Federal Deposit
Insurance Corporation

[[Page 75821]]

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Part II

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 Parts 14, 208, 343, and 536

Consumer Protections for Depository Institution Sales of Insurance;
Final Rule

[[Page 75822]]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 14

[Docket No. 00-26]
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. 2000-97]
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: Final rule.

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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 publishing final 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 Office of the Comptroller of the
Currency (OCC), state member banks in the case of the Board of
Governors of the Federal Reserve System (Board), state nonmember
banks in the case of the Federal Deposit Insurance Corporation
(FDIC), and savings associations in the case of the Office of Thrift
Supervision (OTS).

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EFFECTIVE DATE: April 1, 2001.

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; Sally
Watts, Counsel (Banking and Finance), (202) 906-7380; 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. 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 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 (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 National Association of
Insurance Commissioners (NAIC) has submitted a comment letter in
connection with the proposed rules. In preparing the proposed rules and
these final rules, the Agencies also have met and consulted with the
NAIC.\3\ These final rules reflect these meetings with, and comments
from, the NAIC.
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\3\ A summary of the Agencies' consultations with the NAIC is
available in the rule-making file.
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The texts of the Agencies' final rules are substantially identical.
Any differences in style or terms are not intended to create
substantive differences in the requirements imposed by the regulations.

Overview of Comments Received

On August 21, 2000, the Agencies published a joint notice of
proposed rulemaking (the proposed rules) in the Federal Register (65 FR
50882). The Agencies received approximately 75 comments in response to
the proposed rules.
The majority of comments were received from depository
institutions. These commenters offered a large number of suggested
changes, with the most commonly advanced suggestions including:
modifying the ``covered person'' definition; excepting various types of
insurance from coverage by the final rules; eliminating certain
disclosure requirements; and limiting the physical separation
requirements to the teller area of an institution.
The NAIC submitted a comment on behalf of the State insurance
authorities that generally supported the Agencies' proposed rules. The
NAIC advised the Agencies to clarify in the final rules the role of the
States in regulating insurance sales. The NAIC also requested more
detailed guidance in the Consumer Grievance Appendix to the final
rules. Finally, the NAIC expressed its view that the lending area of a
depository institution should be separated from the area in which
insurance is sold.
The Agencies have modified certain provisions of the proposed rules
in light of the comments received. The most significant comments, and
the Agencies' responses, are discussed in the following section-by-
section analysis. As was done in the preamble discussion of the
proposed rules, the citations are to sections only, leaving blank the

[[Page 75823]]

citations to the part numbers used by each agency.\4\
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\4\ The Board's rule is a new subpart of the Board's existing
Regulation H, and not a separate regulation. Accordingly, the
sections of the Board's rule are numbered consecutively.
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The Agencies also received several comments requesting the Agencies
to delay the effective date of these rules. The commenters state that
institutions will need time to modify existing disclosure forms, train
personnel and implement system changes. In determining the effective
date and administrative compliance requirements for new regulations,
the Agencies are required to consider any administrative burden that
the regulations would place on depository institutions and to delay the
effective date until at least the first day of a calendar quarter that
begins on or after the date on which the regulations are published.\5\
The Agencies recognize that ``lead time'' is necessary for some
institutions covered by the final rules to adjust their systems to
comply, although others have systems that already conform to some
extent to the requirements of the rules. The Agencies therefore have
made the effective date April 1, 2001.
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\5\ 12 U.S.C. 4802.
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Section-by-Section Analysis

The discussion that follows applies to each of the Agencies' final
rules.

Section ____.10 Purpose and Scope

Proposed Sec. ____.10 identified the purposes and scope of the
rules. As stated in the proposal, the rules are intended to establish
consumer protections in connection with retail sales of insurance
products and annuities \6\ to consumers by any depository institution
or by any person that is engaged in these activities at an office of
the institution or on behalf of the institution. These rules address
certain consumer protection concerns that arise from the conduct of
insurance activities by a depository institution, at an office of the
institution, or on behalf of the institution and are not intended to
authorize new activities. These rules are not exclusive and, for
example, applicable State laws administered by State insurance
commissioners may apply, as provided by sections 104 and 305 of the G-
L-B Act.
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\6\ These 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 appropriate agency and the courts.
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The Agencies received several comments on the proposed scope of
these rules. Some of these commenters noted that the Interagency
Statement on Retail Sales of Nondeposit Investment Products (February
15, 1994) (Interagency Statement) also may apply in certain
circumstances to sales of insurance or annuities by depository
institutions. These commenters requested clarification on how the
Agencies will apply the Interagency Statement to those products subject
to both these rules and the Interagency Statement. The Agencies note
that in the event of a conflict between the Interagency Statement and
the final rules, the rules will prevail.
Certain of the definitions contained in the final rules also
address the circumstances under which the rules will apply. Under the
proposed rules, only subsidiaries that 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 \7\ would be subject
to the requirements of the rules. 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 received only one comment supporting broader application
of the final rules to depository institution subsidiaries. The Agencies
believe that extending the rules to a depository institution's
subsidiary in circumstances other than when the subsidiary is selling
insurance products or annuities at an office of the institution or
acting ``on behalf of'' the depository institution is unnecessary and,
therefore, the final rules retain the approach taken in the proposed
rules on this issue. 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.''
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\7\ OTS does not intend the requirements of this part to apply
to other savings association operating subsidiaries or service
corporations by operation of 12 CFR 559.3(h). The OCC does not
intend the requirements of this part to apply to other national bank
operating subsidiaries by operation of 12 CFR 5.34(e)(3).
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Section ____.20 Definitions

The proposed rules contained several definitions about which the
Agencies received little or no comment. The final rules therefore
retain the definitions of ``affiliate,'' ``company,'' ``control,''
``domestic violence,'' and ``subsidiary'' set forth in the proposed
rules. The definitions about which the Agencies received more
substantial comment are discussed below.
Consumer (Sec. ____.20(d)). The proposed rules defined ``consumer''
as an individual who obtains, applies for, or is solicited to obtain
insurance products or annuities from a covered person. The final rules
make a clarifying change by replacing the term ``obtains'' with
``purchases'' in the definition of ``consumer.'' A purchase includes
any transaction where there is a cost to the consumer for the insurance
either directly or indirectly such as a higher interest rate on a loan.
Several commenters asked the Agencies to distinguish between the
terms ``consumer'' and ``customer'' in the same way as the Final Rules
on the Privacy of Consumer Financial Information (Privacy Rules).\8\
However, unlike the Privacy Rules, section 47 uses the terms
``consumer'' and ``customer'' interchangeably without distinguishing
between the two terms. For this reason, the Agencies believe that
Congress did not intend to distinguish between consumers and customers
for purposes of section 47. Thus, the Agencies have determined to
continue to use the single term ``consumer'' in the final rules.
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\8\ 65 FR 35162 (June 1, 2000).
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The Agencies also requested comment on whether the final rules
should expand the definition of ``consumer'' to include small
businesses. The majority of those commenting on this issue believed
that the Agencies should not expand the definition to include small
businesses because most Federal consumer protection statutes apply only
to individuals. The Agencies agree with these commenters and therefore
have not changed the definition of ``consumer'' to include small
businesses.
The Agencies also invited 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.'' One effect of this change would be to exclude
entities such as sole proprietorships and partnerships from the scope
of the rules.
Several commenters preferred limiting the definition in this manner
to be consistent with the Truth in Lending regulation's definition of
``consumer credit.'' \9\ The Agencies agree with the commenters that
depository institutions are familiar with this approach because it is
used in other consumer protection rules. Thus, the final rules apply to
an individual ``who purchases or applies for insurance products or
annuities primarily for personal, family, or household purposes.''
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\9\ 12 CFR 226.2(a)(12)(``Consumer credit means credit offered
or extended to a consumer primarily for personal, family, or
household purposes.'')

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[[Page 75824]]

Covered person or you (Sec. ____.20(e)). The proposal used the term
``covered person,'' or ``you,'' to determine to whom the requirements
in these rules 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'' includes any person, including a
subsidiary or other affiliate, if that person or one of its employees
sells, solicits, advertises, or offers insurance products or annuities
at an office of an institution or on behalf of an institution.
For purposes of this definition, the proposed rules provided that 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;
(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.
In the preamble to the proposed rules, the Agencies noted that the
second prong of the ``on behalf of'' test--the receipt of commissions
or fees--did 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 calculated as a share of the commissions
or fees derived from the insurance product or annuity sale.
The Agencies sought 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 invited comment on whether the following should be
considered an activity on behalf of the institution:
The use of the name or corporate logo of the holding
company or other affiliate, as opposed to the name or corporate logo of
the depository institution in documents evidencing the sale,
solicitation, advertising, or offer of an insurance product or annuity.
The sale, solicitation, advertising, or offer of an
insurance product or annuity at an off-premises site that identifies or
refers to the holding company or other affiliate, as opposed to the
depository institution, or uses the name or corporate logo of the
holding company or other affiliate.
The Agencies received several comments on the proposed definition
of covered person. Many commenters did not believe that the second
prong of the ``on behalf of'' test should include a depository
institution's receipt of commissions or fees as a result of cross
marketing. Those commenters suggested that the risk of customer
confusion is small because a consumer typically would not know about
the receipt of these fees. These commenters believed that requiring
disclosures in these situations might actually result in increased
customer confusion. The Agencies agree and therefore delete the
reference to cross-marketing in the final rules. Thus, for example,
while the sharing of customer lists with an unaffiliated third party
would trigger certain requirements under the Privacy Rules, it would
not trigger the requirements under any of the prongs in these final
rules. The Agencies also note that the institution's receipt of
dividends from a subsidiary, or a holding company's receipt of
dividends from an affiliate, does not constitute receipt of
``commissions or fees'' within the meaning of this paragraph.
Several commenters also contended that the term ``on behalf of''
should not include sales of insurance products or annuities that result
from a referral to an unaffiliated insurance agency by an employee of a
depository institution. Unlike cross-marketing, a depository
institution making a referral is in a position to influence a
consumer's choice of insurance providers. Therefore, the final rules
retain the reference to ``referrals'' in the second prong of the ``on
behalf of'' test, but with an important modification.
Rather than applying to any commission or fee derived from a sale
resulting from a referral, the second prong of the ``on behalf of''
test in the final rules applies only when a depository institution has
a contractual arrangement with an insurance provider to receive those
fees. This is meant to distinguish referral fees and commissions
received by a depository institution under an arrangement based on
sales with an insurance provider from those referral fees received by a
teller, which are limited by Sec. ____.50(b). Under Sec. ____.50(b),
any person who accepts deposits from the public in an area where such
transactions are routinely conducted may receive a referral fee if it
is 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.
A number of commenters also contended that the third prong of the
``on behalf of'' test should not cover situations where documents or
other communications use the depository institution's corporate logo or
corporate name (a common logo or name used by the corporate family and
not just by the depository institution). Those commenters believe that
these circumstances alone are insufficient to create a level of
confusion that warrants imposing the requirements under this rule.
Moreover, extending the rules in this manner would cover transactions
in which a depository institution has no involvement in the sale of
insurance. The Agencies agree with these commenters, and therefore, the
third prong of the ``on behalf of'' test in the final rules has been
modified so that it does not cover documents that use a corporate logo
or corporate name. It does, however, cover documents evidencing the
sale, solicitation, advertising, or offer of an insurance product or
annuity that identify or refer to the depository institution. Under the
final rules, insurance activities are conducted on behalf of a
depository institution if the documents evidencing the activity
identify or refer to the institution. In the Agencies' view, the
circumstances when the relevant documents refer to the institution for
purposes of this test will depend on the facts involved.
The final rules also delete the fourth prong of the proposed ``on
behalf of'' test because it is covered by the three remaining revised
prongs. As revised, the Agencies believe that the remaining three
prongs capture the appropriate circumstances under which a person could
be said to be acting ``on behalf of'' a depository institution for
purposes of these rules.
Several commenters also noted that the definition of ``covered
person'' or ``you'' could be read to mean that once a person is a
``covered person,'' all insurance sales, solicitations, advertisements
or offers by that person would be subject to these rules, whether or
not these activities are conducted at an office of, or on behalf of, a
depository

[[Page 75825]]

institution. The Agencies do not intend this result and have changed
the proposal to clarify that a covered person is: (1) A depository
institution; or (2) any other person only when the person sells,
solicits, advertises or offers an insurance product or annuity to a
consumer at an office of the institution or on behalf of the
institution.
Finally, in the preamble to the proposed rules, the Agencies noted
that the use of electronic media may present special issues in the
application of the ``on behalf of test'' of the covered person
definition. The Agencies invited comment on whether, and under what
circumstances, to require disclosures for sales or solicitations by
electronic media.
Several commenters suggested that the purposes of the statute and
the rules--to avoid customer confusion about the nature of the products
offered that arises because of the identity of the seller or marketer--
is not implicated in all cases where a depository institution acts
solely to bring together buyers and sellers of insurance products. For
example, the Agencies believe that links established from depository
institution web sites through the Internet or wireless services
generally do not come within the scope of the covered person
definition. To the extent there is a risk of possible consumer
confusion when a customer leaves an institution's web site, the nature
or type of these disclosures may differ and is better addressed in
subsequent guidance or rulemaking.
Electronic media (Sec. ____.20(g)). 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.
A discussion of changes made to these provisions in the final rules is
set forth below. See proposed Sec. ____.40.
In addition, the proposed rules recognized the need for flexibility
to accommodate rapid changes in communications technologies and thus
defined ``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 Agencies invited comment on
this proposed definition and on whether a more expansive definition
would be consistent with the G-L-B Act's requirement for both written
and oral disclosures. The majority of commenters supported the proposed
definition of ``electronic media'' \10\ because it provided sufficient
flexibility to address future innovation. The final rule, therefore,
retains the proposed definition of ``electronic media.''
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\10\ Most of the comments concerning electronic media were
raised in the context of disclosures and acknowledgments and are,
therefore, discussed in the sections below concerning those
requirements.
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Office (Sec. ____.20(h)). The proposed rules defined ``office'' as
the premises of an institution where retail deposits are accepted from
the public. The Agencies received several comments requesting that this
definition be limited to deposit taking areas. The Agencies note that
specific provisions in these rules relating to the physical separation
of the insurance activities and permissibility of referral fees are
limited to areas where deposits are routinely taken. However, the
Agencies do not believe that the overall protections afforded by these
rules should be limited in this manner and, therefore, retain in the
final rules the definition of ``office'' set forth in the proposed
rules.
The proposed rules did not define the term ``insurance product.''
As explained in the preamble to the proposed rules, 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 G-L-B
Act lists certain types of products that are first offered after
January 1, 1999 that may constitute insurance for purposes of
determining when a national bank may underwrite, rather than sell,
insurance. Thus, the Agencies indicated that they will look to a
variety of sources in determining whether a given product is covered by
the proposed rules, including section 302(c), common usage,
conventional definitions, judicial interpretations, and other Federal
laws. The Agencies invited 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.''
Few commenters requested a specific definition of insurance. Many
commenters, however, asked that we exclude certain products from
coverage or at least not require certain disclosures for those
products. For example, those commenters believe that the rules should
not cover credit insurance and property and casualty insurance because
these products do not have an investment component and have been sold
by and on behalf of depository institutions for years without consumer
confusion. Section 47 of the G-L-B Act, however, does not distinguish
between types of insurance products nor are the consumer protections
under the statute limited to instances where there is a risk of
investment loss or consumer confusion. The final rules therefore do not
define the term ``insurance'' but, as explained in the discussion of
Sec. ____.40, provide more guidance on when certain disclosures are
required.

Section ____.30 Prohibited Practices

Under section 47(b) of the FDIA, the Agencies' regulations must
prohibit a covered person from engaging 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, \11\ is conditional upon either:
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\11\ 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 final 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 consumer from obtaining, an insurance product or annuity from an
unaffiliated entity. These prohibitions on tying and coercion were set
forth in proposed Sec. ____.30(a).
Section 47(c)(2) of the FDIA also requires the Agencies'
regulations to prohibit 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

[[Page 75826]]

insurance product or annuity from another source.
These prohibitions on misrepresentations were set forth in
Sec. ____.30(b) of the proposed rules.
The Agencies received several comments on these prohibitions. A few
commenters asserted that the prohibitions on tying an extension of
credit to the purchase of insurance should apply only to depository
institutions and not all covered persons because section 106(b) of the
Bank Holding Company Amendments of 1970 applies only to depository
institutions. Therefore, the commenters requested the Agencies to amend
proposed Sec. ____.30(a) to delete references to parties other than
depository institutions.
The commenter's proposed changes to Sec. ____.30(a) are not
supported by the statutory language, however. Section 47(c)(2) is not
limited to depository institutions but also expressly applies to
persons selling at an office of a depository institution or on behalf
of the institution. In addition, Sec. ____.30(a) is not a restatement
of the section 106(b) prohibition on coercion by depository
institutions. Rather, it is a prohibition on misleading a consumer into
believing that an extension of credit could be conditioned in a manner
that is prohibited by section 106(b). Section 47(c) of the G-L-B Act
recognizes that either a depository institution, or someone selling at
an office of a depository institution or on its behalf could mislead a
consumer in this way. Therefore, the Agencies decline to limit
Sec. ____.30(a) to depository institutions. \12\
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\12\ The Agencies note that other provisions, such as the
prohibitions on misrepresentations and certain required disclosures,
also generally address situations relating to consumer coercion.
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One commenter also questioned whether Secs. ____.30 (a) and (b)
would apply to ``force placed'' insurance. ``Force placed'' is a term
used to describe a situation in which a depository institution
purchases insurance, and bills the customer for it, because the
customer has failed to obtain, or allowed to lapse, required insurance
coverage for an asset used as collateral for a secured loan. The
Agencies do not intend these final rules to apply to force placed
insurance purchases since they are made by depository institutions to
protect loan collateral rather than by consumers.
Finally, proposed Sec. ____.30(c) implemented 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. One commenter stated
that this provision could be difficult to comply with where a covered
person sells or offers for sale insurance products for which a third
party makes the decisions regarding the underwriting, pricing, renewal,
scope of coverage, or payment of claims. However, the statute provides
no exception from the prohibition on domestic violence discrimination
in these circumstances. Therefore, the final rules as modified prohibit
a covered person from selling or offering for sale, as principal,
agent, or broker, any life or health insurance product if the status of
the applicant or insured as a victim of domestic violence or as a
provider of services to victims of domestic violence is considered as a
criterion in any decision with regard to insurance underwriting,
pricing, renewal, or scope of coverage of such product, or with regard
to the payment of insurance claims on such product, except as required
or expressly permitted under State law.

Section ____.40 What a Covered Person Must Disclose

In addition to prohibiting the misrepresentations outlined above,
section 47(c) of the FDIA requires the Agencies' regulations to mandate
that a covered person make affirmative disclosures in connection with
the initial purchase of an insurance product or annuity. The proposed
rules required 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.
Several commenters believed that the first disclosure--that the
insurance product or annuity is not a deposit or other obligation of,
or guaranteed by, the depository institution--is unnecessary and not
required by section 47. These commenters asserted that there is minimal
risk that a customer will confuse an insurance product or annuity with
a deposit. The Agencies disagree with this contention, particularly
where the product has a savings component. Although the first
disclosure is not expressly required by the statute, section 47
requires the Agencies to issue regulations that are consistent with the
requirements of the G-L-B Act and provide ``additional protections for
customers'' as necessary. The Agencies believe that requiring a covered
person to disclose that the insurance product or annuity is not a
deposit is necessary to protect consumers from confusion about the
nature of the product offered.
There are, however, some instances where the first and second
disclosures may not be accurate. Several commenters noted that the
second disclosure--that a product is not insured by the depository
institution or an agency of the United States--would not be true for
Federal Crop Insurance and Federal Flood Insurance, both of which are
insured by United States agencies. To address these concerns and to
ensure that the disclosures required by Sec. ____.40(a) are only made
where accurate, the Agencies have modified Sec. ____.40(a) to require a
covered person to make the disclosures except to the extent the
disclosures would not be accurate.
Several commenters also suggested removing certain types of
insurance, such as property and casualty insurance and credit-related
insurance, from the requirement to disclose that the product is not
FDIC-insured. These commenters contend that there is little risk of
confusion in these circumstances and that such disclosures may serve to
increase customer confusion about the nature of the product offered.
The Agencies disagree with this contention and favor requiring this
disclosure in connection with the sale of any insurance product to
prevent possible confusion about the nature of the product offered. The
Agencies, however, will review this requirement on an on-going basis
and make future changes if necessary.
Several commenters objected to the requirement that a covered
person give the anti-coercion disclosures twice (once before the
insurance sale and again if the consumer applies for credit). These
commenters argued that section 47(a)(1)(A) provides that the Agencies'
regulations only require the anti-coercion disclosure be made at the
time of an application for credit. The

[[Page 75827]]

Agencies agree that this is a permissible interpretation of the statute
and believe that the anti-coercion disclosure is most meaningful and
relevant at the time a consumer is applying for credit. For this
reason, the final rules only require that the anti-coercion disclosure
be given at the time of application for credit. The Agencies have
redesignated this provision as Sec. ____.40(b) in the final rules.
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
(proposed Sec. ____.40(a)(4)) also must 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. Section 47 of the FDIA authorizes the
Agencies to make necessary adjustments to the G-L-B Act's requirements
for sales conducted in person, by telephone, or by electronic media.
Section 47(a)(1) also requires the Agencies to publish final rules in a
form that the Agencies jointly determine to be appropriate. Proposed
Secs. ____.40(b)(2) set forth special timing and method of disclosure
rules for electronic and telephone disclosures. Because the Agencies
modified the anti-coercion disclosure and redesignated it as
Sec. ____.40(b), the timing and method of disclosure rules are
contained in Sec. ____.40(c).
The Agencies received several comments on the timing and method of
disclosures. A few commenters contended that it would be difficult if
not impossible to provide the required oral disclosures in connection
with direct mail solicitations. The Agencies recognize that providing
oral disclosures in circumstances like these--where there is no means
of communicating orally at the time of the sales presentation--would be
impracticable. Therefore, the final rule provides that if the sale of
an insurance product or annuity is conducted by mail, a covered person
that sells, solicits or offers an insurance product or annuity by mail
is not required to make the oral disclosures required by
Sec. ____.40(a). The final rule further provides that if a covered
person receives an application for credit by mail, the covered person
is not required to make the oral disclosure required by
Sec. ____.40(b). The Agencies also intend this exception from the oral
disclosure requirements to apply to a situation such as a ``take one''
credit application, where the consumer picks up a blank application
form, completes the application at home, and mails it back to the
institution.
A similar situation arises with respect to offers, solicitations or
sales by telephone. Under the proposed rules, a covered person who
takes an application for credit by telephone may provide the written
anti-coercion disclosure by mail, if the covered person mails it to the
consumer within three days starting on the next business day, excluding
Sundays and the legal public holidays specified in 5 U.S.C. 6103(a).
Several commenters requested the Agencies extend this flexible approach
to all of the written disclosures, not just the anti-coercion
disclosure, when transactions are conducted by telephone. The Agencies
agree with this concern and have changed the final rules relating to
telephone transactions to extend the option of providing any written
disclosures by mail within a three-day time period.
Under proposed 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 proposed
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. The proposal also required a
covered person to comply with all other requirements imposed by law or
regulation for providing disclosures electronically.
In the preamble to the proposed rules, the Agencies also noted 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) \13\ contains, among
other things, Federal rules governing the use of electronic records for
providing required information to consumers. An institution may satisfy
a legal requirement that the institution provide written disclosures by
using 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.\14\ 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.\15\ The
Agencies invited comment on whether--and, if so, how--they should
address the requirements of the E-Sign Act in the context of these
proposed rules.
---------------------------------------------------------------------------

\13\ Pub. L. 106-229, 114 Stat. 464 (June 30, 2000) (codified at
12 U.S.C. 7001 et seq.) The E-Sign Act generally took effect on
October 1, 2000, although there are delayed effective dates for
provisions other than those discussed in the text.
\14\ See 12 U.S.C. 7001(c)(1).
\15\ 12 U.S.C. 7004(d)(1).
---------------------------------------------------------------------------

Two commenters suggested that providing disclosures consistent with
the E-Sign Act should suffice. Commenters did not support other
modifications of the final rule to address the E-Sign requirements. The
Agencies believe electronic disclosures in lieu of written disclosures
are appropriate if they meet the requirements of the E-Sign Act. Thus,
the final rules provide that, subject to the requirements of section
101(c) of the E-Sign Act, a covered person may provide the written
disclosures required by section ____.40(a) and (b) through electronic
media if the consumer affirmatively consents to receiving disclosures
electronically and if the disclosures are provided in a format that the
consumer may retain or obtain later. This option is not limited to
situations where the sale is conducted entirely through the use of
electronic media, as in the proposed rule. Moreover, under the final
rules, any disclosures required by ____.40(a) and (b) that are provided
by electronic media are not required to be provided orally.
The Agencies made one additional clarifying change to the timing
and method of the disclosure provisions to avoid an open-ended time
frame for disclosures. The proposed rules required a covered person to
make the anti-coercion disclosure ``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.'' Section
____.40(c)(1) requires that this

[[Page 75828]]

disclosure be made ``at the time the consumer applies for an extension
of credit in connection with which an insurance product or annuity is
solicited, offered, or sold.'' In addition, if a solicitation, offer,
or sale occurs in connection with an application for credit that is
pending with the depository institution, a covered person must make the
disclosure when the solicitation, offer, or sale occurs.
The Agencies note that, consistent with section 47(c), the final
rules require a covered person to provide the disclosures in connection
with the ``initial purchase'' of an insurance product or annuity.
Accordingly, while new disclosures are not required when a consumer
simply renews an insurance policy or annuity, disclosures are required
if a consumer purchases a different insurance product or annuity.
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)(3)
contained this requirement and further required that the disclosures
also must be designed to call attention to the nature and significance
of the information provided. For example, the proposed rules provided
that a covered person may use the following short-form disclosures as
may be appropriate:

NOT A DEPOSIT
NOT FDIC-INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NOT GUARANTEED BY THE BANK [OR SAVINGS ASSOCIATION]
MAY GO DOWN IN VALUE.

Several commenters requested that the Agencies clarify the
circumstances in which a covered person may use the short form
disclosures. The Agencies believe that provisions in the Joint
Interpretations of the Interagency Statement on Retail Sales of
Nondeposit Investment Products (September 12, 1995) for use of short
form disclosures provide useful guidance on this issue. Therefore, the
final rules are changed to provide that short form disclosures may be
used in visual media, such as television broadcasts, ATM screens,
billboards, signs, posters, and in written advertisements and
promotional materials, such as brochures. The Agencies note that it may
be appropriate to use the short form disclosures in other
circumstances. The Agencies will monitor use of these disclosures and
issue further guidance if necessary.
In addition, several commenters requested that the final rules
provide a short form of the anti-coercion disclosures. However, the
commenters' suggested short form anti-coercion disclosure did not
adequately capture all of the information contained in the form set
forth in Sec. ____.40(b) of the final rules. Moreover, the Agencies
believe that requiring the full anti-coercion disclosure is not
particularly burdensome because the final rules require the disclosure
to be made only in circumstances involving a consumer's application for
credit in connection with which insurance is solicited, offered, or
sold. Therefore, the final rules do not provide a short form of the
anti-coercion disclosure.
The Agencies also invited comment on whether the final rule should
provide specific methods of calling attention to the material contained
in the disclosures. For example, the Agencies suggested that the final
rule could provide that the disclosures are designed to call attention
to the nature and significance of the information provided if they use:
A plain-language heading to call attention to the
disclosures;
A typeface and type size that are easy to read;
Wide margins and ample line spacing;
Boldface or italics for key words; and
Distinctive type size, style, and graphic devices, such as
shading or sidebars, when the disclosures are combined with other
information.
Some commenters expressed concern that including these examples in
the regulation would be viewed as adding new requirements. These
concerns, however, are unfounded. The Agencies believe that providing
examples of possible methods of calling attention to the material
contained in the disclosures will provide useful guidance to the
industry. The Agencies therefore have included these methods in the
final rules as examples of ways in which a covered person could call a
consumer's attention to the nature and significance of the information
provided in the required disclosures. These examples are not binding
requirements.
Further, as provided in Sec. ____.40(c)(6) of the final rules, a
disclosure 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 invited comment on whether these standards would
adequately address situations where disclosures are made through
electronic media. For example, the Federal Trade Commission (FTC)
recently released detailed 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.\16\ The Agencies sought comment on
whether the type of detail provided in the FTC guidance is necessary in
these proposed rules.
---------------------------------------------------------------------------

\16\ The FTC's guidance, Dot Com Disclosures: Information about
Online Advertising is available at www.ftc.gov/bcp/conline/pubs/
buspubs/dotcom/index.html.
---------------------------------------------------------------------------

The Agencies received several comments on this issue, none of which
favored providing the type of detail provided in the FTC guidance.
Accordingly, the final rule does not include this level of detail.
Consumer Acknowledgment
Under the proposal, a covered person must obtain from the consumer,
at the time the consumer receives the disclosures set forth in proposed
Sec. ____.40(a), the consumer's acknowledgment of receipt. In keeping
with section 47's express provision for adjustments to the G-L-B Act's
requirements for sales conducted by electronic media and the E-Sign
Act, the proposal further provided that a consumer who has received
disclosures through electronic media may acknowledge receipt of the
disclosures electronically or in paper form.
Several commenters noted that it would be difficult to comply with
the consumer acknowledgment requirement in situations other than face-
to-face transactions. In mail or telephone transactions, for example, a
covered person cannot control whether a consumer completes and returns
a written acknowledgment. These commenters requested that the Agencies
modify the proposed consumer acknowledgment provision to waive the
written acknowledgment requirement in transactions that are not face-
to-face. The Agencies appreciate the difficulties with obtaining
consumer acknowledgments in non-face-to-face transactions but note that
section 47 of the G-L-B Act contains no waiver for consumer
acknowledgments in those situations. To address this problem, the
Agencies have modified the consumer

[[Page 75829]]

acknowledgment provision to provide that, if the disclosures required
under Sec. ____.40(a) or (b) are provided in connection with a
transaction that is conducted by telephone, a covered person must: (1)
Obtain an oral acknowledgment of receipt of the disclosures and
maintain sufficient documentation to show that the acknowledgment was
given; and (2) make reasonable efforts to obtain a written
acknowledgment from the consumer. The final rules also clarify that a
covered person may in all circumstances permit a consumer to
acknowledge receipt of the disclosure electronically or in paper form.
The Agencies intend that the implementation of this consumer
acknowledgment requirement will not affect the substantive requirements
of the parties pursuant to contracts for the sale of insurance products
and annuities under applicable State law.
Advertisements and Other Promotional Material for Insurance Products or
Annuities
In accordance with section 47(c)(1)(C) of the FDIA, proposed
Sec. ____.40(c) clarified that the disclosures described in proposed
Sec. ____.40 are not required in advertisements of a general nature
describing or listing the services or products offered by the
depository institution. The final rules modify this section slightly,
and redesignate it as Sec. ____.40(d), to clarify that the exclusion of
the disclosure requirements does not apply to all advertisements and
promotional material for insurance products or annuities but only to
such material that is of a general nature, describing or listing the
services or products offered by the depository institution. Further,
Sec. ____.40(d) refers only to the disclosures described in
Sec. ____.40(a). The Agencies believe that because the anti-coercion
disclosure set forth in Sec. ____.40(b) is required to be made only in
the context of an application for credit, it could be confusing to the
consumer if the disclosures were required in all advertisements and
promotional material for insurance products or annuities.

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) set forth this
general rule. It further required 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.
The Agencies received several comments on this provision, most of
which asked for clearer guidance on what constitutes the area where
deposits are routinely accepted. Several asserted that the physical
segregation requirement should not apply to an institution's
``platform'' areas and should only apply to teller windows.
``Platform'' areas are typically areas of an institution's premises in
which employees other than tellers engage in a variety of activities,
including the origination of loans, the sale of insurance and annuity
products, and occasionally, the acceptance of deposits. The Agencies
wish to clarify for purposes of these final rules that the areas where
retail deposits are routinely accepted from the general public are
generally limited to traditional teller windows and teller lines.
One commenter also recommended physically segregating the area
where lending activities occur from the area where insurance products
or annuities sales occur. The Agencies decline to make this change
because it would extend significantly beyond the restrictions set forth
in the statute.
Proposed Sec. ____.50(b) implemented section 47(d)(2)(B) of the
FDIA, concerning referrals to insurance product and annuity sales
personnel by a person who accepts deposits from the public. Under that
proposed section, 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. The Agencies received
several comments requesting that the limits on referral fees apply only
to tellers. The Agencies believe that the person described in the
regulation text--that is, a person ``who accepts deposits from the
public in an area where such transactions are routinely conducted''
will typically be a teller. The Agencies also believe that a
description by function is preferable because it is more precise. We
have therefore retained the language as proposed.

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, proposed
section ____.60 provided that 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. One commenter expressed the opinion that
this provision is unnecessary because each state's insurance licensing
agency is already policing its licensing and qualification
requirements. The Agencies retain this provision because it is required
by the statute.

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 rules. Each agency has
procedures in place to handle consumer complaints they receive
directly.\17\ The Agencies will apply those procedures to complaints
involving these rules. The Appendix to each agency's final 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 has violated the requirements of these
rules may contact the consumer complaint office listed in the Appendix.
---------------------------------------------------------------------------

\17\ E.g., OTS Customer Service Plan at www.ots.treas.gov/
consass/html.
---------------------------------------------------------------------------

Each agency already has entered into, or is developing, agreements
with State insurance commissioners regarding the sharing of consumer
complaints. It is expected that these agreements will facilitate prompt
resolution of consumer complaints and ensure that incoming complaints
are directed to the appropriate agency. Consumer complaints alleging
violations of these rules that raise issues under State and

[[Page 75830]]

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 final 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 final rules is greater than the protection provided by comparable
state law or rulings, these final 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 final 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 final rules will be
applicable unless the State adopts legislation within three years to
override the preemption notice.
In the preamble to the proposed rules, the Board, FDIC and OCC
invited 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. The comments generally did not
support the inclusion in the final rules of a preemption appendix. The
Agencies do not believe it would be useful to include such an appendix.

Regulatory Analysis

A. Paperwork Reduction Act

The Agencies may not conduct or sponsor, and respondents are not
required to respond to, an information collection unless it displays a
currently valid Office of Management and Budget (OMB) control number.
The OMB control numbers and clearance expiration dates are listed
below:

OCC: 1557-0220; October 31, 2003.
Board: 7100-0295; November 30, 2003.
FDIC: 3064-0140; October 31, 2003.
OTS: 1550-0106; October 31, 2003.

The final rule 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) (Secs. ____. 40(a) and (b)).
The Agencies received one comment that addressed a perceived low
burden estimate stemming from these disclosures. The commenter,
however, provided no suggestion as to an appropriate higher estimate.
Other comments regarding the information collection are discussed above
in the preamble discussion of Secs. ____.20, ____.40 (a) and (b).
OCC: The 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. OMB has reviewed and approved the collections of
information contained in the rule under control number 1557-0220, in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.). There are 1,949 respondents with a total annual burden of 19,490
hours.
Board: The 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. In accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board approved the rule
under the authority delegated to the Board by OMB. The OMB control
number is 7100-0295. There are 1,010 respondents with a total annual
burden of 46,090 hours.
FDIC: The 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. OMB has reviewed and approved the
collections of information contained in the rule under control number
3064-0140, in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.). There are 5,800 respondents with a total annual
burden of 76,667 hours.
OTS: The 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. OMB has reviewed and approved the collections of
information contained in the rule under control number 1550-0106, in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.). There are 1,097 respondents with a total annual burden of 47,286
hours.
The Agencies have a continuing interest in the public's opinion
regarding collections of information. Members of the public may submit
comments, at any time, regarding any aspect of these collections of
information. Comments may be sent to:
OCC: Jessie Dunaway, Clearance Officer, Office of the Comptroller
of the Currency, 250 E Street, SW, Mailstop 8-4, Washington, DC 20219.
Board: Mary M. West, Federal Reserve Board Clearance Officer,
Mailstop 97, Division of Research and Statistics, Board of Governors of
the Federal Reserve System, Washington, DC 20551.
FDIC: Steven F. Hanft, Assistant Executive Secretary (Regulatory
Analysis), Federal Deposit Insurance Corporation, Room F-4080, 550 17th
Street, NW, Washington, DC 20429.
OTS: Dissemination Branch (1550-0106), Office of Thrift
Supervision, 1700 G Street, NW, Washington, DC 20552.

B. Regulatory Flexibility Act

OCC: The Regulatory Flexibility Act (5 U.S.C. 601-612) requires
federal agencies either to provide a Final Regulatory Flexibility
Analysis (FRFA) with a final rule or certify that the final rule ``will
not, if promulgated,'' have a significant economic impact on a
substantial number of small entities. On the basis of the information
currently available, the OCC is of the opinion that this final rule is
unlikely to have a significant impact on a substantial number of small
entities. Because the final rules implement new legislation, however,
the OCC lacks historical information specific to the requirements in
the final rules on which to base estimates of cost. For this reason,
the OCC has prepared the following FRFA.
Reasons, Objectives, and Legal Basis for the Final Rule
The OCC is issuing this final rule to implement section 47 of the
FDIA. A fuller discussion of the reasons for, objectives of, and legal
basis for, the final rule appears elsewhere in the Supplementary
Information.
Description of the Small Entities to Which the Final Rule Would Apply
The final rule would apply to a national bank or any ``other
person'' who, at an office of a national bank or on behalf of a
national bank, sells,

[[Page 75831]]

solicits, advertises, or offers insurance products or annuities to
consumers. The final rule would apply regardless of the size of the
bank or other organization for which a person worked.
Small national banks are generally defined, for Regulatory
Flexibility Act purposes, as those with assets of $100 million or less.
13 CFR 121.201, Division H (2000). 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
final rule. We estimated in the preamble to the proposed rule that 976
of the national banks that sold insurance as of January, 1999, had $100
million or less in assets. We received no comment on this estimate and
believe it to be accurate.
Reporting, Recordkeeping, and Compliance Requirements of the Final Rule
The final rule 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 final
rule 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.\18\
---------------------------------------------------------------------------

\18\ The final 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.
This final rule will not become effective until April 1, 2001, which
should allow ample time for most banks to exhaust their inventory of
printed materials and prepare new materials. 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.
Summary of Significant Issues Raised by the Public Comments in Response
to Initial Regulatory Flexibility Analysis and Description of Steps the
Agency Has Taken To Minimize Burden
The issues raised by the commenters are described more fully
elsewhere in the Supplementary Information. The issues that were raised
by commenters about the proposal's impact on small businesses were the
following:
The requirement that a covered person obtain a written
acknowledgment of receipt of disclosures for a telephone transaction
could require significant effort and additional correspondence if the
customer does not return the acknowledgment with other paperwork for
the policy. This effort would be a significant burden for small
financial institutions.
The requirement that such insurance as credit and mortgage
insurance be sold in an area of the office separate from where deposits
are routinely taken poses a particular hardship for small financial
institutions where deposits and loan applications are taken at the same
place.
The OCC considered how to tailor the form of disclosures and
acknowledgments to the form of the sales transaction and how to make
the record of acknowledgment functional, within the statutory
constraints. In the case of telephone applications for credit, the
proposed rule permitted the anti-coercion disclosure due at the time of
applications to be given orally and followed with written disclosures
mailed within three days. To extend the principle more broadly, the
final rule applies this form of providing written disclosures for
telephone sales to all the required disclosures. The timing has been
clarified to be three business days, starting with the first business
day after the telephone transaction. With respect to telephone sales,
the final rule permits an oral acknowledgment of the disclosures if the
covered person documents the acknowledgment. In that case, the final
rule requires the covered person also to make reasonable efforts to
obtain a written acknowledgment.
We have made an additional change affecting disclosures relevant to
sales initiated by telephone. The proposed rule limited the use of
electronic disclosures to those transactions taking place entirely
electronically. Commenters were concerned that the proposed rule did
not permit electronic disclosures to be used in transactions that may
have started with a telephone contact. To address this concern, the
final rule provides that, if a transaction involves telephone contact,
but the consumer affirmatively consents to transmission of disclosures
through electronic media instead of on paper, the covered person may
provide the ``written'' disclosures electronically. Of course, these
electronic disclosures must satisfy the rule's requirement that the
format of disclosure be one that permits the consumer to retain or to
obtain later, such as by printing or storing electronically. Where
disclosures are made electronically, the rule already provided that the
consumer could acknowledge them electronically. Electronic
acknowledgment of electronic disclosures applies under the final rule
to these mixed media transactions, as well. The final rule also
provides that oral disclosures are not required where disclosures are
provided electronically. This exception applies not only to disclosures
provided in the sale of insurance and annuities as in the proposed
rule, but also to the anti-coercion disclosure provided with credit
applications.
In response to the concern expressed about the difficulty of
separating functions in a small office, we have clarified in the
preamble to this final rule that generally the location where deposits
are routinely taken is the teller window and teller line. This
distinction permits a savings association to sell insurance products
and annuities from the ``platform area,'' where loan transactions may
routinely be conducted, if the savings association distinguishes that
area from the teller window area. The regulation also

[[Page 75832]]

requires this segregation of functions into separate areas ``to the
extent practicable.'' If it is not practicable for a small institution
to have separate areas, it could make other efforts to satisfy the
separation of functions between deposit taking and selling of
insurance.
We note that in addition to these specific responses to concerns
expressed with reference to impact on small entities, we have limited
the scope of the rule in other ways to minimize compliance burdens. The
final rule:
Only applies to retail sales, solicitations,
advertisements, or offers of insurance products or annuities to
individuals purchasing for personal, family, or household use. The
Agencies have determined, after requesting comment on whether to also
include small business insurance purchases, not to broaden the
coverage.
Does not apply to subsidiaries of depository institutions,
except where the 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.
Clarifies the scope of the rule and the definition of
``you'' to apply only to transactions conducted by the person that are
by, at an office of, or on behalf of, the savings association.
Defines ``office'' narrowly to include only premises where
retail deposits are accepted from the public.
Clarifies when certain disclosures must be provided,
including that a disclosure such as ``not insured by any federal
agency'' is not to be given where it would be inaccurate (as in the
case of federally-insured crop insurance or flood insurance).
Only requires the anti-coercion disclosure to be made
once, instead of twice per transaction.
Provides flexibility for covered persons to use a variety
of means to provide disclosures that are readily understandable and
call attention to the information.
Provides that, in the case of telephone sales, the duty to
obtain a consumer's acknowledgment of receiving the disclosures may be
satisfied by an oral acknowledgment of disclosures combined with
reasonable efforts to obtain a written acknowledgment.
Does not require disclosures in advertisements of a
general nature describing or listing the services or products offered
by the savings association.
Provides for a delayed effective date, requiring
compliance by April 1, 2001, to permit adequate time to prepare
disclosures and acknowledgment materials and train staff.
Significant Alternatives to the Final Rule
Section 305 of the G-L-B Act expressly prescribes the content of
its implementing regulations. The OCC's final rule 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 final rule, the OCC has considered the burden on
small national banks to the extent that it has the discretion to do so.
As set forth above in the discussion of significant issues raised in
response to the Initial Regulatory Flexibility Analysis, the Agencies
have modified the final rules to minimize burden.
Duplicative, Overlapping, or Conflicting Federal Rules
As used in the 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 final rules do
not appear to conflict materially with the Interagency Statement.
Board: The Regulatory Flexibility Act (5 U.S.C. 601-12) requires
federal agencies either to provide a Final Regulatory Flexibility
Analysis with a final rule or to certify that the final rule will not
have a significant economic impact on a substantial number of small
entities. Based on available data, the Board is unable to determine at
this time whether the final rule would have a significant impact on a
substantial number of small entities. For this reason, the Board has
prepared the following Final Regulatory Flexibility Analysis.
Reasons, Objectives, and Legal Basis for the Final Rule
A description of the reasons why the Board is adopting this final
rule and a statement of the need for, and the objectives of, the final
rule are contained in the supplementary materials provided above. The
Board's final rule is virtually identical to the final rules being
adopted by the other Federal banking agencies for the depository
institutions over which they have primary supervisory authority.
Description of the Small Entities to Which the Final Rule Would Apply
The final rule applies to all state member banks and any other
person when that person sells, solicits, advertises, or offers an
insurance product or annuity to an individual for personal, family, or
household purposes 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 the bank, or how many of these other persons are small
entities.
Summary of Significant Issues Raised by the Public Comments in Response
to Initial Regulatory Flexibility Analysis and Description of Steps the
Agency has Taken to Minimize Burden
The issues raised by the commenters generally are described more
fully in the supplementary material provided above. The issues that
were raised by commenters in connection with impact on small
businesses, specifically, were the following:
The requirement that a covered person obtain a written
acknowledgment of receipt of disclosures for a telephone transaction
could require significant effort and additional correspondence if the
customer does not return the acknowledgment with other paperwork for
the policy. This effort would be a significant burden for small
financial institutions.
The requirement that such insurance as credit and mortgage
insurance be sold in an area of the office separate from where deposits
are routinely taken poses a particular hardship for small financial
institutions

[[Page 75833]]

where deposits and loan applications are taken at the same place.
The Board considered how to tailor the form of disclosures and
acknowledgments to the form of the sales transaction and how to make
the record of acknowledgment functional, within the statutory
constraints. In the case of telephone applications for credit, the
proposed rule permitted the anti-coercion disclosure due at the time of
applications to be given orally and followed with written disclosures
mailed within three days. To extend the principle more broadly, the
final rule applies this form of providing written disclosures for
telephone sales to all the required disclosures. The timing has been
clarified to be three business days, starting with the first business
day after the telephone transaction. With respect to telephone sales,
the final rule permits an oral acknowledgment of the disclosures if the
acknowledgment is documented. In that case, the final rule requires
also that reasonable efforts be made to obtain a written
acknowledgment.
We have made an additional change affecting disclosures relevant to
sales initiated by telephone. The proposed rule limited the use of
electronic disclosures to those transactions taking place entirely
electronically. Commenters were concerned that the proposed rule did
not permit electronic disclosures to be used in transactions that may
have started with a telephone contact. To address this concern, the
final rule provides that, if a transaction involves telephone contact,
but the consumer affirmatively consents to transmission of disclosures
through electronic media instead of on paper, the covered person may
provide the ``written'' disclosures electronically. Of course, these
electronic disclosures must satisfy the rule's requirement that the
format of disclosure be one that permits the consumer to retain or to
obtain later, such as by printing or storing electronically. Where
disclosures are made electronically, the rule already provided that the
consumer could acknowledge them electronically. Electronic
acknowledgment of electronic disclosures applies under the final rule
to these mixed media transactions, as well.
In response to the concern expressed about the difficulty of
separating functions in a small office, we have clarified in the
preamble to this final rule that generally the location where deposits
are routinely taken is the teller window and teller line. This
distinction permits a state member bank to sell insurance products and
annuities from the ``platform area,'' where loan transactions may
routinely be conducted, if the state member bank distinguishes that
area from the teller window area. The regulation also requires this
segregation of functions into separate areas ``to the extent
practicable.'' If it is not practicable for a small institution to have
separate areas, it could make other efforts to satisfy the separation
of functions between deposit taking and selling of insurance.
We note that in addition to these specific responses to concerns
expressed with reference to impact on small entities, we have limited
the scope of the rule in other ways to minimize compliance burdens. The
final rule:
Only applies to retail sales, solicitations,
advertisements, or offers of insurance products or annuities to
individuals purchasing for personal, family, or household use. The
Agencies have determined, after requesting comment on whether to also
include small business insurance purchases, not to broaden the
coverage.
Does not apply to subsidiaries of depository institutions,
except where the subsidiaries are selling, soliciting, advertising, or
offering insurance products or annuities to consumers at an office of a
state member bank or on behalf of a state member bank.
Clarifies the scope of the rule and the definition of
``you'' to apply only to transactions conducted by the person that are
by, at an office of, or on behalf of, the state member bank.
Defines ``office'' narrowly to include only premises where
retail deposits are accepted from the public.
Clarifies when certain disclosures must be provided,
including that a disclosure such as ``not insured by any federal
agency'' is not to be given where it would be inaccurate (as in the
case of federally-insured crop insurance or flood insurance).
Only requires the anti-coercion disclosure to be made
once, instead of twice per transaction.
Provides flexibility for covered persons to use a variety
of means to provide disclosures that are readily understandable and
call attention to the information.
Provides that, in the case of telephone sales, the duty to
obtain a consumer's acknowledgment of receiving the disclosures may be
satisfied by an oral acknowledgment of disclosures combined with
reasonable efforts to obtain a written acknowledgment.
Does not require disclosures in advertisements of a
general nature describing or listing the services or products offered
by the state member bank.
Provides for a delayed effective date, requiring
compliance by April 1, 2001, to permit adequate time to prepare
disclosures and acknowledgment materials and train staff.
Reporting, Recordingkeeping, and Compliance Requirements of the Final
Rule
The final rule requires a depository institution to make required
disclosures in connection with insurance activities and applications
for credit if insurance is sold or solicited in connection with the
credit. Some insurance products or annuities that are covered by the
final regulation may also be subject to the 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 final rule. The Board does not
believe that the final rule would conflict materially with the
Interagency Statement.
The final rule also prohibits certain practices in the sale of
insurance, such as the tying of credit and insurance, making
misrepresentations, and discriminating against the victims of domestic
violence. These prohibitions incorporate the existing statutory
prohibition on tying arrangements in section 106(b) of the Bank Holding
Company Amendments of 1970 (12 U.S.C. 1972). Existing laws also ban
many types of discrimination. To some extent, therefore, state member
banks may already have the professional skills needed to comply with
the requirements of the final rule.
Significant Alternatives to the Final Rule
As explained above, the substantive provisions of the final rule
are required by section 47 of the FDIA. The final rule does not impose
any new substantive requirements that are not mandated by the statute.
Section 47 applies to all depository institutions, regardless of size,
and does not provide the Agencies with the authority to exempt a small
institution from the requirements of the statute. Thus, the Board has
only limited discretion to consider alternatives to minimize the
economic impact on small entities. As explained above, the Agencies
have made some modifications to the proposed rule to accommodate
existing methods of soliciting and selling insurance products and
annuities and to reduce regulatory burden.
FDIC: The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612,
requires

[[Page 75834]]

federal agencies either to provide a Final Regulatory Flexibility
Analysis (FRFA) with a final rule or certify that the final rule ``will
not, if promulgated,'' have a significant economic impact on a
substantial number of small entities. On the basis of the information
currently available, the FDIC believes that this final rule is unlikely
to have a significant impact on a substantial number of small entities.
Because the final rules implement new legislation, however, the FDIC
lacks historical information specific to the requirements in the final
rules on which to base estimates of cost. For this reason, the FDIC has
prepared the following FRFA.
Reasons, Objectives, and Legal Basis for the Final Rule.
The FDIC is issuing this final rule to implement section 47 of the
FDIA. A fuller discussion of the reasons for, objectives of, and legal
basis for, the final rule appears elsewhere in the Supplementary
Information.
Description of the Small Entities to Which the Final Rule Would Apply
The FDIC's final rule applies to all FDIC-insured, state-chartered
banks that are not members of the Federal Reserve System (approximately
5800) and any ``other person'' who, at an office of the bank or on
behalf of the bank, sells, solicits, advertises, or offers insurance
products or annuities to consumers. The final rule applies regardless
of the size of the bank or other organization for which a person
worked. The FDIC estimated in the preamble to the proposed rule that
approximately 3700 of this total are ``small entities'' as defined by
the RFA \19\ We received no comment on this estimate and believe it to
be accurate.
---------------------------------------------------------------------------

\19\ 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 of
banking purposes as a national or commercial, savings institution or
credit union with less than $100 million in assets.'' See 13 CFR
121.201.
---------------------------------------------------------------------------

Reporting, Recordkeeping, and Compliance Requirements of the Final Rule
The final rule requires banks (and entities acting on behalf of
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 and annuities to consumers. The final rule also
requires 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. \20\
---------------------------------------------------------------------------

\20\ The final rule also requires 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 bank to determine what costs, if any,
the bank must incur in order to avoid customer confusion.
---------------------------------------------------------------------------

The FDIC believes that most 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.
This final rule will not become effective until April 1, 2001, which
should allow ample time for most banks to use up their inventory of
printed materials and prepare new materials. 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.
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 FDIC'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.
Summary of Significant Issues Raised by the Public Comments in Response
to Initial Regulatory Flexibility Analysis and Description of Steps the
Agency Has Taken To Minimize Burden
The issues raised by the commenters generally are described more
fully in the supplementary material provided above. The issues that
were raised by commenters in connection with impact on small
businesses, specifically, were the following:
The requirement that a covered person obtain a written
acknowledgment of receipt of disclosures for a telephone transaction
could require significant effort and additional correspondence if the
customer does not return the acknowledgment with other paperwork for
the policy. This effort would be a significant burden for small
financial institutions.
The requirement that such insurance as credit and mortgage
insurance be sold in an area of the office separate from where deposits
are routinely taken poses a particular hardship for small financial
institutions where deposits and loan applications are taken at the same
place.
The FDIC seriously considered how to tailor the form of disclosures
and acknowledgments to the form of the sales transaction and how to
make the record of acknowledgment functional, within the statutory
constraints. In the case of telephone applications for credit, the
proposed rule permitted the anti-coercion disclosure due at the time of
applications to be given orally and followed with written disclosures
mailed within three days. To extend the principle more broadly, the
final rule applies this form of providing written disclosures for
telephone sales to all the required disclosures. The timing has been
clarified to be three business days, starting with the first business
day after the telephone transaction. With respect to telephone sales,
the final rule permits an oral acknowledgment of the disclosures if the
covered person documents the acknowledgment. In that case, the final
rule requires the covered person also to make reasonable efforts to
obtain a written acknowledgment.
We have made an additional change affecting disclosures relevant to
sales initiated by telephone. The proposed rule limited the use of
electronic disclosures to those transactions taking place entirely
electronically. Commenters were concerned that the proposed rule did
not permit electronic disclosures to be used in transactions that may
have started with a telephone contact. To address this concern, the
final rule provides that, if a transaction involves telephone contact,
but the consumer affirmatively consents to transmission of disclosures
through electronic media instead of on paper, the covered person may
provide the ``written'' disclosures electronically. Of course, these
electronic disclosures must satisfy the rule's requirement that the
format of disclosure be one that permits the consumer to retain or to
obtain later, such as by printing or storing electronically. Where
disclosures are made electronically, the rule already provided that the
consumer could acknowledge them electronically. Electronic
acknowledgment of

[[Page 75835]]

electronic disclosures applies under the final rule to these mixed
media transactions, as well. The final rule also provides that oral
disclosures are not required where disclosures are provided
electronically. This exception applies not only to disclosures provided
in the sale of insurance and annuities as in the proposed rule, but
also to the anti-coercion disclosure provided with credit applications.
In response to the concern expressed about the difficulty of
separating functions in a small office, we have clarified in the
preamble to this final rule that generally the location where deposits
are routinely taken is the teller window and teller line. This
distinction permits a depository institution to sell insurance products
and annuities from the ``platform area,'' where loan transactions may
routinely be conducted, if the savings association distinguishes that
area from the teller window area. The regulation also requires this
segregation of functions into separate areas ``to the extent
practicable.'' If it is not practicable for a small institution to have
separate areas, it could make other efforts to satisfy the separation
of functions between deposit taking and selling of insurance.
We note that in addition to these specific responses to concerns
expressed with reference to impact on small entities, we have limited
the scope of the rule in other ways to minimize compliance burdens. The
final rule:
Only applies to retail sales, solicitations,
advertisements, or offers of insurance products or annuities to
individuals purchasing for personal, family, or household use. The
Agencies have determined, after requesting comment on whether to also
include small business purchase, not to broaden the coverage.
Does not apply to subsidiaries of depository institutions,
except where the 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 adopting 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.
Clarifies the scope of the rule and the definition of
``you'' to apply only to transactions conducted by the person that are
by, at an office of, or on behalf of, the bank.
Defines ``office'' narrowly to include only premises where
retail deposits are accepted from the public.
Clarifies when certain disclosures must be provided,
including that a disclosure such as ``not insured by any federal
agency'' is not to be given where it would be inaccurate (as in the
case of federally-insured crop insurance or flood insurance).
Only requires the anti-coercion disclosure to be made
once, instead of twice per transaction.
Provides flexibility for covered persons to use a variety
of means to provide disclosures that are readily understandable and
call attention to the information.
Provides that, in the case of telephone sales, the duty to
obtain a consumer's acknowledgment of receiving the disclosures may be
satisfied by an oral acknowledgment of disclosures combined with
reasonable efforts to obtain a written acknowledgment.
Does not require disclosures in advertisements of a
general nature describing or listing the services or products offered
by the bank.
Provides for a delayed effective date, requiring
compliance by April 1, 2001, to permit adequate time to prepare
disclosures and acknowledgment materials and train staff.
Significant Alternatives to the Final Rule
Section 305 of the G-L-B Act expressly prescribes the content of
its implementing regulations. The FDIC's final rule does not depart
materially from the requirements of the statute. The statute does not
authorize the FDIC to provide exemptions or exceptions to its
requirements for small banks.
In preparing the final rule, the FDIC has considered the burden on
small banks to the extent that it has the discretion to do so. As set
forth above in the discussion of significant issues raised in response
to the Initial Regulatory Flexibility Analysis, the Agencies have
modified the final rules to minimize burden.
Duplicative, Overlapping, or Conflicting Federal Rules
As used in the 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 final rules do
not appear to conflict materially with the Interagency Statement.
OTS: The Regulatory Flexibility Act (5 U.S.C. 601-612) requires
federal agencies to prepare a final regulatory flexibility analysis
(RFA) with a final rule, unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. OTS believes that this rule will not have a significant
economic impact on a substantial number of small thrifts or other small
entities because the burden imposed on small entities stems in large
part from the G-L-B Act rather than from the final rule. This final
rule restates and clarifies the statutory requirements. These
clarifications should reduce the burden of complying with the G-L-B Act
provisions. OTS has revised the proposed rule to reduce the regulatory
burden on financial institutions of all sizes, as discussed below.
However, OTS has prepared the following final RFA, because the G-L-B
Act creates requirements that, in part, are new to the OTS, the thrift
industry, and others, and because OTS is uncertain of the economic
impact of compliance with the new requirements.
1. Statement of Need and Objectives
A description of the reasons why OTS is adopting this final rule
and a statement of the objectives of, and legal basis for, the final
rule, are contained in the supplementary materials provided above.
2. Small Entities to Which the Final Rule Would Apply
The final rule would apply to a savings association or any ``other
person'' who, at an office of a savings association or on behalf of a
savings association, sells, solicits, advertises, or offers insurance
products or annuities to consumers. The final rule would apply
regardless of the size of the savings association or other organization
for which a person worked.
Small savings associations are generally defined, for Regulatory

[[Page 75836]]

Flexibility Act purposes, as those with assets of $100 million or less.
13 CFR 121.201, Division H (2000). As of the publication of the
proposed rule, OTS calculated that of the approximately 1,097 savings
associations, a maximum of 482 were small savings associations.
Currently, OTS calculates that of the approximately 1,091 savings
associations, a maximum of 476 are small savings associations. OTS
estimates that all of the small savings associations sell, solicit,
advertise, or offer insurance products or annuities to consumers.
OTS does not collect data on how many ``covered persons'' that are
not savings associations 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, or on how many of
them are small entities. The initial RFA published in the proposed rule
sought information about impact on entities other than savings
associations affected by the rule to permit OTS to better analyze the
effect. Although OTS received comments on the proposed rule from
insurance industry representatives, who might have data with respect to
their members, none of them provided information on the number or size
of entities other than savings associations affected by the rule. As a
result, OTS is unable to determine the number or size of entities other
than savings associations affected by this final rule.
3. Significant Issues Raised in Response to Initial Regulatory
Flexibility Analysis and Changes Made To Minimize Burden
The issues raised by the commenters generally are described more
fully in the supplementary material provided above. The issues that
were raised by commenters in connection with impact on small
businesses, specifically, were the following:
The requirement that a covered person obtain a written
acknowledgment of receipt of disclosures for a telephone transaction
could require significant effort and additional correspondence if the
customer does not return the acknowledgment with other paperwork for
the policy. This effort would be a significant burden for small
financial institutions.
The requirement that such insurance as credit and mortgage
insurance be sold in an area of the office separate from where deposits
are routinely taken poses a particular hardship for small financial
institutions where deposits and loan applications are taken at the same
place.
OTS seriously considered how to tailor the form of disclosures and
acknowledgments to the form of the sales transaction and how to make
the record of acknowledgment functional, within the statutory
constraints. In the case of telephone applications for credit, the
proposed rule permitted the disclosure on anti-tying due at the time of
applications to be given orally and followed with written disclosures
by mail, provided that the written disclosures were mailed within three
days. To extend the principle more broadly, the final rule applies this
form of providing written disclosures for telephone sales to all the
required disclosures. The timing has been clarified to be three
business days, starting with the first business day after the telephone
transaction. With respect to telephone sales, the final rule permits an
oral acknowledgment of the disclosures if the covered person documents
the acknowledgment. In that case, the final rule requires the covered
person to make reasonable efforts to obtain a written acknowledgment,
as well.
We have made an additional change affecting disclosures relevant to
sales initiated by telephone. In response to concerns expressed about
the proposed rule's limitation of using electronic disclosures to those
transactions taking place entirely electronically, and not permitting
them to be used in transactions that may have started with a telephone
contact, we have removed that limitation. Thus, if a transaction
involves telephone contact, but the consumer affirmatively consents to
transmission of disclosures through electronic media instead of on
paper, the covered person may provide the ``written'' disclosures
electronically. Of course, these electronic disclosures must satisfy
the rule's requirement that the format of disclosure be one that
permits the consumer to retain or to obtain later, such as by printing
or storing electronically. Where disclosures are made electronically,
the rule already provided that the consumer could acknowledge them
electronically. Electronic acknowledgment of electronic disclosures
applies under the final rule to these mixed media transactions, as
well. The final rule also provides that oral disclosures are not
required where disclosures are provided electronically. This exception
applies not only to disclosures provided in the sale of insurance and
annuities as in the proposed rule, but also to the anti-coercion
disclosure provided with credit applications.
In response to the concern expressed about the difficulty of
separating functions in a small office, we have clarified in the
preamble to this final rule that generally the location where deposits
are routinely taken is the teller window and teller line. This
distinction permits a savings association to sell insurance products
and annuities from the ``platform area'' where loan transactions may
routinely be conducted, if the savings association distinguishes that
area from the teller window area. The regulation also requires this
segregation of functions into separate areas ``to the extent
practicable.'' If it is not practicable for a small institution to have
separate areas, it could make other efforts to satisfy the separation
of functions between deposit taking and selling of insurance.
We note that in addition to these specific responses to concerns
expressed with reference to impact on small entities, we have limited
the scope of the rule in other ways to minimize compliance burdens. The
final rule:
Only applies to retail sales, solicitations,
advertisements, or offers of insurance products or annuities to
individuals purchasing for personal, family, or household use. The
Agencies have determined, after requesting comment on whether to also
include small business purchase, not to broaden the coverage.
Does not apply to subsidiaries of depository institutions,
except where the 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
adopting 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.
Clarifies the scope of the rule and the definition of
``you'' to apply only to transactions conducted by the person that are
by, at an office of, or on behalf of, the savings association.
Defines ``office'' narrowly to include only premises where
retail deposits are accepted from the public.
Clarifies when certain disclosures must be provided,
including that a disclosure such as ``not insured by any federal
agency'' is not to be given where it would be inaccurate (as in the
case of federally-insured crop insurance or flood insurance).
Only requires the anti-coercion disclosure to be made
once, instead of twice per transaction.

[[Page 75837]]

Provides flexibility for covered persons to use a variety
of means to provide disclosures that are readily understandable and
call attention to the information.
Provides that, in the case of telephone sales, the duty to
obtain a consumer's acknowledgment of receiving the disclosures may be
satisfied by an oral acknowledgment of disclosures combined with
reasonable efforts to obtain a written acknowledgment.
Does not require disclosures in advertisements of a
general nature describing or listing the services or products offered
by the savings association.
Provides for a delayed effective date, requiring
compliance by April 1, 2001, to permit adequate time to prepare
disclosures and acknowledgment materials and train staff.
4. Projected Reporting, Recordkeeping and Other Compliance Requirements
While the scope of the final rule 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 this final rule. 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 final rule 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 final rule does not appear to conflict materially
with the Interagency Statement or these other authorities.
As a result of the overlap of the rule's requirements with the
provisions of the Interagency Statement and other federal authorities
discussed above, many savings associations and other persons may
already be partly or fully prepared to meet the requirements of the
final rule. 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. The delayed effective date of the final
rule should provide adequate time for the affected parties to develop
revised materials and to modify web sites, as necessary.
5. Significant Alternatives
The requirements in the final rule parallel those in section 47 of
FDIA. The final rule clarifies the statutory requirements in some areas
and restates the requirements in a more understandable manner in other
areas. The final rule does not impose any requirements that differ
substantially from the statute. 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 3 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), at the office or on
behalf of a depository institution, must comply with these disclosure
requirements. 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.

C. Executive Order 12866

OCC: The OCC has determined that this final rule does 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 final rule 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 final rule falls well short of the thresholds established by the
Executive Order.
OTS: OTS has determined that this final rule does 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. OTS believes
that the impact of the rule would not meet the thresholds of the
Executive Order, and consequently OMB review is not necessary.

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. Section
305(e) of the G-L-B Act imposes the requirements contained in the final
rules concerning domestic violence even without the issuance of
regulations. Sections 305(a)-(d) of the G-L-B Act direct the Agencies
to issue regulations implementing disclosure requirements and
requirements to segregate the areas in which insurance activities are
conducted from the areas where deposits are routinely accepted. The
burden the rules place on the private sector is almost entirely
attributable to the G-L-B Act. Therefore, the OCC and OTS have
determined that the final rules 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

[[Page 75838]]

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. 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.
This final rule satisfies 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).
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 impact 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.
As we indicated in the Supplementary Information that accompanied
the proposal, 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.
Separately, section 305 of the G-L-B Act 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 in preparing this final rule. The Agencies have provided the OMB a
copy of the NAIC's written comments on the proposed rule.
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 by the Board, the OCC, and the FDIC in
accordance with certain specified procedures described in greater
detail in the OCC's statement on Executive Order 13132 above.
OTS has determined that application of these statutorily-mandated
provisions 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, OTS and the other
Agencies have consulted with the National Association of Insurance
Commissioners (NAIC), as indicated in the Supplementary Information
above. As noted above, the Agencies considered and responded to the
NAIC's comments. The Agencies also provided an advance copy of the
final rule to the NAIC and OTS has provided an advance copy of the
final rule to the Conference of State Bank Supervisors. The Agencies
expect to consult with the NAIC and State insurance regulators as
decisions are made concerning preemption in particular states.

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

Section 722 of the G-L-B Act requires that the Federal banking
Agencies use ``plain language'' in all proposed and final rules
published after January 1, 2000. We invited your comments on how to
make the proposed rules easier to understand. We received no comments
on this general topic, only on ways to clarify the meaning of such
terms as ``covered person.'' We did make revisions in response to those
specific types of comments, as discussed above.

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, consumer protection, Insurance, Reporting and
recordkeeping requirements.

12 CFR Part 536

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

[[Page 75839]]

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 amends
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 A 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.

(a) General rule. 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:
(1) Any national bank; or
(2) Any other person that is engaged in such activities at an
office of the bank or on behalf of the bank.
(b) Application to operating subsidiaries. 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 bank or on
behalf of a 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) Bank means a national bank or 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.)
(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 purchases, applies to
purchase, or is solicited to purchase from a covered person insurance
products or annuities primarily for personal, family, or household
purposes.
(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)(1) Covered person means:
(i) A bank; or
(ii) Any other person only when the person sells, solicits,
advertises, or offers an insurance product or annuity to a consumer at
an office of the bank or on behalf of a bank.
(2) 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 at least one of the following applies:
(i) 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;
(ii) The bank refers a consumer to a seller of insurance products
or annuities and the bank has a contractual arrangement to receive
commissions or fees derived from a sale of an insurance product or
annuity resulting from that referral; or
(iii) Documents evidencing the sale, solicitation, advertising, or
offer of an insurance product or annuity identify or refer to the bank.
(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. 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 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. 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 an 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 sell or offer for sale, as principal, agent, or broker,
any life or health insurance product if the status of the

[[Page 75840]]

applicant or insured as a victim of domestic violence or as a provider
of services to victims of domestic violence is considered as a
criterion in any decision with regard to insurance underwriting,
pricing, renewal, or scope of coverage of such product, or with regard
to the payment of insurance claims on such product, except as required
or expressly permitted under State law.

Sec. 14.40 What a covered person must disclose.

(a) Insurance 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, except to the extent
the disclosure would not be accurate, that:
(1) The insurance product or annuity is not a deposit or other
obligation of, or guaranteed by, the bank or 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; and
(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.
(b) Credit disclosure. In the case of an application for credit in
connection with which an insurance product or annuity is solicited,
offered, or sold, a covered person must disclose that the bank may not
condition an extension of credit on either:
(1) The consumer's purchase of an insurance product or annuity from
the bank or any of its affiliates; or
(2) The consumer's agreement not to obtain, or a prohibition on the
consumer from obtaining, an insurance product or annuity from an
unaffiliated entity.
(c) Timing and method of disclosures. (1) In general. 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. The disclosure required by
paragraph (b) of this section must 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 is solicited, offered, or sold.
(2) Exception for transactions by mail. If a sale of an insurance
product or annuity is conducted by mail, a covered person is not
required to make the oral disclosures required by paragraph (a) of this
section. If a covered person takes an application for credit by mail,
the covered person is not required to make the oral disclosure required
by paragraph (b).
(3) Exception for transactions by telephone. If a sale of an
insurance product or annuity is conducted by telephone, a covered
person may provide the written disclosures required by paragraph (a) of
this section by mail within 3 business days beginning on the first
business day after the sale, excluding Sundays and the legal public
holidays specified in 5 U.S.C. 6103(a). If a covered person takes an
application for credit by telephone, the covered person may provide the
written disclosure required by paragraph (b) of this section by mail,
provided the covered person mails it to the consumer within three days
beginning the first business day after the application is taken,
excluding Sundays and the legal public holidays specified in 5 U.S.C.
6103(a).
(4) Electronic form of disclosures. (i) Subject to the requirements
of section 101(c) of the Electronic Signatures in Global and National
Commerce Act (12 U.S.C. 7001(c)), a covered person may provide the
written disclosures required by paragraph (a) and (b) of this section
through electronic media instead of on paper, if the consumer
affirmatively consents to receiving the disclosures electronically and
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) Any disclosures required by paragraphs (a) or (b) of this
section that are provided by electronic media are not required to be
provided orally.
(5) 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 in visual media, such as television broadcasting,
ATM screens, billboards, signs, posters and written advertisements and
promotional materials, as appropriate and consistent with paragraphs
(a) and (b) of this section:

NOT A DEPOSIT
NOT FDIC-INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NOT GUARANTEED BY THE BANK [OR SAVINGS ASSOCIATION]
MAY GO DOWN IN VALUE

(6) Disclosures must be meaningful. (i) A covered person must
provide the disclosures required by paragraphs (a) and (b) of this
section in a meaningful form. Examples of the types of methods that
could call attention to the nature and significance of the information
provided include:
(A) A plain-language heading to call attention to the disclosures;
(B) A typeface and type size that are easy to read;
(C) Wide margins and ample line spacing;
(D) Boldface or italics for key words; and
(E) Distinctive type style, and graphic devices, such as shading or
sidebars, when the disclosures are combined with other information.
(ii) 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.
(iii) 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.
(7) Consumer acknowledgment. A covered person must obtain from the
consumer, at the time a consumer receives the disclosures required
under paragraphs (a) or (b) of 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 covered person may permit a consumer to acknowledge
receipt of the disclosures electronically or in paper form. If the
disclosures required under paragraphs (a) or (b) of this section are
provided in connection with a transaction that is conducted by
telephone, a covered person must:
(i) Obtain an oral acknowledgment of receipt of the disclosures and
maintain sufficient documentation to show that the acknowledgment was
given; and
(ii) Make reasonable efforts to obtain a written acknowledgment
from the consumer.
(d) Advertisements and other promotional material for insurance
products or annuities. The disclosures described in paragraph (a) of
this section are required in advertisements and promotional material
for insurance products or annuities unless the advertisements and
promotional materials are of a general nature

[[Page 75841]]

describing or listing the services or products offered by the bank.

Sec. 14.50 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 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. 14.60 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 A to Part 14--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 this part should contact
the Customer Assistance Group, Office of the Comptroller of the
Currency, (800) 613-6743, 1301 McKinney Street, Suite 3710, Houston,
Texas 77010-3031.

Dated: November 17, 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 amends
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 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,
78l(b), 78l(g), 78l(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.

Subpart H [Redesignated as Subpart I]

2. The existing subpart H--Interpretations is redesignated as
subpart I.

3. A new subpart H is 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 A 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:
(a) Any state member bank; or
(b) Any other person that is engaged in such activities at an
office of the 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) Bank means a state member bank.
(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 purchases, applies to
purchase, or is solicited to purchase from you insurance products or
annuities primarily for personal, family, or household purposes.
(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) 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 you 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 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)).
(j)(1) You means:
(i) A bank; or
(ii) Any other person only when the person sells, solicits,
advertises, or offers an insurance product or annuity to a consumer at
an office of the bank or on behalf of a bank.
(2) 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 at least one of the following applies:
(i) 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;

[[Page 75842]]

(ii) If the bank refers a consumer to a seller of insurance
products or annuities and the bank has a contractual arrangement to
receive commissions or fees derived from the sale of an insurance
product or annuity resulting from that referral; or
(iii) Documents evidencing the sale, solicitation, advertising, or
offer of an insurance product or annuity identify or refer to the bank.

Sec. 208.83 Prohibited practices.

(a) Anticoercion and antitying rules. You 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
(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 an 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
sell or offer for sale, as principal, agent, or broker, any life or
health insurance product if the status of the applicant or insured as a
victim of domestic violence or as a provider of services to victims of
domestic violence is considered as a criterion in any decision with
regard to insurance underwriting, pricing, renewal, or scope of
coverage of such product, or with regard to the payment of insurance
claims on such product, except as required or expressly permitted under
State law.

Sec. 208.84 What you must disclose.

(a) Insurance disclosures. In connection with the initial purchase
of an insurance product or annuity by a consumer from you, you must
disclose to the consumer, except to the extent the disclosure would not
be accurate, that:
(1) The insurance product or annuity is not a deposit or other
obligation of, or guaranteed by, the bank or 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; and
(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.
(b) Credit disclosure. In the case of an application for credit in
connection with which an insurance product or annuity is solicited,
offered, or sold, you must disclose that the bank may not condition an
extension of credit on either:
(1) The consumer's purchase of an insurance product or annuity from
the bank or any of its affiliates; or
(2) The consumer's agreement not to obtain, or a prohibition on the
consumer from obtaining, an insurance product or annuity from an
unaffiliated entity.
(c) Timing and method of disclosures. (1) In general. 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. The disclosure required by
paragraph (b) of this section must be made orally and in writing at the
time the consumer applies for an extension of credit in connection with
which insurance is solicited, offered, or sold.
(2) Exceptions for transactions by mail. If a sale of an insurance
product or annuity is conducted by mail, you are not required to make
the oral disclosures required by paragraph (a) of this section. If you
take an application for credit by mail, you are not required to make
the oral disclosure required by paragraph (b) of this section.
(3) Exception for transactions by telephone. If a sale of an
insurance product or annuity is conducted by telephone, you may provide
the written disclosures required by paragraph (a) of this section by
mail within 3 business days beginning on the first business day after
the sale, excluding Sundays and the legal public holidays specified in
5 U.S.C 6103(a). If you take an application for such credit by
telephone, you may provide the written disclosure required by paragraph
(b) of this section by mail, provided you mail it to the consumer
within three days beginning the first business day after the
application is taken, excluding Sundays and the legal public holidays
specified in 5 U.S.C. 6103(a).
(4) Electronic form of disclosures. (i) Subject to the requirements
of section 101(c) of the Electronic Signatures in Global and National
Commerce Act (12 U.S.C. 7001(c)), you may provide the written
disclosures required by paragraphs (a) and (b) of this section through
electronic media instead of on paper, if the consumer affirmatively
consents to receiving the disclosures electronically and 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) Any disclosures required by paragraphs (a) or (b) of this
section that are provided by electronic media are not required to be
provided orally.
(5) 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, in visual media, such as television broadcasting, ATM
screens, billboards, signs, posters and written advertisements and
promotional materials, as appropriate and consistent with paragraphs
(a) and (b) of this section:

NOT A DEPOSIT
NOT FDIC-INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NOT GUARANTEED BY THE BANK
MAY GO DOWN IN VALUE

(6) Disclosures must be meaningful. (i) You must provide the
disclosures required by paragraphs (a) and (b) of this section in a
meaningful form. Examples of the types of methods that could call
attention to the nature and significance of the information provided
include:
(A) A plain-language heading to call attention to the disclosures;
(B) A typeface and type size that are easy to read;
(C) Wide margins and ample line spacing;

[[Page 75843]]

(D) Boldface or italics for key words; and
(E) Distinctive type size, style, and graphic devices, such as
shading or sidebars, when the disclosures are combined with other
information.
(ii) 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.
(iii) 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.
(7) Consumer acknowledgment. You must obtain from the consumer, at
the time a consumer receives the disclosures required under paragraphs
(a) or (b) of 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. You may permit a consumer to acknowledge receipt of the
disclosures electronically or in paper form. If the disclosures
required under paragraphs (a) or (b) of this section are provided in
connection with a transaction that is conducted by telephone, you must:
(i) Obtain an oral acknowledgment of receipt of the disclosures and
maintain sufficient documentation to show that the acknowledgment was
given; and
(ii) Make reasonable efforts to obtain a written acknowledgment
from the consumer.
(d) Advertisements and other promotional material for insurance
products or annuities. The disclosures described in paragraph (a) of
this section are required in advertisements and promotional material
for insurance products or annuities unless the advertisements and
promotional materials are of a general nature describing or listing the
services or products offered by the bank.

Sec. 208.85 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 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. 208.86 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 A to Subpart H--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 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, D.C.
20551.

By order of the Board of Governors of the Federal Reserve
System, November, 21, 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 amends 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 you must disclose.
343.50 Where insurance activities may take place.
343.60 Qualification and licensing requirements for insurance
sales personnel.
Appendix A 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:
(a) Any bank; or
(b) Any other 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 purchases, applies to
purchase, or is solicited to purchase from you insurance products or
annuities primarily for personal, family, or household purposes.
(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) 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

[[Page 75844]]

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 you 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 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)).
(j) (1) You means:
(i) A bank; or
(ii) Any other person only when the person sells, solicits,
advertises, or offers an insurance product or annuity to a consumer at
an office of the bank or on behalf of a bank.
(2) 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 at least one of the following applies:
(i) 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;
(ii) The bank refers a consumer to a seller of insurance products
or annuities and the bank has a contractual arrangement to receive
commissions or fees derived from a sale of an insurance product or
annuity resulting from that referral; or
(iii) Documents evidencing the sale, solicitation, advertising, or
offer of an insurance product or annuity identify or refer to the bank.

Sec. 343.30 Prohibited practices.

(a) Anticoercion and antitying rules. You 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
(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 an 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
sell or offer for sale, as principal, agent, or broker, any life or
health insurance product if the status of the applicant or insured as a
victim of domestic violence or as a provider of services to victims of
domestic violence is considered as a criterion in any decision with
regard to insurance underwriting, pricing, renewal, or scope of
coverage of such product, or with regard to the payment of insurance
claims on such product, except as required or expressly permitted under
State law.

Sec. 343.40 What you must disclose.

(a) Insurance disclosures. In connection with the initial purchase
of an insurance product or annuity by a consumer from you, you must
disclose to the consumer, except to the extent the disclosure would not
be accurate, that:
(1) The insurance product or annuity is not a deposit or other
obligation of, or guaranteed by, the bank or 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; and
(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.
(b) Credit disclosure. In the case of an application for credit in
connection with which an insurance product or annuity is solicited,
offered, or sold, you must disclose that the bank may not condition an
extension of credit on either:
(1) The consumer's purchase of an insurance product or annuity from
the bank or any of its affiliates; or
(2) The consumer's agreement not to obtain, or a prohibition on the
consumer from obtaining, an insurance product or annuity from an
unaffiliated entity.
(c) Timing and method of disclosures. (1) In general. 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. The disclosure required by
paragraph (b) of this section must 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 is solicited, offered, or sold.
(2) Exception for transactions by mail. If a sale of an insurance
product or annuity is conducted by mail, you are not required to make
the oral disclosures required by paragraph (a) of this section. If you
take an application for credit by mail, you are not required to make
the oral disclosure required by paragraph (b).
(3) Exception for transactions by telephone. If a sale of an
insurance product or annuity is conducted by telephone, you may provide
the written disclosures required by paragraph (a) of this section by
mail within 3 business days beginning on the first business day after
the sale, excluding Sundays and the legal public holidays specified in
5 U.S.C. 6103(a). If you take an application for credit by telephone,
you may provide the written disclosure required by paragraph (b) of
this section by mail, provided you mail it to the consumer within three
days beginning the first business day after the application is taken,
excluding Sundays and the legal public holidays specified in 5 U.S.C.
6103(a).
(4) Electronic form of disclosures. (i) Subject to the requirements
of section 101(c) of the Electronic Signatures in Global and National
Commerce Act (12 U.S.C. 7001(c)), you may provide the written
disclosures required by paragraph (a) and (b) of this section through
electronic media instead of on paper, if the consumer affirmatively

[[Page 75845]]

consents to receiving the disclosures electronically and 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) Any disclosure required by paragraphs (a) or (b) of this
section that is provided by electronic media is not required to be
provided orally.
(5) 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 in visual media, such as television broadcasting, ATM
screens, billboards, signs, posters and written advertisements and
promotional materials, as appropriate and consistent with paragraphs
(a) and (b) of this section:

NOT A DEPOSIT
NOT FDIC-INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NOT GUARANTEED BY THE BANK
MAY GO DOWN IN VALUE

(6) Disclosures must be meaningful. (i) You must provide the
disclosures required by paragraphs (a) and (b) of this section in a
meaningful form. Examples of the types of methods that could call
attention to the nature and significance of the information provided
include:
(A) A plain-language heading to call attention to the disclosures;
(B) A typeface and type size that are easy to read;
(C) Wide margins and ample line spacing;
(D) Boldface or italics for key words; and
(E) Distinctive type size, style, and graphic devices, such as
shading or sidebars, when the disclosures are combined with other
information.
(ii) 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 do not provide the printed material
when required and do not orally disclose the information to the
consumer when required.
(iii) 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.
(7) Consumer acknowledgment. You must obtain from the consumer, at
the time a consumer receives the disclosures required under paragraphs
(a) or (b) of 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. You may permit a consumer to acknowledge receipt of the
disclosures electronically or in paper form. If the disclosures
required under paragraphs (a) or (b) of this section are provided in
connection with a transaction that is conducted by telephone, you must:
(i) Obtain an oral acknowledgment of receipt of the disclosures and
maintain sufficient documentation to show that the acknowledgment was
given; and
(ii) Make reasonable efforts to obtain a written acknowledgment
from the consumer.
(d) Advertisements and other promotional material for insurance
products or annuities. The disclosures described in paragraph (a) of
this section are required in advertisements and promotional material
for insurance products or annuities unless the advertisements and
promotional materials are 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 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 A 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 this part 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.

By order of the Board of Directors.

Federal Deposit Insurance Corporation.

Dated at Washington, DC, this 21st day of November, 2000.
Robert E. Feldman,
Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

For the reasons set out in the joint preamble, OTS amends 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 A to Part 536--Consumer Grievance Process.

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

Sec. 536.10 Purpose and scope.

(a) General rule. 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:
(1) Any savings association; or
(2) Any other person that is engaged in such activities at an
office of a savings association or on behalf of a savings association.
(b) Application to operating subsidiaries. For purposes of
Sec. 559.3(h) of this chapter, an operating subsidiary is subject to
this part only to the extent

[[Page 75846]]

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 purchases, applies to purchase, or
is solicited to purchase from a covered person insurance products or
annuities primarily for personal, family, or household purposes.
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)).
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 a covered person 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
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
You means:
(1) A savings association, as defined in Sec. 561.43 of this
chapter; or
(2) Any other person only when the person sells, solicits,
advertises, or offers an insurance product or annuity 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 the savings association or at another location, sells,
solicits, advertises, or offers an insurance product or annuity and at
least one of the following applies:
(i) 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 savings association;
(ii) The savings association refers a consumer to a seller of
insurance products and annuities and the savings association has a
contractual arrangement to receive commissions or fees derived from a
sale of an insurance product or annuity resulting from that referral;
or
(iii) Documents evidencing the sale, solicitation, advertising, or
offer of an insurance product or annuity identify or refer to the
savings association.

Sec. 536.30 Prohibited practices.

(a) Anticoercion and antitying rules. You may not engage in any
practice that would lead a consumer to believe that an extension of
credit, in violation of section 5(q) of the Home Owners' Loan Act (12
U.S.C. 1464(q)), 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 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 an insurance product or annuity you or any
subsidiary of a savings association sell or offer for sale 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 a 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
sell or offer for sale, as principal, agent, or broker, any life or
health insurance product if the status of the applicant or insured as a
victim of domestic violence or as a provider of services to victims of
domestic violence is considered as a criterion in any decision with
regard to insurance underwriting, pricing, renewal, or scope of
coverage of such product, or with regard to the payment of insurance
claims on such product, except as required or expressly permitted under
State law.

Sec. 536.40 What you must disclose.

(a) Insurance disclosures. In connection with the initial purchase
of an insurance product or annuity by a consumer from you, you must
disclose to the consumer, except to the extent the disclosure would not
be accurate, that:
(1) The insurance product or annuity is not a deposit or other
obligation of, or guaranteed by, a savings association or 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; and
(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.
(b) Credit disclosures. In the case of an application for credit in
connection with which an insurance product or annuity is solicited,
offered, or sold, you must disclose that a savings association may not
condition an extension of credit on either:
(1) The consumer's purchase of an insurance product or annuity from
the savings association or any of its affiliates; or

[[Page 75847]]

(2) The consumer's agreement not to obtain, or a prohibition on the
consumer from obtaining, an insurance product or annuity from an
unaffiliated entity.
(c) Timing and method of disclosures. (1) In general. 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. The disclosure required by
paragraph (b) of this section must 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 is solicited, offered, or sold.
(2) Exception for transactions by mail. If you conduct an insurance
product or annuity sale by mail, you are not required to make the oral
disclosures required by paragraph (a) of this section. If you take an
application for credit by mail, you are not required to make the oral
disclosure required by paragraph (b) of this section.
(3) Exception for transactions by telephone. If a sale of an
insurance product or annuity is conducted by telephone, you may provide
the written disclosures required by paragraph (a) of this section by
mail within 3 business days beginning on the first business day after
the sale, solicitation, or offer, excluding Sundays and the legal
public holidays specified in 5 U.S.C. 6103(a). If you take an
application for credit by telephone, you may provide the written
disclosure required by paragraph (b) of this section by mail, provided
you mail it to the consumer within three days beginning the first
business day after the application is taken, excluding Sundays and the
legal public holidays specified in 5 U.S.C. 6103(a).
(4) Electronic form of disclosures. (i) Subject to the requirements
of section 101(c) of the Electronic Signatures in Global and National
Commerce Act (12 U.S.C. 7001(c)), you may provide the written
disclosures required by paragraph (a) and (b) of this section through
electronic media instead of on paper, if the consumer affirmatively
consents to receiving the disclosures electronically and 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) You are not required to provide orally any disclosures
required by paragraphs (a) or (b) of this section that you provide by
electronic media.
(5) 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 in visual media, such as television broadcasting, ATM
screens, billboards, signs, posters and written advertisements and
promotional materials, as appropriate and consistent with paragraphs
(a) and (b) of this section:

NOT A DEPOSIT
NOT FDIC-INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NOT GUARANTEED BY THE SAVINGS ASSOCIATION
MAY GO DOWN IN VALUE

(6) Disclosures must be meaningful. (i) You must provide the
disclosures required by paragraphs (a) and (b) of this section in a
meaningful form. Examples of the types of methods that could call
attention to the nature and significance of the information provided
include:
(A) A plain-language heading to call attention to the disclosures;
(B) A typeface and type size that are easy to read;
(C) Wide margins and ample line spacing;
(D) Boldface or italics for key words; and
(E) Distinctive type size, style, and graphic devices, such as
shading or sidebars, when the disclosures are combined with other
information.
(ii) 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 do not provide the printed material
when required and do not orally disclose the information to the
consumer when required.
(iii) 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.
(7) Consumer acknowledgment. You must obtain from the consumer, at
the time a consumer receives the disclosures required under paragraphs
(a) or (b) of 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. You may permit a consumer to acknowledge receipt of the
disclosures electronically or in paper form. If the disclosures
required under paragraphs (a) or (b) of this section are provided in
connection with a transaction that is conducted by telephone, you must:
(i) Obtain an oral acknowledgment of receipt of the disclosures and
maintain sufficient documentation to show that the acknowledgment was
given; and
(ii) Make reasonable efforts to obtain a written acknowledgment
from the consumer.
(d) Advertisements and other promotional material for insurance
products or annuities. The disclosures described in paragraph (a) of
this section are required in advertisements and promotional material
for insurance products or annuities unless the advertisements and
promotional material are of a general nature describing or listing the
services or products offered by a savings association.

Sec. 536.50 Where insurance activities may take place.

(a) General rule. A savings association must, to the extent
practicable:
(1) 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;
(2) Identify the areas where insurance product or annuity sales
activities occur; and
(3) Clearly delineate and distinguish those areas from the areas
where the savings 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.

[[Page 75848]]

Appendix A 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 the 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.complaint@ots.treas.gov.

Dated: November 21, 2000.