 hours.

This estimate assumes 10 hours would be involved in the development of 
the disclosures required by this part for each national bank that sells 
insurance. The total burden will exceed 19,490 hours, however, because 
the proposal also requires that disclosures be provided to individual 
consumers in connection with particular transactions. Estimation of 
this burden requires the OCC to estimate the number of consumer 
transactions per bank (or entity selling on behalf of a bank) per year 
in which disclosures are required to be provided and the amount of time 
per transaction providing the disclosures will take. The OCC does not 
currently collect this type of information. We invite comment on what 
assumption we should use in arriving at a revised estimate of total 
burden for purposes of the final rule.
    Board: In accordance with section 3506 of the Paperwork Reduction 
Act of 1995 (44 U.S.C. Ch. 35; 5 CFR part 1320, appendix A1), the Board 
reviewed the notice of proposed rulemaking under the authority 
delegated to the Board by the OMB. Comments on the collections of 
information should be sent to Mary M. West, Federal Reserve Board 
Clearance Officer, Division of Research and Statistics, Mail Stop 97, 
Board of Governors of the Federal Reserve System, Washington, DC 20551, 
with a copy to the Office of Management and Budget, Paperwork Reduction 
Project (7100-to be assigned), Washington, DC 20503.
    The likely respondents are state member banks and any other persons 
selling, soliciting, advertising, or offering insurance products or 
annuities at an office of a state member bank or on behalf of a state 
member bank.
    Estimated number of respondents: 1,010.
    Estimated number of responses: 553,079.
    Estimated burden hours per response: 5 minutes.
    Estimated total burden: 46,090 hours.
    FDIC: The collections of information contained in the notice of 
proposed rulemaking will be submitted to the OMB in accordance with the 
Paperwork Reduction Act of 1995, 44 U.S.C. 3507. Comments on the 
collections of

[[Page 50888]]

information should be sent to Steven F. Hanft, Office of the Executive 
Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW, 
Washington, DC 20429, with a copy to the Office of Management and 
Budget, Paperwork Reduction Project (3064-to be assigned), Washington, 
DC 20503.
    The likely respondents are insured nonmember banks and any other 
persons selling, soliciting, advertising, or offering insurance 
products or annuities at an office of an insured nonmember bank or on 
behalf of an insured nonmember bank.
    Estimated number of respondents: 5800.
    Estimated number of responses: 920,000.
    Estimated burden hours per response: 5 minutes.
    Estimated total burden: 76,667 hours.
    OTS: The collection of information requirements contained in the 
notice of proposed rulemaking will be submitted to the OMB in 
accordance with the Paperwork Reduction Act of 1995. 44 U.S.C. 3507. 
Comments on the collection of information should be sent to the 
Dissemination Branch (1550-to be assigned), Office of Thrift 
Supervision, 1700 G Street, NW, Washington, DC 20552, with a copy to 
the Office of Management and Budget, Paperwork Reduction Project (1550-
to be assigned), Washington, DC 20503.
    The likely respondents are savings associations and any other 
persons selling, soliciting, advertising, or offering insurance 
products or annuities at an office of a savings association or on 
behalf of a savings association.
    Estimated number of respondents: 1,097.
    Estimated number of responses: 567,432.
    Estimated average hours per response: 5 minutes.
    Estimated total burden: 47,286 hours.

B. Regulatory Flexibility Act

    OCC: The Regulatory Flexibility Act requires federal agencies 
either to certify that a proposed rule would not, if adopted in final 
form, have a significant impact on a substantial number of small 
entities or to prepare an initial regulatory flexibility analysis 
(IRFA) of the proposal and publish the analysis for comment. See 5 
U.S.C. 603, 605. On the basis of the information currently available, 
the OCC is of the opinion that this proposal is unlikely to have a 
significant impact on a substantial number of small entities if it is 
adopted in final form. Because the proposal implements new legislation, 
however, the OCC lacks historical information specific to the 
requirements in the proposal on which to base estimates of cost. For 
this reason, the OCC has prepared the following IRFA. We invite comment 
on whether the assumptions used in the IRFA are accurate, as well as 
any compliance cost estimate that national banks can provide.

Reasons, Objectives, and Legal Basis for the Proposal

    The OCC is issuing this proposal to implement section 305 of the G-
L-B Act. A fuller discussion of the reasons for, objectives of, and 
legal basis for the proposed rules appears elsewhere in the 
Supplementary Information.

Reporting, Recordkeeping, and Compliance Requirements of the Proposal

    The proposal requires national banks (and entities acting on behalf 
of national banks) to amend the written materials and Internet web 
sites they use in connection with the retail sale, solicitation, 
advertising, or offer of insurance products to consumers. The proposal 
also requires national banks (and entities acting on their behalf) to 
obtain from consumers acknowledgment that the consumer has received 
certain disclosures. The substance of these requirements is described 
in detail elsewhere in the SUPPLEMENTARY INFORMATION.\21\
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    \21\ The proposed rule also requires national banks to keep the 
area where the bank conducts insurance transactions physically 
separate from the areas where retail deposits are routinely accepted 
from the general public ``to the extent practicable.'' This 
requirement, which is worded like the requirement in the statute, 
leaves significant discretion to each national bank to determine 
what costs, if any, the bank must incur in order to avoid customer 
confusion.
---------------------------------------------------------------------------

    The OCC believes that most national banks will be able to satisfy 
the disclosure provisions by including the information required to be 
disclosed in their written materials with minimal cost. We estimate 
that most banks maintain a 3 to 4 month inventory of those materials. 
The OCC expects that there will be several months between publication 
of this proposal and the effective date of the final rules, which 
should allow for most banks to use up their inventory of printed 
materials before the final rules take effect. Nevertheless, our 
analysis assumes that some banks may need to amend the written 
materials they have in inventory during an interim period between the 
effective date of the final rule and the next regularly scheduled 
printing of those materials because their inventories will not be 
depleted during that time. These banks--which are probably smaller 
banks that order written materials infrequently and in large quantities 
to obtain reduced rates on printing--would therefore incur costs as a 
result of this requirement.
    There are approximately 25 national banks that sell insurance 
products over the Internet. Our experience has been that Internet banks 
regularly upgrade their web sites. Adding the required disclosures 
could be done as part of a regular upgrade and would therefore present 
only minimal additional costs to the bank.
    The primary cost associated with the requirement that a bank obtain 
from the consumer a written acknowledgment of the consumer's receipt of 
the disclosures is, in the OCC's opinion, likely to be the cost of 
developing the written acknowledgment. Banks that sell insurance 
products over the Internet should, as part of a regularly scheduled 
upgrade, be able to revise their web sites to include a series of 
``click throughs'' that will require affirmation from the customer that 
he or she has received the required disclosures.

Description of the Small Entities to Which the Proposal Would Apply

    As of January, 1999, 1,949 national banks or national bank 
subsidiaries were engaged in insurance activities that would bring them 
within the scope of coverage of the proposed rule. We estimate that 976 
of the national banks that sold insurance as of January, 1999, had $100 
million or less in assets.\22\
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    \22\ For Regulatory Flexibility Act purposes, small national 
banks are generally defined as those with assets under $100 million.
---------------------------------------------------------------------------

Significant Alternatives to the Proposal

    Section 305 of the G-L-B Act expressly prescribes the content of 
its implementing regulations. The OCC's proposal does not depart 
materially from the requirements of the statute. The statute does not 
authorize the OCC to provide exemptions or exceptions to its 
requirements for small national banks.
    In preparing the proposal, the OCC has considered the burden on 
small national banks to the extent that it has the discretion to do so. 
The Supplementary Information describes and solicits comment on a 
number of alternatives that would reduce the regulatory burden. These 
include providing a more expansive definition of ``electronic media'' 
to allow even more flexibility in meeting the disclosure and consumer 
acknowledgment requirements, and ensuring that covered persons may 
fully utilize electronic signatures and other provisions of the E-Sign 
Act.
    The OCC requests comment on whether these, or other approaches that

[[Page 50889]]

are available in light of the express requirements of section 305, 
would be appropriate to reduce regulatory burden on small national 
banks.

Duplicative, Overlapping, or Conflicting Federal Rules

    As used in the Interagency Statement on Retail Sales of Nondeposit 
Investment Products (February 15, 1994) (Interagency Statement), the 
term ``nondeposit investment products,'' includes some products, such 
as annuities, that are covered by section 47 of FDIA and these proposed 
rules. The Interagency Statement provides, among other things, that 
institutions should disclose to customers that such products are not 
insured by the FDIC or the depository institution and are subject to 
investment risk including possible loss of principal. It also provides 
that institutions should obtain acknowledgments from customers 
verifying that they have received and understand the disclosures. The 
Interagency Statement further provides that retail sales or 
recommendations of nondeposit investment products should be conducted 
in a location physically distinct from where retail deposits are taken, 
that nondeposit investment product sales personnel should receive 
adequate training, and that referral fees should be limited. The 
proposed rules do not appear to conflict materially with the 
Interagency Statement.
    Board: The Regulatory Flexibility Act (5 U.S.C. 603) requires an 
agency to publish an initial regulatory flexibility analysis with any 
notice of proposed rulemaking unless the proposed rule would not have a 
significant impact on a substantial number of small entities. Based on 
available data, the Board is unable to determine at this time whether 
the proposed rule would have a significant impact on a substantial 
number of small entities.
    A description of the reasons why action by the agency is being 
considered and a statement of the objectives of, and legal basis for, 
the proposed rule are contained in the supplementary material above. 
The Board's proposed rule is virtually identical to the rules proposed 
by the other Federal banking agencies for the depository institutions 
over which they have primary supervisory authority.
    The proposed rule would apply to all state member banks and any 
other person who sells, solicits, advertises, or offers an insurance 
product or annuity to an individual at an office of a state member bank 
or on behalf of the bank. As of year-end 1999, there were approximately 
1,010 state member banks. The Board estimates that approximately 480 
state member banks have assets less than $100 million. Based on 
available data, the Board is unable to estimate the number of other 
persons who engage in retail insurance activities at an office of a 
state member bank or on behalf of such a bank, or how many of these 
other persons are small entities.
    As explained in the supplementary material above, the substantive 
provisions of the proposed rule are required by section 47 of the FDIA. 
Under the proposed rule, state member banks and other covered persons 
engaging in retail insurance activities must make disclosures to 
consumers and obtain the consumers' acknowledgment of the receipt of 
the disclosures. Banks that conduct insurance transactions by means of 
electronic media may be required to modify their current procedures for 
these transactions.
    Some insurance products or annuities that are covered by the 
proposed rule may also be considered nondeposit investment products 
that are subject to the Interagency Statement on Retail Sales of 
Nondeposit Investment Products (February 15, 1994) (``Interagency 
Statement''). The Interagency Statement provides for consumer 
disclosure, acknowledgment, separation of activities, and personnel 
qualification requirements that are similar to the provisions of the 
proposed rule. The Board does not believe that the proposed rule would 
conflict materially with the Interagency Statement. The proposed rule 
incorporates the statutory prohibition on tying arrangements in section 
106(b) of the Bank Holding Company Amendments of 1970 (12 U.S.C. 1972).
    As explained above, the substantive provisions of proposed rule are 
required by section 47 of the FDIA. Section 47 applies to all 
depository institutions, regardless of size, and does not provide the 
Federal banking agencies with the authority to exempt a small 
institution from the requirements of the statute. Under section 47, the 
regulations required by that section do not extend to any subsidiary of 
a depository institution if the banking agencies determine that such an 
extension of the protections in the statute is not necessary. The 
Board's proposed rule would apply only to those subsidiaries of a state 
member bank that engage in retail insurance activities at an office of 
the bank or on behalf of the bank. Retail insurance activities by other 
types of subsidiaries that do not have the specified connection to the 
parent bank would be subject instead to the consumer protection 
requirements imposed by the functional regulator of those subsidiaries.
    The Board requests comment on the burdens associated with the 
proposed rule and on whether there are appropriate alternative 
provisions would reduce the burdens on small institutions.
    FDIC: The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) 
requires the Agencies to either prepare an initial regulatory 
flexibility analysis (IRFA) with these proposed rule or certify that 
these proposed rules would not have a significant economic impact on a 
substantial number of small entities as defined in the RFA. The FDIC 
cannot, at this time, determine whether these proposed rules would have 
a significant economic impact on a substantial number of small entities 
as defined in the RFA.\23\ Therefore, the FDIC includes the following 
IRFA.
---------------------------------------------------------------------------

    \23\ The RFA defines the term ``small entity'' in 5 U.S.C. 601 
by reference to definitions published by the Small Business 
Administration (SBA). The SBA has defined a ``small entity for 
banking purposes as a national or commercial bank, savings 
institution or credit union with less than $100 million in assets.'' 
See 13 CFR 121.201.
---------------------------------------------------------------------------

Reasons for the Proposed Rules

    The FDIC is requesting comments on the proposed rules published 
pursuant to section 47 of the FDIA, which was added by section 305 of 
the G-L-B Act. Section 47 requires that the Agencies jointly prescribe 
consumer protection regulations that apply to retail sales practices, 
solicitations, advertising, or offers of any insurance product by a 
depository institution or any person that is engaged in such activities 
at an office of the institution or on behalf of the institution. These 
requirements are expressly mandated by the G-L-B Act. It is the view of 
the FDIC that the
G-L-B Act's requirements account for substantially all of the economic 
impact of the proposed rules.

Statement of Objectives and Legal Basis

    The Supplementary Information section above contains the 
information. The legal basis for the proposed regulation is the G-L-B 
Act.

Description/Estimate of the Small Entities to Which the Proposed Rules 
Would Apply

    The proposed rules at 12 CFR part 343 would apply to all FDIC-
insured, state-chartered banks that are not members of the Federal 
Reserve System (approximately 5800). The FDIC estimates that 
approximately 3700 of this total are ``small entities'' as defined by 
the RFA. In addition, the FDIC estimates that all 3700 of these small

[[Page 50890]]

banks sell, solicit, advertise, or offer certain types of insurance 
products or annuities to consumers.
    The FDIC does not have data concerning how many other persons sell, 
solicit, advertise, or offer insurance products or annuities to 
consumers at an office of the bank or ``on behalf of'' the bank. 
Similarly, the FDIC does not have data regarding how many of these 
other persons are small entities.
    The FDIC specifically seeks comments on the number and size of 
savings associations and other persons that are subject to the rule.

Projected Reporting, Recordkeeping and Other Compliance Requirements

    The information collection requirements imposed by the G-L-B Act 
and the proposed rules are discussed above in the section titled 
``Paperwork Reduction Act.''

General Requirements

    As described more fully in the supplementary material provided 
above, the proposed rules: (1) Contain new disclosure and consumer 
acknowledgment requirements; (2) prohibit coercion, tying, 
misrepresentations, and domestic violence discrimination; (3) require 
separation of deposit activities from insurance and annuity activities; 
(4) limit referral fees; and (5) require insurance and annuity sales 
personnel be appropriately qualified and licensed. The requirements of 
the proposed rules are mandated by section 47 of FDIA, as added by 
section 305 of the G-L-B Act. The proposed rules do not add to the 
statutory requirement in any significant way.
    To minimize the compliance burdens, the proposal would:
     Not apply to subsidiaries of depository institutions, 
except where such subsidiaries are selling, soliciting, advertising, or 
offering insurance products or annuities to consumers at an office of a 
bank or on behalf of a bank. The FDIC is proposing this approach even 
though under section 47(a)(2) of FDIA, the FDIC could apply the 
requirements to subsidiaries if it determined that doing so was 
necessary to ensure the consumer protections provided by the statute.
     Take a narrow approach to defining when a person is 
selling, soliciting, advertising, or offering insurance products or 
annuities on behalf of a bank. The Agencies have, however, requested 
comment on an alternative approach to this issue.
     Only apply to retail sales, solicitations, advertisements, 
or offers of insurance products or annuities to individuals. The 
Agencies have, however, requested comment on an alternative approach to 
this issue.
     Define ``office'' narrowly only to include premises of a 
savings association where retail deposits are accepted from the public.
     Permit disclosures to be provided through electronic 
media, obviating the need for oral or paper disclosures, where the 
consumer agrees and if the disclosures are provided in a format that 
the consumer may retain or obtain later.
     Remove impediments to telephone sales, solicitations, 
advertisements, and offers by permitting covered persons to provide 
disclosures orally by telephone and then timely follow up with written 
or electronic disclosures.
     Provide flexibility for covered persons to use a variety 
of means to provide disclosures that are readily understandable and 
call attention to the information.
     Permit consumers to use electronic media to acknowledge 
their receipt of disclosures.
     Not require disclosures in advertisements of a general 
nature describing or listing the services or products offered by the 
bank.
    Many banks and other persons may already be partly or fully 
prepared to meet the requirements of these proposed rules. As discussed 
below, many of the requirements such as those on disclosure, consumer 
acknowledgments, physical separation of deposit activities from 
nondeposit activities, training of sales personnel, and limitations on 
referral fees are similar to existing standards applicable to banks and 
others who offer or sell nondeposit investment products. Compliance 
with other requirements, such as the prohibition on domestic violence 
discrimination, will call for similar types of resources as are used to 
comply with other existing nondiscrimination statutes such as the Equal 
Credit Opportunity Act, 15 U.S.C. 1691-1691f, and the Fair Housing Act, 
42 U.S.C. 3601 et seq. Covered persons may need to provide further 
training or additional personnel, including personnel skilled in 
clerical, computer, compliance, and legal matters.
    The FDIC does not have a practicable or reliable basis for 
quantifying the costs of these proposed rules, or of any alternatives 
to the proposed rules. While the FDIC does not believe that the 
proposed rules would be burdensome, it is uncertain what the economic 
impact of compliance with the new requirements would be or how many 
persons would be subject to the rule. Rather than merely guess at the 
regulatory burden of these proposed rules, the FDIC solicits comment on 
these burdens and on ways to minimize the burdens, consistent with the 
G-L-B Act.

Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    While the scope of the proposed regulation implementing section 47 
of FDIA is unique, there is some overlap with certain prior guidance 
and Federal statutes and rules. As used in the Interagency Statement on 
Retail Sales of Nondeposit Investment Products (February 15, 1994) 
(``Interagency Statement''), the term ``nondeposit investment 
products,'' includes some products, such as annuities, that are covered 
by section 47 of FDIA and these proposed rules. The Interagency 
Statement provides, among other things, that institutions should 
disclose to customers that such products are not issued by the FDIC or 
the depository institution and are subject to investment risk including 
possible loss of principal. It also provides that institutions should 
obtain acknowledgments from customers verifying that they have received 
and understand the disclosures. The Interagency Statement further 
provides that retail sales or recommendations of nondeposit investment 
products should be conducted in a location physically distinct from 
where retail deposits are taken, that nondeposit investment product 
sales personnel should receive adequate training, and that referral 
fees should be limited.
    Other federal authorities that overlap with the proposed rules 
include the statutory prohibition on tying arrangements in section 
106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 
1972). State consumer protection rules also may apply to sales, 
solicitations, advertisements, and offers of insurance products or 
annuities.
    The proposed rules do not appear to conflict materially with the 
Interagency Statement or these other authorities. The FDIC seeks 
comment on any other Federal or State requirements that may duplicate, 
overlap, or conflict with the proposal.

Discussion of Significant Alternatives

    The requirements in the proposed rules parallel those in section 47 
of FDIA. The proposed rules would clarify the statutory requirements in 
some areas and restate the requirements in a more understandable manner 
in other areas. It would not impose any substantially different 
requirements. Since the requirements are set by statute, OTS has

[[Page 50891]]

only limited discretion to consider alternatives. To the extent that 
the FDIC does have discretion, it has exercised that discretion to 
minimize the burden as discussed above.
    Congress has decided that ``any depository institution'' and ``any 
person'' that is engaged in retail sales, solicitations, advertising, 
or offers of insurance products (or annuities) must comply. The G-L-B 
Act does not expressly authorize the FDIC to exempt small banks, 
affiliates, or persons from these requirements. The FDIC does not 
interpret the statute to permit such an exemption.
    The supplementary material provided above describes and solicits 
comment on a number of alternatives that would reduce the regulatory 
burden. These include:
     Providing a more expansive definition of ``electronic 
media'' to provide even more flexibility in meeting the disclosure and 
consumer acknowledgment requirements.
     Making revisions to ensure that covered persons may fully 
utilize electronic signatures and other provisions of the E-Sign Act.
     Defining the term ``insurance'' in ways that could narrow 
or clarify the scope of the rule.
    The FDIC requests comment on whether these or other alternatives 
would reduce the burdens and whether any exceptions for small 
institutions would be appropriate.
    OTS: The Regulatory Flexibility Act requires federal agencies to 
either prepare an initial regulatory flexibility analysis (IRFA) with a 
proposed rule or certify that the proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
OTS cannot, at this time, determine whether these proposed rules would 
have a significant economic impact on a substantial number of small 
entities. Therefore, OTS includes the following IRFA.
    A description of the reasons why OTS is considering this action and 
a statement of the objectives of, and legal basis for, these proposed 
rules, are contained in the supplementary materials provided above.
1. Small Entities to Which the Proposed Rules Would Apply
    The proposed rules would apply to savings associations and any 
other persons who, at an office of a savings association or on behalf 
of a savings association, sell, solicit, advertise, or offer insurance 
products or annuities to consumers. The proposed rules would apply 
regardless of the size of the savings association or other person.
    OTS calculates that of the approximately 1,097 savings 
associations, a maximum of 482 are small savings associations. Small 
savings associations are generally defined, for Regulatory Flexibility 
Act purposes, as those with assets under $100 million. 13 CFR 121.201, 
Division H (1999). OTS estimates that all of the small savings 
associations sell, solicit, advertise, or offer insurance products or 
annuities to consumers.
    OTS does not have data on how many other persons sell, solicit, 
advertise, or offer insurance products or annuities to consumers at an 
office of a savings association or on behalf of a savings association. 
OTS does not have data on how many of these other persons are small 
entities.
    OTS specifically seeks comment on the number and size of savings 
associations and other persons that are subject to the rule.
2. Requirements of the Proposed Rules
    As described more fully in the supplementary material provided 
above, the proposed rules: (1) Contain new disclosure and consumer 
acknowledgment requirements; (2) prohibit coercion, tying, 
misrepresentations, and domestic violence discrimination; (3) require 
separation of deposit activities from insurance and annuity activities; 
(4) limit referral fees; and (5) require insurance and annuity sales 
personnel be appropriately qualified and licensed. The requirements of 
the proposed rules are mandated by section 47 of FDIA, as added by 
section 305 of the G-L-B Act. The proposed rules do not add to the 
statutory requirement in any significant way.
    To minimize the compliance burdens, the proposal would:
     Not apply to subsidiaries of depository institutions, 
except where such subsidiaries are selling, soliciting, advertising, or 
offering insurance products or annuities to consumers at an office of a 
savings association or on behalf of a savings association. OTS is 
proposing this approach even though under section 47(a)(2) of FDIA OTS 
could apply the requirements to subsidiaries if it determined that 
doing so was necessary to ensure the consumer protections provided by 
the statute.
     Take a narrow approach to defining when a person is 
selling, soliciting, advertising, or offering insurance products or 
annuities on behalf of a savings association. The Agencies have, 
however, requested comment on an alternative approach to this issue.
     Only apply to retail sales, solicitations, advertisements, 
or offers of insurance products or annuities to individuals. The 
Agencies have, however, requested comment on an alternative approach to 
this issue.
     Define ``office'' narrowly only to include premises of a 
savings association where retail deposits are accepted from the public.
     Permit disclosures to be provided through electronic 
media, obviating the need for oral or paper disclosures, where the 
consumer affirmatively consents and if the disclosures are provided in 
a format that the consumer may retain or obtain later.
     Remove impediments to telephone sales, solicitations, 
advertisements, and offers by permitting covered persons to provide 
certain disclosures orally by telephone and then timely follow up with 
written or electronic disclosures.
     Provide flexibility for covered persons to use a variety 
of means to provide disclosures that are readily understandable and 
call attention to the information.
     Permit consumers to use electronic media to acknowledge 
their receipt of disclosures.
     Not require disclosures in advertisements of a general 
nature describing or listing the services or products offered by the 
savings association.
    Many savings associations and other persons may already be partly 
or fully prepared to meet the requirements of these proposed rules. As 
discussed below, many of the requirements such as those on disclosure, 
consumer acknowledgments, physical separation of deposit activities 
from nondeposit activities, training of sales personnel, and 
limitations on referral fees are similar to existing standards 
applicable to savings associations and others who offer or sell 
nondeposit investment products. Persons selling, soliciting, 
advertising, or offering insurance products or annuities may have to 
revise printed materials and modify Internet web sites. Compliance with 
other requirements, such as the prohibition on domestic violence 
discrimination, will call for similar types of resources as are used to 
comply with other existing nondiscrimination statutes such as the Equal 
Credit Opportunity Act, 15 U.S.C. 1691-1691f, and the Fair Housing Act, 
42 U.S.C. 3601 et seq. Covered persons may need to provide further 
training or additional personnel, including personnel skilled in 
clerical, computer, compliance, and legal matters.
    OTS does not have a practicable or reliable basis for quantifying 
the costs of these proposed rules, or of any

[[Page 50892]]

alternatives to the rule. While OTS does not believe that the rule 
would be burdensome, it is uncertain what the economic impact of 
compliance with the new requirements would be or how many persons would 
be subject to the rule. Rather than merely guess at the regulatory 
burden of these proposed rules, OTS solicits comment on these burdens 
and on ways to minimize the burdens, consistent with the G-L-B Act.
3. Significant Alternatives
    The requirements in the proposed rules parallel those in section 47 
of FDIA. The proposed rules would clarify the statutory requirements in 
some areas and restate the requirements in a more understandable manner 
in other areas. It would not impose any substantially different 
requirements. Since the requirements are set by statute, OTS has only 
limited discretion to consider alternatives. To the extent that OTS 
does have discretion, it has exercised that discretion to minimize the 
burden as discussed in section 2 above.
    Congress has decided that ``any depository institution'' and ``any 
person'' that is engaged in retail sales, solicitations, advertising, 
or offers of insurance products (or annuities) must comply. The G-L-B 
Act does not expressly authorize OTS to exempt small savings 
associations, affiliates, or persons from these requirements. OTS does 
not interpret the statute to permit such an exemption.
    The supplementary material provided above describes and solicits 
comment on a number of alternatives that would reduce the regulatory 
burden. These include:
     Providing a more expansive definition of ``electronic 
media'' to provide even more flexibility in meeting the disclosure and 
consumer acknowledgment requirements.
     Making revisions to ensure that covered persons may fully 
utilize electronic signatures and other provisions of the E-Sign Act.
     Defining the term ``insurance'' in ways that could narrow 
or clarify the scope of the rule.
    OTS requests comment on whether these or other alternatives would 
reduce the burdens and whether any exceptions for small institutions 
would be appropriate.
4. Other Matters
    While the scope of the proposed regulation implementing section 47 
of FDIA is unique, there is some overlap with certain prior guidance 
and Federal statutes and rules. As used in the Interagency Statement on 
Retail Sales of Nondeposit Investment Products (February 15, 1994) 
(``Interagency Statement''), the term ``nondeposit investment 
products,'' includes some products, such as annuities, that are covered 
by section 47 of FDIA and these proposed rules. The Interagency 
Statement provides, among other things, that institutions should 
disclose to customers that such products are not insured by the FDIC or 
the depository institution and are subject to investment risk including 
possible loss of principal. It also provides that institutions should 
obtain acknowledgments from customers verifying that they have received 
and understand the disclosures. The Interagency Statement further 
provides that retail sales or recommendations of nondeposit investment 
products should be conducted in a location physically distinct from 
where retail deposits are taken, that nondeposit investment product 
sales personnel should receive adequate training, and that referral 
fees should be limited.
    Other federal authorities that overlap with the proposed rules 
include the statutory prohibition on tying arrangements in section 5(q) 
of the Home Owners' Loan Act (12 U.S.C. 1464(q)), and OTS's regulation 
prohibiting advertising that is inaccurate or makes misrepresentations 
(12 CFR 563.27). State consumer protection rules also may apply to 
sales, solicitations, advertisements, and offers of insurance products 
or annuities.
    The proposed rules do not appear to conflict materially with the 
Interagency Statement or these other authorities. OTS seeks comment on 
any other Federal or State requirements that may duplicate, overlap, or 
conflict with the proposal.

C. Executive Order 12866

    OCC: The Comptroller of the Currency has determined that these 
proposed rules, if adopted as a final rule, would not constitute a 
``significant regulatory action'' for the purposes of Executive Order 
12866. While the OCC's cost estimates are necessarily imprecise because 
the requirements included in the proposal result from new legislation, 
under the most conservative cost scenarios that the OCC can develop on 
the basis of available information, the impact of the proposal falls 
well short of the thresholds established by the Executive Order.
    OTS: OTS has determined that these proposed rules, if adopted as a 
final rule, would not constitute a ``significant regulatory action'' 
for the purposes of Executive Order 12866. The rule follows closely the 
requirements of section 305 of the G-L-B Act. Since the G-L-B Act 
establishes the minimum requirements for this activity, OTS has little 
discretion to propose regulatory options that might significantly 
reduce costs or other burdens.
    Nevertheless, OTS acknowledges that the rule would impose costs on 
covered persons by requiring them to make disclosures and obtain 
consumer acknowledgments of those disclosures. While OTS does not 
believe that the impact of the rule would meet the thresholds of the 
Executive Order, OTS invites the thrift industry and the public to 
provide any cost estimates and related data that they think would be 
useful to the agency in evaluating the overall costs of the rule. OTS 
will review carefully the comments and cost data that you provide and 
will revisit the cost aspects of the G-L-B Act as implemented by this 
proposal in developing the final rule.

D. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
also requires the agency to identify and consider a reasonable number 
of regulatory alternatives before promulgating the rule. However, an 
agency is not required to assess the effects of its regulatory actions 
on the private sector to the extent that such regulations incorporate 
requirements specifically set forth in law. 2 U.S.C. 1531. Most of the 
proposed rules' provisions are already mandated by the applicable 
provisions in section 305 of the G-L-B Act, which would become 
effective and binding on the private sector without a regulatory 
promulgation. Therefore, the OCC and OTS have determined that this 
proposed regulation will not result in expenditures by State, local, 
and tribal governments, in the aggregate, or by the private sector, of 
$100 million or more in any one year. Accordingly, the OCC and OTS have 
not prepared a budgetary impact statement or specifically addressed the 
regulatory alternatives considered.

E. Executive Order 13132--Federalism

    OCC: Executive Order 13132 imposes certain requirements when an 
agency issues a regulation that has federalism implications or that 
preempts State law.

[[Page 50893]]

Under the Executive Order, a regulation has federalism implications if 
it has substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
In general, the Executive Order requires the agency to adhere strictly 
to federal constitutional principles in developing rules that have 
federalism implications; provides guidance about an agency's 
interpretation of statutes that authorize regulations that preempt 
State law; and requires consultation with State officials before the 
agency issues a final rule that has federalism implications or that 
preempts State law.
    In the OCC's opinion, it is not clear that Executive Order 13132 
applies to the OCC's rules implementing section 305 of the G-L-B Act 
because the statute itself directs most of the significant policy 
choices that the Agencies have made--that is, the statute expressly 
prescribes both the substantive content and the preemptive effect of 
the rules. Moreover, the effect of the language of the express 
preemption provision in section 305 is to preserve State laws, subject 
to certain exceptions, rather than to preempt them. Under that 
provision, the insurance customer protections in the Agencies' rules 
generally will not have preemptive effect in a State where the State 
has in effect statutes, rules, regulations, orders, or interpretations 
that are inconsistent with or contrary to the regulations prescribed by 
the Agencies unless a provision in the Agencies' rules affords greater 
protection to customers than is afforded by a comparable State law. 
Section 305 prescribes a process for the Agencies to use in order to 
determine jointly whether a provision in the Agencies' regulations 
satisfies this ``greater protection'' standard. If the Agencies make 
that joint determination, and provide written notice to the affected 
State that its law is preempted, then that provision of State law will 
be preempted unless, within 3 years after the date that the Agencies 
issue the written notice, the State adopts legislation that overrides 
the preemption.
    Elsewhere in the Supplementary Information, the OCC and the other 
Agencies have asked for comment on the best way to administer these 
provisions in order to reduce uncertainty on the part of the 
institutions we supervise about whether federal or State standards 
apply. Regardless of how the Agencies address this practical issue, 
however, the federalism implications and the preemptive effect of the 
OCC's rules implementing section 305 depend, in the first instance, on 
how the Agencies' final rules compare with a particular State's laws 
and, ultimately, on whether a State adopts the ``opt-out'' legislation 
that section 305 permits.
    Nonetheless, the OCC plans for its final rules to satisfy the 
requirements of the Executive Order. If an agency promulgates a 
regulation that has federalism implications and preempts State law, the 
Executive Order imposes upon the agency requirements to consult with 
State and local officials; to publish a ``federalism summary impact 
statement,'' and to make written comments from State and local 
officials available to the Director of the Office of Management and 
Budget (OMB).
    Separately, section 305 requires the Agencies to consult with State 
insurance regulators before issuing final implementing regulations. As 
described elsewhere in the Supplementary Information, the OCC and the 
other Agencies have consulted with the NAIC and provided them with an 
advance copy of the proposal. The OCC has provided an advance copy of 
the proposal to the Conference of State Bank Supervisors. The OCC will 
include in the preamble to the final rules a federalism summary impact 
statement that comports with the requirements of the Executive Order, 
and we will make any written comments we receive from State or local 
officials available to the Director of OMB.
    OTS: Executive Order 13132 imposes certain requirements on an 
agency when formulating and implementing policies that will have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, or taking 
actions that preempt state law. Section 47(g) of FDIA, 12 U.S.C. 1831x, 
as added by section 305 of the G-L-B Act, provides that the insurance 
consumer protections in the Agencies' rules generally will not apply to 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by any savings association 
or any person that is engaged in such activities at an office of the 
savings association or on behalf of the savings association in a State 
where the State has in effect statutes, regulations, orders, or 
interpretations that are inconsistent with or contrary to the 
provisions of the federal regulations. However, if the federal 
regulations afford greater protection for insurance consumers than a 
comparable State law, rule, regulation, order, or interpretation, the 
State provision may be preempted in accordance with certain specified 
procedures.
    OTS has determined that application of these statutorily-mandated 
provisions, through its proposed rule, will have federalism 
implications and may result in the preemption of state law. Section 
47(a) of FDIA obligates OTS to issue this regulation to implement 
section 305 of the G-L-B Act, which includes section 47(g) of FDIA. 
Consistent with section 47(a)(3) of FDIA and section 6(c) of Executive 
Order 13132, the Agencies have consulted with the National Association 
of Insurance Commissioners (NAIC), as indicated in the Supplementary 
Information above. The Agencies provided an advance copy of the 
proposed rule to the NAIC and the NAIC commented that the rule should 
expressly acknowledge the applicability of state insurance requirements 
to banks and savings associations offering or selling insurance. In 
response, the Agencies have indicated in the preamble that State 
consumer protection rules also may apply to bank and savings 
association insurance sales. OTS has also provided a copy of the 
proposed rule to the Conference of State Bank Supervisors. OTS invites 
comment on the federalism and preemption issues implicated by this 
proposed rule.

Solicitation of Comments on Use of ``Plain Language''

    Section 722 of the G-L-B Act requires the Federal banking Agencies 
to use ``plain language'' in all proposed and final rules published 
after January 1, 2000. We invite your comments on how to make these 
proposed rules easier to understand. For example:
     Have we organized the material to suit your needs? If not, 
how could the material be better organized?
     Are the requirements in the rule clearly stated? If not, 
how could the rule be more clearly stated?
     Does the rule contain technical language or jargon that 
isn't clear? If not, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the rule easier to understand? If 
so, what changes to the format would make the rule easier to 
understand?
     Would more (but shorter) sections be better? If so, which 
sections should be changed?
     What else could we do to make the rule easier to 
understand?

[[Page 50894]]

OCC Comment Solicitation on Impact on Community Banks

    The OCC also seeks comments on the impact of this proposal on 
community banks. The OCC recognizes that community banks operate with 
more limited resources than larger institutions and may present a 
different risk profile. Thus, the OCC specifically requests comments on 
the impact of the proposal on community banks' current resources and 
available personnel with the requisite expertise, and whether the goals 
of the proposed regulation could be achieved, for community banks, 
through an alternative approach.

List of Subjects

12 CFR Part 14

    Banks, banking; Insurance consumer protection; National banks.

12 CFR Part 208

    Accounting, Agriculture, Banks, Banking, Confidential business 
information, Crime, Currency, Federal Reserve System, Insurance 
consumer protection, Mortgages, Reporting and recordkeeping 
requirements, Securities.

12 CFR Part 343

    Banks, banking; Insurance consumer protection.

12 CFR Part 536

    Consumer protection, Insurance, Reporting and recordkeeping 
requirements, Savings associations.

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set out in the joint preamble, the OCC proposes to 
amend chapter I of title 12 of the Code of Federal Regulations by 
adding a new part 14 to read as follows:

PART 14--CONSUMER PROTECTION IN SALES OF INSURANCE

Sec.
14.10   Purpose and scope.
14.20   Definitions.
14.30   Prohibited practices.
14.40   What a covered person must disclose.
14.50   Where insurance activities may take place.
14.60   Qualification and licensing requirements for insurance sales 
personnel.

Appendix to Part 14--Consumer Grievance Process.

    Authority: 12 U.S.C. 1 et seq., 24 (Seventh), 92, 93a, 1818, and 
1831x.


Sec. 14.10  Purpose and scope.

    This part establishes consumer protections in connection with 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by any national bank or by 
any person that is engaged in such activities at an office of the 
national bank or on behalf of the bank. For purposes of this part, the 
terms ``national bank'' or ``bank'' includes a Federal Branch or agency 
of a foreign bank as defined in section 1 of the International Banking 
Act of 1978 (12 U.S.C. 3101, et seq.) For purposes of Sec. 5.34(e)(3) 
of this chapter, an operating subsidiary is subject to this part only 
to the extent that it sells, solicits, advertises, or offers insurance 
products or annuities at an office of a national bank or on behalf of a 
national bank.


Sec. 14.20  Definitions.

    As used in this part:
    (a) Affiliate means a company that controls, is controlled by, or 
is under common control with another company.
    (b) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    (c) Consumer means an individual who obtains, applies to obtain, or 
is solicited to obtain insurance products or annuities from a covered 
person.
    (d) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (e) Covered person means a national bank or Federal branch or any 
other person selling, soliciting, advertising, or offering insurance 
products or annuities to a consumer at an office of the national bank, 
or on behalf of the bank. For purposes of this definition, activities 
on behalf of a national bank include activities where a person, whether 
at an office of the bank or at another location sells, solicits, 
advertises, or offers an insurance product or annuity and:
    (1) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the national bank;
    (2) The depository institution receives commissions or fees, in 
whole or in part, derived from the sale of an insurance product or 
annuity as a result of cross-marketing or referrals by the bank or an 
affiliate;
    (3) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the bank 
or use its corporate logo or corporate name; or
    (4) The sale, solicitation, advertising, or offer of an insurance 
product or annuity takes place at an off-premises site, such as a 
kiosk, that identifies or refers to the bank or uses its corporate logo 
or corporate name.
    (f) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (g) Electronic media includes any means for transmitting messages 
electronically between a covered person and a consumer in a format that 
allows visual text to be displayed on equipment, for example, a 
personal computer monitor.
    (h) Office means the premises of a national bank where retail 
deposits are accepted from the public.
    (i) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).


Sec. 14.30  Prohibited practices.

    (a) Anticoercion and antitying rules. A covered person may not 
engage in any practice that would lead a consumer to believe that an 
extension of credit, in violation of section 106(b) of the Bank Holding 
Company Act Amendments of 1970 (12 U.S.C. 1972), is conditional upon 
either:
    (1) The purchase of an insurance product or annuity from the 
national bank or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the

[[Page 50895]]

consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. A covered person 
may not engage in any practice or use any advertisement at any office 
of, or on behalf of, the bank or a subsidiary of the bank that could 
mislead any person or otherwise cause a reasonable person to reach an 
erroneous belief with respect to:
    (1) The fact that any insurance product or annuity sold or offered 
for sale by a covered person or any subsidiary of the bank is not 
backed by the Federal government or the bank, or the fact that the 
insurance product or annuity is not insured by the Federal Deposit 
Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank or subsidiary of the bank at which 
insurance products or annuities are sold or offered for sale, the fact 
that:
    (i) The approval of an extension of credit to a consumer by the 
bank or subsidiary may not be conditioned on the purchase of an 
insurance product or annuity by the consumer from the bank or a 
subsidiary of the bank; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. A covered 
person may not, with regard to any insurance underwriting, pricing, 
renewal, or scope of coverage decision, or payment of insurance claims, 
on a life or health insurance product consider as a criterion the 
status of the person applying for the insurance, or the person who is 
insured, as a victim of domestic violence or a provider of services to 
domestic violence victims, except as required or expressly permitted 
under State law.


Sec. 14.40  What a covered person must disclose.

    (a) Disclosures. In connection with the initial purchase of an 
insurance product or annuity by a consumer from a covered person, a 
covered person must disclose to the consumer that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the national bank or (if applicable) 
an affiliate of the bank;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, the national bank, or (if applicable) an affiliate of the bank;
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value; and
    (4) The national bank may not condition an extension of credit on 
either:
    (i) The consumer's purchase of an insurance product or annuity from 
the bank or any of its affiliates; or
    (ii) The consumer's agreement not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Timing and method of disclosures. (1) In general. (i) The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer.
    (ii) The disclosures required by paragraph (a)(4) of this section 
must also be made orally and in writing at the time the consumer 
applies for an extension of credit in connection with which an 
insurance product or annuity will be solicited, offered, or sold. If a 
covered person takes an application for such credit by telephone, the 
covered person may provide the written disclosure required by paragraph 
(a)(4) of this section by mail, provided the covered person mails it to 
the consumer within three days, excluding Sundays and the legal public 
holidays specified in 5 U.S.C. 6103(a).
    (2) Electronic form of disclosures. (i) Where the consumer 
affirmatively consents, a covered person may provide the written 
disclosures required by paragraph (a) of this section through 
electronic media instead of on paper, if they are provided in a format 
that the consumer may retain or obtain later, for example, by printing 
or storing electronically (such as by downloading).
    (ii) If the sale of an insurance product or annuity is conducted 
entirely through the use of electronic media, and the disclosures are 
provided electronically, a covered person is not required to provide 
disclosures orally.
    (3) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, a covered person may use the 
following disclosures, as appropriate and consistent with paragraph (a) 
of this section:

     Not a Deposit
     Not FDIC-Insured
     Not Insured by any Federal Government Agency
     Not Guaranteed by the Bank
     May Go Down in Value

    (4) Disclosures must be meaningful. (i) A covered person must 
provide the disclosures required by paragraph (a) of this section in a 
meaningful form. A covered person has not provided the disclosures in a 
meaningful form if the covered person merely states to the consumer 
that the required disclosures are available in printed material, but 
does not provide the printed material when required and does not orally 
disclose the information to the consumer when required. A covered 
person provides the disclosures in a meaningful form if the covered 
person provides the disclosures in printed form and orally discloses 
the information to the consumer, or if the covered person provides the 
disclosures through electronic media under paragraph (b)(2) of this 
section and complies with paragraph (b)(4)(ii) of this section.
    (ii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass 
the visual text of the disclosures before purchasing an insurance 
product or annuity.
    (5) Consumer acknowledgment. A covered person must obtain from the 
consumer, at the time a consumer receives the disclosures required 
under this section or at the time of the initial purchase by the 
consumer of an insurance product or annuity, a written acknowledgment 
by the consumer that the consumer received the disclosures. A consumer 
who has received disclosures through electronic media may acknowledge 
receipt of the disclosures electronically or in paper form.
    (c) Advertisements and other promotional material. The disclosures 
required by this section are not required in advertisements of a 
general nature describing or listing the services or products offered 
by the national bank.


Sec. 14.50  Where insurance activities may take place.

    (a) General rule. A national bank must, to the extent practicable, 
keep the area where the bank conducts transactions involving insurance 
products or annuities physically segregated from areas where retail 
deposits are routinely accepted from the general public, identify the 
areas where insurance product or annuity sales activities occur, and 
clearly delineate and distinguish those areas from the

[[Page 50896]]

areas where the national bank's retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in the bank may 
refer a consumer who seeks to purchase an insurance product or annuity 
to a qualified person who sells that product only if the person making 
the referral receives no more than a one-time, nominal fee of a fixed 
dollar amount for each referral that does not depend on whether the 
referral results in a transaction.


Sec. 14.60  Qualification and licensing requirements for insurance 
sales personnel.

    A national bank may not permit any person to sell or offer for sale 
any insurance product or annuity in any part of its office or on its 
behalf, unless the person is at all times appropriately qualified and 
licensed under applicable State insurance licensing standards with 
regard to the specific products being sold or recommended.

Appendix to Part 14--Consumer Grievance Process

    Any consumer who believes that any national bank or any other 
person selling, soliciting, advertising, or offering insurance 
products or annuities to the consumer at an office of the national 
bank or on behalf of the bank has violated the requirements of this 
part should contact the Customer Assistance Group, Office of the 
Comptroller of the Currency at the following address: 1301 McKinney 
Street, Suite 3710, Houston, Texas 77010-3031.

    Dated: August 14, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.

Board of Governors of the Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons set out in the joint preamble, the Board proposes 
to amend part 208, chapter II, title 12 of the Code of Federal 
Regulations as follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

    1. The authority citation for part 208 is proposed to be revised to 
read as follows:

    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 
2901-2907, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 
781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C. 
5318, 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.

    2. The existing subpart H--Interpretations is proposed to be 
redesignated as subpart I.
    3. A new subpart H is proposed to be added to read as follows:

Subpart H--Consumer Protection in Sales of Insurance

Sec.
208.81   Purpose and scope.
208.82   Definitions for purposes of this subpart.
208.83   Prohibited practices.
208.84   What you must disclose.
208.85   Where insurance activities may take place.
208.86   Qualification and licensing requirements for insurance 
sales personnel.

Appendix to Subpart H--Consumer Grievance Process.


Sec. 208.81  Purpose and scope.

    This subpart establishes consumer protections in connection with 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by any state member bank or 
by any person that is engaged in such activities at an office of the 
state member bank or on behalf of the bank.


Sec. 208.82  Definitions for purposes of this subpart.

    As used in this subpart:
    (a) Affiliate means a company that controls, is controlled by, or 
is under common control with another company.
    (b) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    (c) Consumer means an individual who obtains, applies to obtain, or 
is solicited to obtain insurance products or annuities from you.
    (d) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (e) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (f) Electronic media includes any means for transmitting messages 
electronically between you and a consumer in a format that allows 
visual text to be displayed on equipment, for example, a personal 
computer monitor.
    (g) Office means the premises of a state member bank where retail 
deposits are accepted from the public.
    (h) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
    (i) You means a state member bank or any other person selling, 
soliciting, advertising, or offering insurance products or annuities to 
a consumer at an office of the state member bank, or on behalf of the 
bank. For purposes of this definition, activities on behalf of a state 
member bank include activities where a person, whether at an office of 
the bank or at another location sells, solicits, advertises, or offers 
an insurance product or annuity and:
    (1) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the state member bank;
    (2) The state member bank receives commissions or fees, in whole or 
in part, derived from the sale of an insurance product or annuity as 
result of cross-marketing or referrals by the bank or an affiliate;
    (3) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the bank 
or use its corporate logo or corporate name; or
    (4) The sale, solicitation, advertising, or offer of an insurance 
product or annuity takes place at an off-premises site, such as a 
kiosk, that identifies or refers to the bank or uses its corporate logo 
or corporate name.


Sec. 208.83  Prohibited practices.

    (a) Anticoercion and antitying rules. You may not engage in any 
practice that

[[Page 50897]]

would lead a consumer to believe that an extension of credit, in 
violation of section 106(b) of the Bank Holding Company Act Amendments 
of 1970 (12 U.S.C. 1972), is conditional upon either:
    (1) The purchase of an insurance product or annuity from the state 
member bank or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. You may not engage 
in any practice or use any advertisement at any office of, or on behalf 
of, the bank or a subsidiary of the bank that could mislead any person 
or otherwise cause a reasonable person to reach an erroneous belief 
with respect to:
    (1) The fact that any insurance product or annuity sold or offered 
for sale by you or any subsidiary of the bank is not backed by the 
Federal government or the bank, or the fact that the insurance product 
or annuity is not insured by the Federal Deposit Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank or subsidiary of the bank at which 
insurance products or annuities are sold or offered for sale, the fact 
that:
    (i) The approval of an extension of credit to a consumer by the 
bank or subsidiary may not be conditioned on the purchase of an 
insurance product or annuity by the consumer from the bank or a 
subsidiary of the bank; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. You may not, 
with regard to any insurance underwriting, pricing, renewal, or scope 
of coverage decision, or payment of insurance claims, on a life or 
health insurance product consider as a criterion the status of the 
person applying for the insurance, or the person who is insured, as a 
victim of domestic violence or a provider of services to domestic 
violence victims, except as required or expressly permitted under State 
law.


Sec. 208.84  What you must disclose.

    (a) Disclosures. In connection with the initial purchase of an 
insurance product or annuity by a consumer from you, you must disclose 
to the consumer that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the state member bank or (if 
applicable) an affiliate of the bank;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, the state member bank, or (if applicable) an affiliate of the 
bank;
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value; and
    (4) The state member bank may not condition an extension of credit 
on either:
    (i) The consumer's purchase of an insurance product or annuity from 
the bank or any of its affiliates; or
    (ii) The consumer's agreement not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Timing and method of disclosures. (1) In general. (i) The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer.
    (ii) The disclosures required by paragraph (a)(4) of this section 
must also be made orally and in writing at the time the consumer 
applies for an extension of credit in connection with which insurance 
will be solicited, offered, or sold. If you take an application for 
such credit by telephone, you may provide the written disclosure 
required by paragraph (a)(4) of this section by mail, provided you mail 
it to the consumer within three days, excluding Sundays and the legal 
public holidays specified in 5 U.S.C. 6103(a).
    (2) Electronic form of disclosures. (i) Where the consumer 
affirmatively consents, you may provide the written disclosures 
required by paragraph (a) of this section through electronic media 
instead of on paper, if they are provided in a format that the consumer 
may retain or obtain later, for example, by printing or storing 
electronically (such as by downloading).
    (ii) If the sale of an insurance product or annuity is conducted 
entirely through the use of electronic media, and the disclosures are 
provided electronically, you are not required to provide disclosures 
orally.
    (3) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, you may use the following 
disclosures, as appropriate and consistent with paragraph (a) of this 
section:

 Not a Deposit
 Not FDIC-Insured
 Not Insured by any Federal Government Agency
 Not Guaranteed by the Bank
 May Go Down in Value


    (4) Disclosures must be meaningful. (i) You must provide the 
disclosures required by paragraph (a) of this section in a meaningful 
form. You have not provided the disclosures in a meaningful form if you 
merely state to the consumer that the required disclosures are 
available in printed material, but you do not provide the printed 
material when required and do not orally disclose the information to 
the consumer when required. You provide the disclosures in a meaningful 
form if you provide the disclosures in printed form and orally disclose 
the information to the consumer, or if you provide the disclosures 
through electronic media under paragraph (b)(2) of this section and 
comply with paragraph (b)(4)(ii) of this section.
    (ii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass 
the visual text of the disclosures before purchasing an insurance 
product or annuity.
    (5) Consumer acknowledgment. You must obtain from the consumer, at 
the time a consumer receives the disclosures required under this 
section or at the time of the initial purchase by the consumer of an 
insurance product or annuity, a written acknowledgment by the consumer 
that the consumer received the disclosures. A consumer who has received 
disclosures through electronic media may acknowledge receipt of the 
disclosures electronically or in paper form.
    (c) Advertisements and other promotional material. The disclosures 
required by this section are not required in advertisements of a 
general nature describing or listing the services or products offered 
by the state member bank.


Sec. 208.85  Where insurance activities may take place.

    (a) General rule. A state member bank must, to the extent 
practicable, keep the area where the bank conducts transactions 
involving insurance products or annuities physically segregated from 
areas where retail deposits are routinely accepted from the general 
public, identify the areas where insurance product or annuity sales 
activities occur, and clearly delineate

[[Page 50898]]

and distinguish those areas from the areas where the state member 
bank's retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in the bank may 
refer a consumer who seeks to purchase an insurance product or annuity 
to a qualified person who sells that product only if the person making 
the referral receives no more than a one-time, nominal fee of a fixed 
dollar amount for each referral that does not depend on whether the 
referral results in a transaction.


Sec. 208.86  Qualification and licensing requirements for insurance 
sales personnel.

    A state member bank may not permit any person to sell or offer for 
sale any insurance product or annuity in any part of its office or on 
its behalf, unless the person is at all times appropriately qualified 
and licensed under applicable State insurance licensing standards with 
regard to the specific products being sold or recommended.

Appendix to Subpart H--Consumer Grievance Process

    Any consumer who believes that any state member bank or any 
other person selling, soliciting, advertising, or offering insurance 
products or annuities to the consumer at an office of the state 
member bank or on behalf of the bank has violated the requirements 
of this subpart should contact the Consumer Complaints Section, 
Division of Consumer and Community Affairs, Board of Governors of 
the Federal Reserve System at the following address: 20th & C 
Streets, NW, Washington, DC 20551.

    By order of the Board of Governors of the Federal Reserve 
System, August 15, 2000.
Jennifer J. Johnson,
Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

    For the reasons set out in the joint preamble, the Federal Deposit 
Insurance Corporation proposes to amend chapter III of title 12 of the 
Code of Federal Regulations by adding a new part 343 to read as 
follows:

PART 343--CONSUMER PROTECTION IN SALES OF INSURANCE

Sec.
343.10   Purpose and scope.
343.20   Definitions.
343.30   Prohibited practices.
343.40   What a covered person must disclose.
343.50   Where insurance activities may take place.
343.60   Qualification and licensing requirements for insurance 
sales personnel.

Appendix to Part 343--Consumer Grievance Process.

    Authority: 12 U.S.C. 1819 (Seventh and Tenth); 12 U.S.C. 1831x.


Sec. 343.10  Purpose and scope.

    This part establishes consumer protections in connection with 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by any bank or by any person 
that is engaged in such activities at an office of the bank or on 
behalf of the bank.


Sec. 343.20  Definitions.

    As used in this part:
    (a) Affiliate means a company that controls, is controlled by, or 
is under common control with another company.
    (b) Bank means an FDIC-insured, state-chartered commercial or 
savings bank that is not a member of the Federal Reserve System and for 
which the FDIC is the appropriate federal banking agency pursuant to 
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).
    (c) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any state, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    (d) Consumer means an individual who obtains, applies to obtain, or 
is solicited to obtain insurance products or annuities from a covered 
person.
    (e) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (f) Covered person or you means a bank, as defined in paragraph (b) 
of this section, or any other person selling, soliciting, advertising, 
or offering insurance products or annuities to a consumer at an office 
of the bank, or on behalf of the bank. For purposes of this definition, 
activities on behalf of a bank include activities where a person, 
whether at an office of the bank or at another location sells, 
solicits, advertises, or offers an insurance product or annuity and:
    (1) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the bank;
    (2) The depository institution receives commissions or fees, in 
whole or in part, derived from the sale of an insurance product or 
annuity as a result of cross-marketing or referrals by the bank or an 
affiliate;
    (3) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the bank 
or use its corporate logo or corporate name; or
    (4) The sale, solicitation, advertising, or offer of an insurance 
product or annuity takes place at an off-premises site, such as a 
kiosk, that identifies or refers to the bank or uses its corporate logo 
or corporate name.
    (g) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (h) Electronic media includes any means for transmitting messages 
electronically between a covered person and a consumer in a format that 
allows visual text to be displayed on equipment, for example, a 
personal computer monitor.
    (i) Office means the premises of a bank where retail deposits are 
accepted from the public.
    (j) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).


Sec. 343.30  Prohibited practices.

    (a) Anticoercion and anti-tying rules. A covered person may not 
engage in any practice that would lead a consumer to believe that an 
extension of credit, in violation of section 106(b) of the Bank Holding 
Company Act Amendments of 1970 (12 U.S.C. 1972), is conditional upon 
either:
    (1) The purchase of an insurance product or annuity from the bank 
or any of its affiliates; or

[[Page 50899]]

    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. A covered person 
may not engage in any practice or use any advertisement at any office 
of, or on behalf of, the bank or a subsidiary of the bank that could 
mislead any person or otherwise cause a reasonable person to reach an 
erroneous belief with respect to:
    (1) The fact that any insurance product or annuity sold or offered 
for sale by a covered person or any subsidiary of the bank is not 
backed by the federal government or the bank, or the fact that the 
insurance product or annuity is not insured by the Federal Deposit 
Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank or subsidiary of the bank at which 
insurance products or annuities are sold or offered for sale, the fact 
that:
    (i) The approval of an extension of credit to a consumer by the 
bank or subsidiary may not be conditioned on the purchase of an 
insurance product or annuity by the consumer from the bank or a 
subsidiary of the bank; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. A covered 
person may not, with regard to any insurance underwriting, pricing, 
renewal, or scope of coverage decision, or payment of insurance claims, 
on a life or health insurance product consider as a criterion the 
status of the person applying for the insurance, or the person who is 
insured, as a victim of domestic violence or a provider of services to 
domestic violence victims, except as required or expressly permitted 
under state law.


Sec. 343.40  What a covered person must disclose.

    (a) Disclosures. In connection with the initial purchase of an 
insurance product or annuity by a consumer from a covered person, a 
covered person must disclose to the consumer that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the bank or (if applicable) an 
affiliate of the bank;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, the bank, or (if applicable) an affiliate of the bank;
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value; and
    (4) The bank may not condition an extension of credit on either:
    (i) The consumer's purchase of an insurance product or annuity from 
the bank or any of its affiliates; or
    (ii) The consumer's agreement not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Timing and method of disclosures. (1) In general. (i) The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer.
    (ii) The disclosures required by paragraph (a)(4) of this section 
must also be made orally and in writing at the time the consumer 
applies for an extension of credit in connection with which an 
insurance product or annuity will be solicited, offered, or sold. If a 
covered person takes an application for such credit by telephone, the 
covered person may provide the written disclosure required by paragraph 
(a)(4) of this section by mail, provided the covered person mails it to 
the consumer within three days, excluding Sundays and the legal public 
holidays specified in 5 U.S.C. 6103(a).
    (2) Electronic form of disclosures. (i) Where the consumer 
affirmatively consents, a covered person may provide the written 
disclosures required by paragraph (a) of this section through 
electronic media instead of on paper, if they are provided in a format 
that the consumer may retain or obtain later, for example, by printing 
or storing electronically (such as by downloading).
    (ii) If the sale of an insurance product or annuity is conducted 
entirely through the use of electronic media, and the disclosures are 
provided electronically, a covered person is not required to provide 
disclosures orally.
    (3) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, a covered person may use the 
following disclosures, as appropriate and consistent with paragraph (a) 
of this section:

 Not a Deposit
 Not FDIC-Insured
 Not Insured by any Federal Government Agency
 Not Guaranteed By the Bank [or Savings Association]
 May Go Down in Value

    (4) Disclosures must be meaningful. (i) A covered person must 
provide the disclosures required by paragraph (a) of this section in a 
meaningful form. A covered person has not provided the disclosures in a 
meaningful form if the covered person merely states to the consumer 
that the required disclosures are available in printed material, but 
does not provide the printed material when required and does not orally 
disclose the information to the consumer when required. A covered 
person provides the disclosures in a meaningful form if the covered 
person provides the disclosures in printed form and orally discloses 
the information to the consumer, or if the covered person provides the 
disclosures through electronic media under paragraph (b)(2) of this 
section and complies with paragraph (b)(4)(ii) of this section.
    (ii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass 
the visual text of the disclosures before purchasing an insurance 
product or annuity.
    (5) Consumer acknowledgment. A covered person must obtain from the 
consumer, at the time a consumer receives the disclosures required 
under this section or at the time of the initial purchase by the 
consumer of an insurance product or annuity, a written acknowledgment 
by the consumer that the consumer received the disclosures. A consumer 
who has received disclosures through electronic media may acknowledge 
receipt of the disclosures electronically or in paper form.
    (c) Advertisements and other promotional material. The disclosures 
required by this section are not required in advertisements of a 
general nature describing or listing the services or products offered 
by the bank.


Sec. 343.50  Where insurance activities may take place.

    (a) General rule. A bank must, to the extent practicable, keep the 
area where the bank conducts transactions involving insurance products 
or annuities physically segregated from areas where retail deposits are 
routinely accepted from the general public, identify the areas where 
insurance product or annuity sales activities occur, and clearly 
delineate and

[[Page 50900]]

distinguish those areas from the areas where the bank's retail deposit-
taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in the bank may 
refer a consumer who seeks to purchase an insurance product or annuity 
to a qualified person who sells that product only if the person making 
the referral receives no more than a one-time, nominal fee of a fixed 
dollar amount for each referral that does not depend on whether the 
referral results in a transaction.


Sec. 343.60  Qualification and licensing requirements for insurance 
sales personnel.

    A bank may not permit any person to sell or offer for sale any 
insurance product or annuity in any part of its office or on its 
behalf, unless the person is at all times appropriately qualified and 
licensed under applicable state insurance licensing standards with 
regard to the specific products being sold or recommended.

Appendix to Part 343--Consumer Grievance Process

    Any consumer who believes that any bank or any other person 
selling, soliciting, advertising, or offering insurance products or 
annuities to the consumer at an office of the bank or on behalf of 
the bank has violated the requirements of part 343 should contact 
the Division of Compliance and Consumer Affairs, Federal Deposit 
Insurance Corporation, at the following address: 550 17th Street, 
NW., Washington, DC 20429, or telephone 202-942-3100 or 800-934-
3342, or e-mail dcainternet@fdic.gov.

    Dated at Washington, DC, this 14th day of August, 2000.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
James D. LaPierre,
Deputy Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

    For the reasons set out in the joint preamble, OTS proposes to 
amend chapter V of title 12 of the Code of Federal Regulations by 
adding a new part 536 to read as follows:

PART 536--CONSUMER PROTECTION IN SALES OF INSURANCE

Sec.
536.10   Purpose and scope.
536.20   Definitions.
536.30   Prohibited practices.
536.40   What you must disclose.
536.50   Where insurance activities may take place.
536.60   Qualification and licensing requirements for insurance 
sales personnel.

Appendix To Part 536--Consumer Grievance Process

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, and 1831x.


Sec. 536.10  Purpose and scope.

    This part establishes consumer protections in connection with 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by any savings association 
or by any person that is engaged in such activities at an office of a 
savings association or on behalf of a savings association. For purposes 
of Sec. 559.3(h) of this chapter, an operating subsidiary is subject to 
this part only to the extent that it sells, solicits, advertises, or 
offers insurance products or annuities at an office of a savings 
association or on behalf of a savings association.


Sec. 536.20  Definitions.

    As used in this part:
    Affiliate means a company that controls, is controlled by, or is 
under common control with another company.
    Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    Consumer means an individual who obtains, applies to obtain, or is 
solicited to obtain insurance products or annuities from you.
    Control of a company has the same meaning as in section 3(w)(5) of 
the Federal Deposit Insurance Act (FDIA) (12 U.S.C. 1813(w)(5)).
    Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    Electronic media includes any means for transmitting messages 
electronically between you and a consumer in a format that allows 
visual text to be displayed on equipment, for example, a personal 
computer monitor.
    Office means the premises of a savings association where retail 
deposits are accepted from the public.
    Subsidiary has the same meaning as in section 3(w)(4) of the FDIA 
(12 U.S.C. 1813(w)(4)).
    You means a savings association, as defined in Sec. 561.43 of this 
chapter, or any other person selling, soliciting, advertising, or 
offering insurance products or annuities to a consumer at an office of 
a savings association, or on behalf of a savings association. For 
purposes of this definition, activities on behalf of a savings 
association include activities where a person, whether at an office of 
a savings association or at another location sells, solicits, 
advertises, or offers an insurance product or annuity and:
    (1) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of a savings association;
    (2) A savings association receives commissions or fees, in whole or 
in part, derived from the sale of an insurance product or annuity as a 
result of cross-marketing or referrals by the savings association or 
its affiliate;
    (3) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to a savings 
association or use its corporate logo or corporate name; or
    (4) The sale, solicitation, advertising, or offer of an insurance 
product or annuity takes place at an off-premises site, such as a 
kiosk, that identifies or refers to a savings association or uses its 
corporate logo or corporate name.


Sec. 536.30  Prohibited practices.

    (a) Anticoercion and antitying rules. As provided in section 5(q) 
of the Home Owners' Loan Act (12 U.S.C. 1464(q)), you may not engage in 
any practice that would lead a consumer to believe that an extension of 
credit is conditional upon either:
    (1) The purchase of an insurance product or annuity from a savings 
association or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the

[[Page 50901]]

consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. You may not engage 
in any practice or use any advertisement at any office of, or on behalf 
of, a savings association or a subsidiary of a savings association that 
could mislead any person or otherwise cause a reasonable person to 
reach an erroneous belief with respect to:
    (1) The fact that any insurance product or annuity sold or offered 
for sale by you or any subsidiary of a savings association is not 
backed by the Federal government or a savings association, or the fact 
that the insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a savings association or subsidiary of a savings 
association at which insurance products or annuities are sold or 
offered for sale, the fact that:
    (i) The approval of an extension of credit to a consumer by the 
savings association or subsidiary may not be conditioned on the 
purchase of an insurance product or annuity by the consumer from the 
savings association or a subsidiary of the savings association; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. You may not, 
with regard to any insurance underwriting, pricing, renewal, or scope 
of coverage decision, or payment of insurance claims, on a life or 
health insurance product consider as a criterion the status of the 
person applying for the insurance, or the person who is insured, as a 
victim of domestic violence or a provider of services to domestic 
violence victims, except as required or expressly permitted under State 
law.


Sec. 536.40  What you must disclose.

    (a) Disclosures. In connection with the initial purchase of an 
insurance product or annuity by a consumer from you, you must disclose 
to the consumer that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, a savings association or (if 
applicable) an affiliate of a savings association;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, a savings association, or (if applicable) an affiliate of a 
savings association;
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value; and
    (4) A savings association may not condition an extension of credit 
on either:
    (i) The consumer's purchase of an insurance product or annuity from 
a savings association or any of its affiliates; or
    (ii) The consumer's agreement not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Timing and method of disclosures. (1) In general. (i) You must 
provide the disclosures required by paragraph (a) of this section 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer.
    (ii) You must also provide the disclosure required by paragraph 
(a)(4) of this section orally and in writing at the time the consumer 
applies for an extension of credit in connection with which an 
insurance product or annuity will be solicited, offered, or sold. If 
you take an application for such credit by telephone, you may provide 
the written disclosure required by paragraph (a)(4) of this section by 
mail, provided you mail it to the consumer within three days, excluding 
Sundays and the legal public holidays specified in 5 U.S.C. 6103(a).
    (2) Electronic form of disclosures. (i) Where the consumer 
affirmatively consents, you may provide the written disclosures 
required by paragraph (a) of this section through electronic media 
instead of on paper, if the disclosures are provided in a format that 
the consumer may retain or obtain later, for example, by printing or 
storing electronically (such as by downloading).
    (ii) If the sale of an insurance product or annuity is conducted 
entirely through the use of electronic media, and the disclosures are 
provided electronically, you are not required to provide disclosures 
orally.
    (3) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, you may use the following 
disclosures, as appropriate and consistent with paragraph (a) of this 
section:

(i) Not a Deposit
(ii) Not FDIC-Insured
(iii) Not Insured by any Federal Government Agency
(iv) Not Guaranteed by the Savings Association
(v) May Go Down in Value

    (4) Disclosures must be meaningful. (i) You must provide the 
disclosures required by paragraph (a) of this section in a meaningful 
form. You have not provided the disclosures in a meaningful form if you 
merely state to the consumer that the required disclosures are 
available in printed material, but you do not provide the printed 
material when required and do not orally disclose the information to 
the consumer when required. You provide the disclosures in a meaningful 
form if you provide the disclosures in printed form and orally disclose 
the information to the consumer, or if you provide the disclosures 
through electronic media under paragraph (b)(2) of this section and 
comply with paragraph (b)(4)(ii) of this section.
    (ii) With respect to those disclosures made through electronic 
media for which you are not required to provide paper or oral 
disclosures, you have not meaningfully provided the disclosures if the 
consumer may bypass the visual text of the disclosures before 
purchasing an insurance product or annuity.
    (5) Consumer acknowledgment. You must obtain from the consumer, at 
the time a consumer receives the disclosures required under this 
section or at the time of the initial purchase by the consumer of an 
insurance product or annuity, a written acknowledgment by the consumer 
that the consumer received the disclosures. A consumer who has received 
disclosures through electronic media may acknowledge receipt of the 
disclosures electronically or in paper form.
    (c) Advertisements and other promotional material. The disclosures 
required by this section are not required in advertisements of a 
general nature describing or listing the services or products offered 
by the savings association.


Sec. 536.50  Where insurance activities may take place.

    (a) General rule. A savings association must, to the extent 
practicable, keep the area where the savings association conducts 
transactions involving insurance products or annuities physically 
segregated from areas where retail deposits are routinely accepted from 
the general public, identify the areas where insurance product or 
annuity sales activities occur, and clearly delineate and distinguish 
those areas from the areas where the savings

[[Page 50902]]

association's retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in a savings 
association may refer a consumer who seeks to purchase an insurance 
product or annuity to a qualified person who sells that product only if 
the person making the referral receives no more than a one-time, 
nominal fee of a fixed dollar amount for each referral that does not 
depend on whether the referral results in a transaction.


Sec. 536.60  Qualification and licensing requirements for insurance 
sales personnel.

    A savings association may not permit any person to sell or offer 
for sale any insurance product or annuity in any part of the savings 
association's office or on its behalf, unless the person is at all 
times appropriately qualified and licensed under applicable State 
insurance licensing standards with regard to the specific products 
being sold or recommended.

Appendix to Part 536--Consumer Grievance Process

    Any consumer who believes that any savings association or any 
other person selling, soliciting, advertising, or offering insurance 
products or annuities to the consumer at an office of the savings 
association or on behalf of a savings association has violated the 
requirements of this part should contact the Director, Consumer 
Programs, Office of Thrift Supervision, at the following address: 
1700 G Street, NW, Washington, DC 20552, or telephone 202-906-6237 
or 800-842-6929, or e-mail consumer.complaints@ots.treas.gov.


    Dated: August 4, 2000.

    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 00-21216 Filed 8-18-00; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P

Last Updated 08/29/2000 communications@fdic.gov