§ 1831x. — Insurance customer protections.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1831x]
TITLE 12--BANKS AND BANKING
CHAPTER 16--FEDERAL DEPOSIT INSURANCE CORPORATION
Sec. 1831x. Insurance customer protections
(a) Regulations required
(1) In general
The Federal banking agencies shall prescribe and publish in
final form, before the end of the 1-year period beginning on
November 12, 1999, customer protection regulations (which the
agencies jointly determine to be appropriate) that--
(A) apply to retail sales practices, solicitations,
advertising, or offers of any insurance product by any
depository institution or any person that is engaged in such
activities at an office of the institution or on behalf of the
institution; and
(B) are consistent with the requirements of this chapter and
provide such additional protections for customers to whom such
sales, solicitations, advertising, or offers are directed.
(2) Applicability to subsidiaries
The regulations prescribed pursuant to paragraph (1) shall
extend such protections to any subsidiary of a depository
institution, as deemed appropriate by the regulators referred to in
paragraph (3), where such extension is determined to be necessary to
ensure the consumer protections provided by this section.
(3) Consultation and joint regulations
The Federal banking agencies shall consult with each other and
prescribe joint regulations pursuant to paragraph (1), after
consultation with the State insurance regulators, as appropriate.
(b) Sales practices
The regulations prescribed pursuant to subsection (a) of this
section shall include antitying and anticoercion rules applicable to the
sale of insurance products that prohibit a depository institution from
engaging in any practice that would lead a customer to believe an
extension of credit, in violation of section 1972 of this title, is
conditional upon--
(1) the purchase of an insurance product from the 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 from an
unaffiliated entity.
(c) Disclosures and advertising
The regulations prescribed pursuant to subsection (a) of this
section shall include the following provisions relating to disclosures
and advertising in connection with the initial purchase of an insurance
product:
(1) Disclosures
(A) In general
Requirements that the following disclosures be made orally
and in writing before the completion of the initial sale and, in
the case of clause (iii), at the time of application for an
extension of credit:
(i) Uninsured status
As appropriate, the product is not insured by the
Federal Deposit Insurance Corporation, the United States
Government, or the depository institution.
(ii) Investment risk
In the case of a variable annuity or other insurance
product which involves an investment risk, that there is an
investment risk associated with the product, including
possible loss of value.
(iii) Coercion
The approval of an extension of credit may not be
conditioned on--
(I) the purchase of an insurance product from the
institution in which the application for credit is
pending or of any affiliate of the institution; or
(II) an agreement by the consumer not to obtain, or
a prohibition on the consumer from obtaining, an
insurance product from an unaffiliated entity.
(B) Making disclosure readily understandable
Regulations prescribed under subparagraph (A) shall
encourage the use of disclosure that is conspicuous, simple,
direct, and readily understandable, such as the following:
(i) ``NOT FDIC--INSURED''.
(ii) ``NOT GUARANTEED BY THE BANK''.
(iii) ``MAY GO DOWN IN VALUE''.
(iv) ``NOT INSURED BY ANY GOVERNMENT AGENCY''.
(C) Limitation
Nothing in this paragraph requires the inclusion of the
foregoing disclosures in advertisements of a general nature
describing or listing the services or products offered by an
institution.
(D) Meaningful disclosures
Disclosures shall not be considered to be meaningfully
provided under this paragraph if the institution or its
representative states that disclosures required by this
subsection were available to the customer in printed material
available for distribution, where such printed material is not
provided and such information is not orally disclosed to the
customer.
(E) Adjustments for alternative methods of purchase
In prescribing the requirements under subparagraphs (A) and
(F), necessary adjustments shall be made for purchase in person,
by telephone, or by electronic media to provide for the most
appropriate and complete form of disclosure and acknowledgments.
(F) Consumer acknowledgment
A requirement that a depository institution shall require
any person selling an insurance product at any office of, or on
behalf of, the institution to obtain, at the time a consumer
receives the disclosures required under this paragraph or at the
time of the initial purchase by the consumer of such product, an
acknowledgment by such consumer of the receipt of the disclosure
required under this subsection with respect to such product.
(2) Prohibition on misrepresentations
A prohibition on any practice, or any advertising, at any office
of, or on behalf of, the depository institution, or any subsidiary,
as appropriate, that could mislead any person or otherwise cause a
reasonable person to reach an erroneous belief with respect to--
(A) the uninsured nature of any insurance product sold, or
offered for sale, by the institution or any subsidiary of the
institution;
(B) in the case of a variable annuity or insurance product
that involves an investment risk, the investment risk associated
with any such product; or
(C) in the case of an institution or subsidiary at which
insurance products are sold or offered for sale, the fact that--
(i) the approval of an extension of credit to a customer
by the institution or subsidiary may not be conditioned on
the purchase of an insurance product by such customer from
the institution or subsidiary; and
(ii) the customer is free to purchase the insurance
product from another source.
(d) Separation of banking and nonbanking activities
(1) Regulations required
The regulations prescribed pursuant to subsection (a) of this
section shall include such provisions as the Federal banking
agencies consider appropriate to ensure that the routine acceptance
of deposits is kept, to the extent practicable, physically
segregated from insurance product activity.
(2) Requirements
Regulations prescribed pursuant to paragraph (1) shall include
the following requirements:
(A) Separate setting
A clear delineation of the setting in which, and the
circumstances under which, transactions involving insurance
products should be conducted in a location physically segregated
from an area where retail deposits are routinely accepted.
(B) Referrals
Standards that permit any person accepting deposits from the
public in an area where such transactions are routinely
conducted in a depository institution to refer a customer who
seeks to purchase any insurance product to a qualified person
who sells such 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.
(C) Qualification and licensing requirements
Standards prohibiting 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.
(e) Domestic violence discrimination prohibition
(1) In general
In the case of an applicant for, or an insured under, any
insurance product described in paragraph (2), the status of the
applicant or insured as a victim of domestic violence, or as a
provider of services to victims of domestic violence, shall not be
considered as a criterion in any decision with regard to insurance
underwriting, pricing, renewal, or scope of coverage of insurance
policies, or payment of insurance claims, except as required or
expressly permitted under State law.
(2) Scope of application
The prohibition contained in paragraph (1) shall apply to any
life or health insurance product which is sold or offered for sale,
as principal, agent, or broker, by any depository institution or any
person who is engaged in such activities at an office of the
institution or on behalf of the institution.
(3) Domestic violence defined
For purposes of this subsection, the term ``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:
(A) Attempting to cause or causing or threatening another
person physical harm, severe emotional distress, psychological
trauma, rape, or sexual assault.
(B) 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.
(C) Subjecting another person to false imprisonment.
(D) Attempting to cause or cause damage to property so as to
intimidate or attempt to control the behavior of another person.
(f) Consumer grievance process
The Federal banking agencies shall jointly establish a consumer
complaint mechanism, for receiving and expeditiously addressing consumer
complaints alleging a violation of regulations issued under the section,
which shall--
(1) establish a group within each regulatory agency to receive
such complaints;
(2) develop procedures for investigating such complaints;
(3) develop procedures for informing consumers of rights they
may have in connection with such complaints; and
(4) develop procedures for addressing concerns raised by such
complaints, as appropriate, including procedures for the recovery of
losses to the extent appropriate.
(g) Effect on other authority
(1) In general
No provision of this section shall be construed as granting,
limiting, or otherwise affecting--
(A) any authority of the Securities and Exchange Commission,
any self-regulatory organization, the Municipal Securities
Rulemaking Board, or the Secretary of the Treasury under any
Federal securities law; or
(B) except as provided in paragraph (2), any authority of
any State insurance commission (or any agency or office
performing like functions), or of any State securities
commission (or any agency or office performing like functions),
or other State authority under any State law.
(2) Coordination with State law
(A) In general
Except as provided in subparagraph (B), insurance customer
protection regulations prescribed by a Federal banking agency
under this section shall not apply to retail sales,
solicitations, advertising, or offers of any insurance product
by any depository institution or to any person who is engaged in
such activities at an office of such institution or on behalf of
the institution, in a State where the State has in effect
statutes, regulations, orders, or interpretations, that are
inconsistent with or contrary to the regulations prescribed by
the Federal banking agencies.
(B) Preemption
(i) In general
If, with respect to any provision of the regulations
prescribed under this section, the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, and
the Board of Directors of the Corporation determine jointly
that the protection afforded by such provision for customers
is greater than the protection provided by a comparable
provision of the statutes, regulations, orders, or
interpretations referred to in subparagraph (A) of any
State, the appropriate State regulatory authority shall be
notified of such determination in writing.
(ii) Considerations
Before making a final determination under clause (i),
the Federal agencies referred to in clause (i) shall give
appropriate consideration to comments submitted by the
appropriate State regulatory authorities relating to the
level of protection afforded to consumers under State law.
(iii) Federal preemption and ability of States to
override Federal preemption
If the Federal agencies referred to in clause (i)
jointly determine that any provision of the regulations
prescribed under this section affords greater protections
than a comparable State law, rule, regulation, order, or
interpretation, those agencies shall send a written
preemption notice to the appropriate State regulatory
authority to notify the State that the Federal provision
will preempt the State provision and will become applicable
unless, not later than 3 years after the date of such
notice, the State adopts legislation to override such
preemption.
(h) Non-discrimination against non-affiliated agents
The Federal banking agencies shall ensure that the regulations
prescribed pursuant to subsection (a) of this section shall not have the
effect of discriminating, either intentionally or unintentionally,
against any person engaged in insurance sales or solicitations that is
not affiliated with a depository institution.
(Sept. 21, 1950, ch. 967, Sec. 2[47], as added Pub. L. 106-102, title
III, Sec. 305, Nov. 12, 1999, 113 Stat. 1410.)
Section Referred to in Other Sections
This section is referred to in title 15 section 6805.
