Federal Deposit
Insurance Corporation

[[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:

<bullet> 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.
<bullet> 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:

<bullet> Not a Deposit
<bullet> Not FDIC-Insured
<bullet> Not insured by any Federal Government Agency
<bullet> Not Guaranteed by the Bank [or Savings Association]
<bullet> 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:
<bullet> A plain-language heading to call attention to the
disclosures;
<bullet> A typeface and font or type size that are easy to read;
<bullet> Wide margins and ample line spacing;
<bullet> Boldface or italics for key words; and
<bullet> 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:
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\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.
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(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\
---------------------------------------------------------------------------

\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\
---------------------------------------------------------------------------

\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:
<bullet> 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.
<bullet> 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.
<bullet> 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.
<bullet> Define ``office'' narrowly only to include premises of a
savings association where retail deposits are accepted from the public.
<bullet> 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.
<bullet> 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.
<bullet> Provide flexibility for covered persons to use a variety
of means to provide disclosures that are readily understandable and
call attention to the information.
<bullet> Permit consumers to use electronic media to acknowledge
their receipt of disclosures.
<bullet> 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:
<bullet> Providing a more expansive definition of ``electronic
media'' to provide even more flexibility in meeting the disclosure and
consumer acknowledgment requirements.
<bullet> Making revisions to ensure that covered persons may fully
utilize electronic signatures and other provisions of the E-Sign Act.
<bullet> 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:
<bullet> 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.
<bullet> 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.
<bullet> 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.
<bullet> Define ``office'' narrowly only to include premises of a
savings association where retail deposits are accepted from the public.
<bullet> 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.
<bullet> 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.
<bullet> Provide flexibility for covered persons to use a variety
of means to provide disclosures that are readily understandable and
call attention to the information.
<bullet> Permit consumers to use electronic media to acknowledge
their receipt of disclosures.
<bullet> 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:
<bullet> Providing a more expansive definition of ``electronic
media'' to provide even more flexibility in meeting the disclosure and
consumer acknowledgment requirements.
<bullet> Making revisions to ensure that covered persons may fully
utilize electronic signatures and other provisions of the E-Sign Act.
<bullet> 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:
<bullet> Have we organized the material to suit your needs? If not,
how could the material be better organized?
<bullet> Are the requirements in the rule clearly stated? If not,
how could the rule be more clearly stated?
<bullet> Does the rule contain technical language or jargon that
isn't clear? If not, which language requires clarification?
<bullet> 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?
<bullet> Would more (but shorter) sections be better? If so, which
sections should be changed?
<bullet> 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:

<bullet> Not a Deposit
<bullet> Not FDIC-Insured
<bullet> Not Insured by any Federal Government Agency
<bullet> Not Guaranteed by the Bank
<bullet> 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:

<bullet> Not a Deposit
<bullet> Not FDIC-Insured
<bullet> Not Insured by any Federal Government Agency
<bullet> Not Guaranteed by the Bank
<bullet> 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:

<bullet> Not a Deposit
<bullet> Not FDIC-Insured
<bullet> Not Insured by any Federal Government Agency
<bullet> Not Guaranteed By the Bank [or Savings Association]
<bullet> 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 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.