AMERICAN INSURANCE ASSOCIATION
August 16, 2004
Office of the Comptroller of the Currency
250 E Street, SW
Mail-Stop 1-5
Washington, DC 20219
Robert E. Feldman,
Executive Secretary
Attn: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Jennifer J. Johnson, Secretary
Board of Governors of the
Federal Reserve System
20th Street & Constitution Ave., NW
Washington, DC 20551
Regulation Comments (Attn: No. 2004-31)
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
Re: FACT ACT AFFILIATE MARKETING RULE:
OCC Docket No. 04-16 (12 CFR Part 41)
Board of Governors of the Federal Reserve System Docket No. R-1203 (12 CFR
Part 222)
FDIC RIN No. 3064-AC 73 (12 CFR Part 334)
OTS No. 2004-31 (12 CFR Part 571)
NCUA (12 CFR Part 717)
Ladies and Gentlemen:
The American Insurance Association (AIA)1 appreciates the opportunity to
provide comments in response to the proposed rules published by the Office
of the Comptroller of the Currency (OCC), the Board of Governors of the
Federal Reserve System (Board), the Federal Deposit Insurance Corporation
(FDIC), the Office of Thrift Supervision (OTS), and the National Credit
Union Administration (NCUA) (collectively, Federal Agencies or
Agencies) in the July 15, 2004 Federal Register implementing the
provisions contained in Section 214 of the Fair and Accurate Credit
Transactions Act of 2003 (FACT Act) (Proposed Rules). 69 Fed. Reg.
42502-42542. Those provisions add a new Section 624 to the Fair Credit
Reporting Act (FCRA) that relates to certain procedures that regulated
entities must follow when an affiliate uses certain information received
from another affiliate to make marketing solicitations to consumers that do
not fall within certain exceptions.
We have reviewed the Proposed Rules and believe that the provisions
generally track the actual language of Section 624. This is particularly
important with respect to this section of the FACT Act, as those companies
that are required to comply with the affiliate marketing solicitation
restrictions must be able to evaluate those restrictions with confidence
that their marketing practices are aligned with the statutory language.
Implementing regulations that introduce interpretations at variance with the
statutory language are not only beyond the authority of the issuing agency,
they lead to undue compliance burdens for regulated entities that have
relied on the plain meaning of statutory language.
Thus, while we agree with the Proposed Rules as phrased, we are concerned
by the Federal Agencies invitation to comment, in the Section-by-Section
Analysis of solicitations involving eligibility information, which seems to
imply that constructive sharing of information by one affiliate with
another affiliate in order for the receiving affiliate to market the sharing
affiliates products or services to its customers does not squarely fall
within the pre-existing business relationship exception. 69 Fed. Reg. at
42507. But an analysis of the statutory exception leads inescapably to the
conclusion that this is precisely the type of solicitation that was
envisioned by the exception.
Subsection 624(a)(4) of the FACT Act lists the exceptions to the general
requirement that consumers be given notice and an opportunity to opt-out
of marketing solicitations by affiliated companies. Importantly, these
exceptions are separated by the disjunctive or, and are therefore
individual, not cumulative. Thus, compliance with any one of the exceptions
will suffice. Subsection 624(a)(4)(A) specifically provides that a person
(which includes any corporation2) need not comply with the consumer notice
and opt-out opportunity where the person is using information to make a
solicitation for marketing purposes to a consumer with whom the person has a
pre-existing business relationship. As a result, a company may market
without restriction to those consumers that have a pre-existing business
relationship with that company.
The term pre-existing business relationship is statutorily defined in
Subsection 624(d)(1) as a relationship between a person, or a persons
licensed agent3, and a consumer that is
based on--
(A) a financial contract between a person and a consumer which is in
force;
(B) the purchase, rental, or lease by the consumer of that persons goods or
services, or a financial transaction (including holding an active account or
policy in force or having another continuing relationship) between the
consumer and that person during the 18-month period immediately preceding
the date on which the consumer is sent a solicitation covered by this
section;
(C) an inquiry or application by the consumer regarding a product or service
offered by that person, during the 3-month period immediately preceding the
date on which the consumer is sent a solicitation covered by this section;
or
(D) any other pre-existing customer relationship defined in the regulations
implementing this section. (Emphasis added.)
Like Section 624s exception structure, a corporate relationship with a
consumer that meets any of the four definitions of pre-existing business
relationship meets the statutory term. For property-casualty insurers, this
means, among other things, that a pre-existing business relationship
exists with their current policyholders and with other consumers with whom
they have a financial contract in place (see Subsection 624(d)(1)(A)), as
well as those consumers that apply for or inquire about the insurers
products or services for 3 months following the application or inquiry, even
when that inquiry or application does not result in issuance of an insurance
policy or other completed business transaction (see Subsection
624(d)(1)(C)).
Importantly, neither the pre-existing business relationship exception
nor the terms definition is limited to solicitations involving an entitys
own products or services. In addition, there is nothing in the exception (or
the corresponding definitions) that precludes an entity from sending a
solicitation to a customer involving another affiliates products or
services.
Further, none of the other exceptions to Section 624s affiliate
marketing solicitation restriction limits the exception for pre-existing
business relationships in any way. As we have noted, the exceptions listed
in Subsection 624(a)(4) are independent of one another each designed to
permit affiliate marketing solicitations in certain situations without the
need for consumer notice or an opportunity to opt-out of such
solicitations. For example, Subsection 624(a)(4)(F) excepts an insurer from
the marketing solicitation restrictions set forth in Section 624 if
compliance with [those requirements] by that [insurer] would prevent
compliance by that [insurer] with any provision of State insurance laws
pertaining to unfair discrimination in any State in which the person is
lawfully doing business. This exception was included to account for the
state insurance regulatory environment that polices property-casualty
insurer business practices for unlawful discrimination, as well as regulates
rates (and, in many instances, requires prior regulatory approval of those
rates) according to a standard that those rates not be excessive,
inadequate, or unfairly discriminatory, and to ensure that insurer
compliance with Section 624 did not put the insurer in conflict with legal
standards in any jurisdiction where it lawfully does business.
Finally, during the FACT Act legislative debate, the meaning of Section
624(a)(4)(A) was clearly understood as allowing companies to market freely
to those consumers with whom they have a pre-existing business relationship,
whether or not the marketing solicitation involved the companys products or
services or those of an affiliate. Indeed, the plain meaning of this
language provided the fulcrum for consensus support for Section 624. Thus,
any implication that constructive sharing, as the Agencies have phrased
it, is questionable constitutes a departure from the statute and must give
way in deference to the clear language of the pre-existing business
relationship exception.
With regard to the Federal Agencies request for comments on the
effective date of the rule, 69 Fed. Reg. at 42512, AIA respectfully suggests
that a six month period is not sufficient for entities to evaluate the final
rule, determine its impact on current affiliate marketing practices, and
implement any needed operational changes. AIA urges the Federal Agencies to
extend the effective date to twelve months from final publication.
* * *
AIA welcomes the opportunity to comment on the affiliate marketing
solicitation provisions of Section 624. We hope that the Proposed Rules, as
finally adopted, follow both the letter and the spirit of the FACT Act and
allows financial services institutions such as AIAs member companies to
continue to engage in activities contemplated by that legislation.
Respectfully submitted,
J. Stephen Zielezienski
Vice President & Associate General Counsel
American Insurance Association
1 AIA is a national trade association of major property and
casualty insurance companies, representing over 450 insurers that provide
all lines of property and casualty insurance throughout the United States
and that wrote more than $115 billion in annual premiums in 2002.
2 See 12 CFR § 41.3(l); 12 CFR § 222.3(l); 12 CFR § 3343.3(l); 12
CFR § 571.3(l); 12 CFR § 571.3(l); 12 CFR § 717.3(l).
3 We note that the Proposed Rules pre-existing business
relationship definition omits the reference to a persons licensed agent
in the introductory phrase. See 12 CFR § 41.3(m); 12 CFR § 222.3(m); 12 CFR
§ 3343.3(m); 12 CFR § 571.3(m); 12 CFR § 571.3(m); 12 CFR § 717.3(m). AIA
respectfully recommends that the regulatory definition be amended to include
that reference in order to align with the actual language of Subsection
624(d)(1). |