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Federal Reserve Bank
ll ★K
of Dallas
September 6, 2000
Notice 2000-55
TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
Request for Public Comment on
Proposed Insurance Consumer Protection Rules
The Board of Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision
(the agencies) have requested public comment on proposed insurance consumer protection rules.
These rules are published pursuant to section 47 of the Federal Deposit Insurance Act, which was
added by section 305 of the Gramm-Leach-Bliley 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 insur-
ance product by a depository institution or any person that is engaged in such activities at an
office of the institution or on behalf of the institution.
The Board must receive comments by October 5, 2000. Please address comments to
Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th and C
Streets, N.W., Washington, DC 20551. Also, you may mail comments electronically to All comments should refer to Docket No. R-1079.
A copy of the Board’s notice as it appears on pages 50882–902, Vol. 65, No. 162 of
the Federal Register dated August 21, 2000, is attached.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.- 2 -
For more information, contact Eugene Coy in this Bank’s Banking Supervision
Department at (214) 922-6201. For additional copies of this Bank’s notice, contact the Public
Affairs Department at (214) 922-5254 or access District Notices on our web site at,
August 21, 2000
Part VII
Department of the
Office of the Comptroller of the
Office of Thrift Supervision
Federal Reserve System
Federal Deposit
Insurance Corporation
12 CFR Part 14, et al.
Consumer Protections for Depository
Institution Sales of Insurance; Proposed
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activities at an office of the institution NW., Washington, DC 20552, AttentionDEPARTMENT OF THE TREASURY
or on behalf of the institution. Docket No. 2000–68. Hand deliver
Office of the Comptroller of the comments to the Guard’s Desk, EastDATES: Comments must be received by
Currency Lobby Entrance, 1700 G Street, NW.,October 5, 2000.
from 9 a.m. to 4 p.m. on business days.
ADDRESSES: Comments should be
12 CFR Part 14 Send facsimile transmissions to FAXdirected to:
Number (202) 906–7755 or (202) 906–Office of the Comptroller of the
[Docket No. 00–16] 6956 (if the comment is over 25 pages).Currency (OCC): Communications
Send e-mails toDivision, Office of the Comptroller ofRIN 1557–AB81 and includethe Currency, 250 E Street, SW., Third
your name and telephone number.FEDERAL RESERVE SYSTEM Floor, Washington, DC 20219,
Interested persons may inspectAttention: Docket No. 00–16; FAX
comments at the Public Reference12 CFR Part 208 number (202) 874–5274 or Internet
Room, 1700 G Street, NW., from 10 a.m.address:
[Docket No. R–1079] until 4 p.m. on Tuesdays andComments may be inspected and
Thursdays. Comments will also bephotocopied at the OCC’s PublicFEDERAL DEPOSIT INSURANCE posted on the OTS Internet Site atReference Room, 250 E Street, SW.,CORPORATION, DC, between 9 a.m. and 5
p.m. on business days. You can make an FOR FURTHER INFORMATION CONTACT:12 CFR Part 343
appointment to inspect the comments OCC: Stuart Feldstein, Assistant
by calling (202) 874–5043.RIN 3064–AC37 Director, or Michele Meyer, Senior
Board of Governors of the Federal Attorney, Legislative and Regulatory
DEPARTMENT OF THE TREASURY Reserve System (Board): Comments, Activities Division, (202) 874–5090; Asa
which should refer to Docket No. R– Chamberlayne, Senior Attorney,
Office of Thrift Supervision 1079, may be mailed to Jennifer J. Securities and Corporate Practices
Johnson, Secretary, Board of Governors Division, (202) 874–5210; Stephanie
12 CFR Part 536 of the Federal Reserve System, 20th and Boccio, Asset Management, (202) 874–
C Streets, NW., Washington, DC 20551 4447; Barbara Washington, Core Policy
[Docket No. 2000–68] or mailed electronically to Development (202) 874–6037, Office of the Comptroller of the Currency, 250 ERIN 1550–AB34
Comments addressed to Ms. Johnson Street, SW., Washington, DC 20219.
also may be delivered to the Board’sConsumer Protections for Depository Board: Richard M. Ashton, Associate
mail room between 8:45 a.m. and 5:15Institution Sales of Insurance General Counsel, Legal Division, (202)
p.m. and to the security control room 452–3750; Angela Desmond, Special
AGENCIES: Office of the Comptroller of outside of those hours. Both the mail Counsel, Division of Bankingthe Currency, Treasury; Board of room and the security control room are Supervision and Regulation, (202) 452–Governors of the Federal Reserve accessible from the courtyard entrance 3497; David A. Stein, Attorney, DivisionSystem; Federal Deposit Insurance on 20th Street between Constitution of Consumer and Community Affairs,Corporation; and Office of Thrift Avenue and C Street, NW. Comments (202) 452–3667, Board of Governors ofSupervision, Treasury. may be inspected in Room MP–500 the Federal Reserve System, 20th and C
ACTION: Joint notice of proposed between 9 a.m. and 5 p.m., pursuant to Streets, NW, Washington, DC 20551. For
rulemaking. § 261.12, except as provided in § 261.14, the hearing impaired only,
of the Board’s Rules Regarding the Telecommunications Device for the DeafSUMMARY: The Office of the Comptroller Availability of Information, 12 CFR (TDD), contact Janice Simms, (202) 872–of the Currency, Board of Governors of 261.12 and 261.14. 4984.the Federal Reserve System, Federal Federal Deposit Insurance FDIC: Keith A. Ligon, Chief, PolicyDeposit Insurance Corporation, and the Corporation (FDIC): Send written Unit, Division of Supervision, (202)Office of Thrift Supervision, comments to Robert E. Feldman, 898–3618; Michael B. Phillips, Counsel,(collectively, the Agencies) are Executive Secretary, Attention: Supervision and Legislation Branch,requesting comment on proposed Comments/OES, Federal Deposit Legal Division, (202) 898–3581; Jason consumer protection rules. Insurance Corporation, 550 17th Street, Cave, Senior Capital Markets Specialist,These rules are published pursuant to NW., Washington, DC 20429. Comments (202) 898–3548, Federal Depositsection 47 of the Federal Deposit may be hand delivered to the guard Insurance Corporation, 550 17th Street,Insurance Act (FDIA), which was added station at the rear of the 17th Street NW, Washington, DC section 305 of the Gramm-Leach- building (located on F Street) on
OTS: Robyn Dennis, Manager,Bliley Act (the G–L–B Act or Act). business days between 7 a.m. and 5 p.m.
Supervision Policy, (202) 906–5751;Section 47 directs the Agencies jointly (Fax number (202) 898–3838).
Richard Bennett, Counsel (Banking andto prescribe and publish consumer Comments may be inspected and
Finance), (202) 906–7409; Mary Janeprotection regulations that apply to photocopied in the FDIC Public
Cleary, Insurance Risk Managementretail sales practices, solicitations, Information Center, Room 100, 801 17th
Specialist, (202) 906–7048, Office ofadvertising, or offers of any insurance Street, NW., Washington, DC 20429,
1 Thrift Supervision, 1700 G Street, NW.,product by a depository institution or between 9 a.m. and 4:30 p.m. on
Washington DC 20552.any person that is engaged in such business days.
SUPPLEMENTARY INFORMATION:Office of Thrift Supervision (OTS):
1 ‘‘Depository institution’’ means national banks Send comments to Manager, Backgroundin the case of institutions supervised by the OCC, Dissemination Branch, Information
state member banks in the case of the Board, state On November 12, 1999, PresidentManagement & Services Division, Officenonmember banks in the case of the FDIC, and
Clinton signed the G–L–B Act into law.savings associations in the case of the OTS. of Thrift Supervision, 1700 G Street,
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2Section 305 of the Act added new office of the institution or on behalf of the definition of ‘‘consumer’’ should be
5section 47 to the FDIA, captioned the institution. A number of issues that expanded to encompass all retail
‘‘Insurance Customer Protections.’’ This clarify the scope of the rule are customers, including small businesses.
section requires the Agencies jointly to addressed through specific definitions The Agencies also seek comment on
prescribe and publish in final form, by discussed below. whether to limit the definition of
For example, section 47 gives theNovember 12, 2000, consumer consumer to individuals who obtain or
Agencies discretion to determineprotection regulations that apply to apply for insurance products or
whether the Act’s consumer protectionsretail sales practices, solicitations, annuities primarily for personal, family,
should extend to a depositoryadvertising, or offers of insurance or household purposes.
institution’s subsidiary in otherproducts by depository institutions or d. Control. The proposed rules use the
circumstances. The Agencies havepersons engaged in these activities at an definition of ‘‘control’’ used in section
11determined to apply the proposed rulesoffice of the institution or on behalf of 3(w)(5) of the FDIA, which, in turn,
12to subsidiaries only if they are sellingthe institution. Section 47 directs the refers to section 2 of the BHCA. Under
insurance products or annuities at anAgencies to include specific provisions this definition, which is used to
office of the institution or acting ‘‘onrelating to sales practices, disclosures determine when companies are
behalf of’’ the depository institution asand advertising, the physical separation affiliates, a company has control over
6defined in the rules. A more completeof banking and nonbanking activities, another company if:
discussion of when a person is engaged (1) The company directly or indirectlyand domestic violence discrimination.
in insurance activities ‘‘on behalf’’ of controls 25 percent or more of any classSection 47 also requires the Agencies
the depository institution is set forth of the company’s voting securities;to consult with the State insurance
below in the definition of ‘‘covered (2) The company controls in anyregulators, as appropriate. The Agencies
person.’’ In addition, the Agencies manner the election of a majority of thecirculated a working draft of this
intend to cover insurance and annuities directors or trustees of the company; orproposal to the National Association of
sales activities on the institution’s (3) The Board determines that theInsurance Commissioners (NAIC) and,
Internet web site and other forms of company exercises, directly oron June 29, 2000, met with NAIC
electronic media. indirectly, a controlling influence overrepresentatives to discuss the proposal.
the management or policies of theThese proposed rules reflect certain Section .20 Definitions
13company. For purposes of thecomments received from the NAIC in
a. Affiliate. The proposed rules use definition of ‘‘control’’ in these rules,that meeting.
the definition of ‘‘affiliate’’ that is used the reference in section 2 of the BHCAThe texts of the Agencies’ proposed
in section 3 of the Federal Deposit to the ‘‘Board’’ means the ‘‘appropriaterules are substantially identical. Any
7Insurance Act (FDIA), which, in turn, Federal banking agency,’’ as defined indifferences in style or terms are not
refers to section 2(k) of the Bank 14section 3(q) of the FDIA.intended to create substantive
8Holding Company Act of 1956 (BHCA). e. Covered person or you. The termdifferences in the requirements imposed
Companies are affiliates if one company ‘‘covered person,’’ or ‘‘you,’’ is criticalby the regulations. The Agencies request
controls, is controlled by, or is under in determining to whom thecomment on all aspects of the proposed
common control with another company. requirements in these proposed rulesrules and on the specific provisions and
b. Company. The proposed rules use will apply. As defined in the proposedissues highlighted in the section-by-
the definition of ‘‘company’’ that is used rules, a covered person means anysection analysis. 9in section 3 of the FDIA, which, in depository institution or any other
Section-by-Section Analysis turn, refers to section 2(b) of the person selling, soliciting, advertising, or
10BHCA. A ‘‘company’’ includes offering insurance products or annuitiesThe discussion that follows applies to
corporations, partnerships, business to a consumer at an office of theeach of the Agencies’ proposed rules.
trusts, associations and similar institution or on behalf of theGiven that each agency will assign a
organizations. institution. A ‘‘covered person’’ maydifferent part to its insurance consumer
c. Consumer. The proposed rules include any person, including anprotection rule, the citations are to
define ‘‘consumer’’ as an individual affiliate, if the person or one of itssections only, leaving citations to part
who obtains, applies for, or is solicited3 employees engages in such activities atnumbers blank.
to obtain insurance products or an office of an institution or on behalf
Section .10 Purpose and Scope annuities from a covered person. of an institution.
Section 47 uses the terms ‘‘consumer’’These proposed rules establish For purposes of this definition, a
and ‘‘customer’’ interchangeably andconsumer protections in connection person’s activities are ‘‘on behalf of’’ a
without appearing to draw distinctionwith retail sales of insurance products depository institution if:
between the two terms. These proposed4 (1) The person represents to aand annuities to consumers by any
rules use the term ‘‘consumer.’’ The consumer that the sale, solicitation,depository institution or by any person
Agencies request comment on whether advertisement, or offer of any insurancethat is engaged in such activities at an
product or annuity is by or on behalf of
5 The Agencies note that other State consumer2 Pub. L. 106–102, sec. 305, 113 Stat. 1338, 1410– the institution;
protection rules also may apply to bank and thrift15 (to be codified at 12 U.S.C. 1831x). (2) The depository institution receivesinsurance sales.
3 The Board’s proposed rule would be a new commissions or fees, in whole or in6 OTS does not intend the requirements of thissubpart of the Board’s existing Regulation H, and
part to apply to other savings association operating part, derived from the sale of annot a separate regulation. Accordingly, the sections
subsidiaries or service corporations by effect of 12 insurance product or annuity as a resultof the Board’s proposed rule are numbered
CFR 559.3(h). OCC does not intend theconsecutively. of cross-marketing or referrals by the
requirements of this part to apply to other national
4 These proposed rules are not intended to have institution or an affiliate;bank operating subsidiaries by effect of 12 CFR
any effect on whether annuities are considered to
be insurance products for purposes of any other
7 1112 U.S.C. 1813(w)(6). 12 U.S.C. 1813(w)(5).section of the G–L–B Act or other laws. That
8 1212 U.S.C. 1841(k). 12 U.S.C. 1841.question depends on the terms and purposes of
9 1312 U.S.C. 1813(w)(7). 12 U.S.C. 1841(a)(2).those laws, as interpreted by the courts and the
10 14appropriate agency. 12 U.S.C. 1841(b). 12 U.S.C. 1813(q).
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llll50884 Federal Register/Vol. 65, No. 162/Monday, August 21, 2000/Proposed Rules
(3) Documents evidencing the sale, under what circumstances, additional G–L–B Act’s requirement that
solicitation, advertising, or offer of an disclosures should be required for sales disclosures be both written and oral.
insurance product or annuity identify or or solicitations by electronic media in h. Office. The proposed rules define
refer to the institution or use its order to alleviate any potential ‘‘office’’ as the premises of an institution
corporate logo or corporate name; or confusion as to the identity of source of where retail deposits are accepted from
(4) The sale, solicitation, advertising, the insurance, such as a disclosure the public.
or offer of an insurance product or informing consumers when they are i. Subsidiary. The proposed rules use
annuity takes place at an off-premises leaving the institution’s web site. Also, the definition of subsidiary in section
15site, such as a kiosk, that identifies or comment is solicited on whether 3(w)(4) of the FDIA. Thus,
refers to the institution or uses its additional or alternative disclosures ‘‘subsidiary’’ means any company that is
might be needed in instances where thecorporate logo or corporate name. owned or controlled directly or
The Agencies note that the second depository institution acts as finder by indirectly by another company and
prong of the ‘‘on behalf of’’ test—the electronic media. includes any service corporation owned
f. Domestic violence. The statute alsoreceipt of commissions or fees—does in whole or in part by an insured
contains a provision prohibiting thenot include situations in which the depository institution or any subsidiary
consideration of a person’s status as ainstitution receives a fee solely for of such a service corporation.
victim of domestic violence or providerperforming a separate service or The proposed rules do not define the
of services to victims of domesticfunction that may relate to an insurance term ‘‘insurance product.’’ The Agencies
violence in connection with certainsale (such as processing a credit card recognize that there is no single
insurance activities. Accordingly, thecharge for the insurance premium, or standard for defining the term
proposed rules prohibit a coveredperforming recordkeeping or payment ‘‘insurance’’ and that its definition may
person, with regard to any insurancefunctions on behalf of the affiliate) vary significantly depending on the
underwriting, pricing, renewal, or scopewhere the fee is based on that service or context in which it is used. For
of coverage decision, or payment offunction and is not a share of the example, section 302 of GLBA lists
insurance claim, on a life or healthcommissions or fees derived from the certain types of products that may
insurance product from considering as ainsurance product or annuity sale. constitute insurance for purposes of
criterion the status of the personThe Agencies seek comment on the determining when a national bank may
applying for the insurance, or theproposed definition of covered person underwrite, rather than sell, insurance.
person who is insured, as a victim ofand specifically on those activities that Thus, the Agencies will look to a variety
domestic violence or a provider ofwould cause a person to be considered of sources in determining whether a
services to domestic violence victims,to be acting ‘‘on behalf of’’ an given product is covered by the
except as required or expresslyinstitution. The Agencies also invite proposed rules. In addition to section
permitted under state law. See proposedcomment on whether the following 302(c), the Agencies will look to
§ .30(c). The proposed rules adoptshould be considered an activity on common usage, conventional
the definition of ‘‘domestic violence’’behalf of the institution: definitions, judicial interpretations, and
set forth in section 47 of the FDIA. other Federal laws. The Agencies invite• The use of the name or corporate logo of g. Electronic media. Section 47
the holding company or other affiliate, as comment on these and other sources for
permits the Agencies to makeopposed to the name or corporate logo of the determining whether a product comes
adjustments to the Act’s requirementsdepository institution in documents within the scope of the proposed rules,
for sales conducted in person, byevidencing the sale, solicitation, advertising, or, alternatively, whether the rule
telephone, or by electronic media toor offer of an insurance product or annuity. should include a specific definition of
• The sale, solicitation, advertising, or provide for the most appropriate and
the term ‘‘insurance.’’offer of an insurance product or annuity at complete form of disclosure and
an off-premises site that identifies or refers to consumer acknowledgment of the Section .30 Prohibited Practices receipt of such disclosures. The The G–L–B Act directs the Agenciesopposed to the depository institution, or uses proposed rules set forth special rules for to include in the implementingthe name or corporate logo of the holding electronic disclosures and consumer regulations specific prohibitedcompany or other affiliate.
acknowledgments and for telephone practices. Under section 47(b) of theThe agencies recognize that when sales. See proposed § .40. The FDIA, a covered person may not engageelectronic media are used, special issues Agencies recognize that methods of in any practice that would lead aarise. For example, a depository electronic communication are rapidly consumer to believe that an extension ofinstitution’s web site may link or refer changing and have attempted to provide credit, in violation of the anti-tyinga consumer to a separate insurance flexibility in these proposed rules to provisions of section 106(b) of the Bankagency, which may be operated by the accommodate such changes. Thus, the Holding Company Act Amendments ofinstitution or an affiliate of the proposed rules define ‘‘electronic 161970, is conditional upon either:institution or may be unaffiliated. In media’’ broadly to include any means (1) The purchase of an insurancethis kind of transaction, although the for transmitting messages electronically
product or annuity from the depositorydepository institution is identified to between a covered person and a
institution or any of its affiliates; orthe consumer through its web site, the consumer in a format that allows visual
(2) An agreement by the consumer notmandatory disclosures and other text to be displayed on equipment, such
to obtain, or a prohibition on theprotections of the proposed rules may as a personal computer. The reference to
not be necessary. There may be personal computers is illustrative only
15 12 U.S.C. 1813(w)(4).
instances where a depository institution and the reference to equipment includes 16 12 U.S.C. 1972. Section 106(b) of the Bank
is not engaged in the sale or solicitation other electronic devices that meet the Holding Company Act Amendments of 1970 does
of an insurance product or annuity, but not apply to savings associations. Those institutionsdefinition.
are, however, subject to comparable prohibitions oninstead acting as a finder by providing The Agencies invite comment on the
tying and coercion, under section 5(q) of the Homeconsumers web links to providers of proposed definition of ‘‘electronic
Owners’ Loan Act (HOLA), 12 U.S.C. 1464(q).
insurance products and annuities. media’’ and whether a more expansive Accordingly, OTS’s proposed rule cites the HOLA
Comment is solicited on whether, and definition would be consistent with the provision.
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llllllFederal Register/Vol. 65, No. 162/Monday, August 21, 2000/Proposed Rules 50885
consumer from obtaining, an insurance (4) The depository institution may not sale. The Agencies invite comment on
product or annuity from an unaffiliated condition an extension of credit on the proposed rules for electronic and
entity. These prohibitions on tying and either the consumer’s purchase of an telephone disclosures. Specifically, the
coercion are set forth in proposed insurance product or annuity from the Agencies request comment on whether
§ .30(a). depository institution or any of its the rules are flexible enough to permit
affiliates or the consumer’s agreement future technological innovation andSection 47(c)(2) of the FDIA also
not to obtain, or a prohibition on the whether the format and timingprohibits a covered person from
consumer from obtaining, an insurance requirements are sufficient to provideengaging in any practice at any office of,
product or annuity from an unaffiliated consumers with the type of protectionsor on behalf of, a depository institution
entity. envisioned by section 47 of the FDIA.or a subsidiary of a depository
The Agencies note that newinstitution that could mislead any Timing and Method of Disclosures
legislation addressing the use ofperson or otherwise cause a reasonable
Under proposed § .40(b)(1), a electronic signatures and electronicperson to reach an erroneous belief with
covered person must provide the records may affect institutions thatrespect to:
disclosures described in § .40(a) provide disclosures and obtain(1) The uninsured nature of any
orally and in writing before the acknowledgments electronically. Theinsurance product or annuity offered for
completion of the sale of an insurance Electronic Signatures in Global andsale by the covered person or
product or annuity to a consumer. The National Commerce Act (the E-Signsubsidiary;
17disclosures concerning the prohibition Act) contains, among other things,(2) In the case of an insurance product
on tying an extension of credit to an Federal rules governing the use ofor annuity that involves investment risk,
insurance product or annuity purchase electronic records for providingthe investment risk associated with any
(§ .40(a)(4)) must also be made required information to consumers. Asuch product; or
orally and in writing at the time the legal requirement that consumer(3) The fact that the approval of an consumer applies for an extension of disclosures be in writing may beextension of credit to a consumer by the credit in connection with which an satisfied by an electronic disclosure if
institution or subsidiary may not be insurance product or annuity will be the consumer affirmatively consents and
conditioned on the purchase of an solicited, offered, or sold. if certain other requirements of the E-
insurance product or annuity from the
Sign Act are met. For example, the E-Electronic and Telephone Disclosuresinstitution or subsidiary, and that the
Sign Act requires that, before a
consumer is free to purchase the Section 47 of the FDIA authorizes the consumer consents to receive
insurance product or annuity from Agencies to make necessary adjustments electronically information that is
another source. These prohibitions on to the G–L–B Act’s requirements for otherwise legally required to be
misrepresentations are set forth in sales conducted by telephone or by provided in writing, the consumer must
proposed § .30(b). electronic media. Proposed receive a ‘‘clear and conspicuous
Finally, proposed § .30(c) §§ .40(b)(2) sets forth special timing statement’’ containing certain
implements section 47(e) of the FDIA, and method of disclosure rules for 18information prescribed by the statute.
which, as already noted, prohibits a electronic and telephone disclosures. The statute authorizes Federal
covered person from considering a Under § .40(b)(2)(i), where the regulatory agencies to exempt specified
person’s status as a victim of domestic consumer affirmatively consents, a categories or types of records from the
violence or a provider of services to covered person may provide the written E-Sign Act requirements relating to
domestic violence victims in making disclosures required by § .40(a) consumer consent only if an exemption
decisions regarding certain types of through electronic media instead of on is necessary to eliminate a substantial
insurance products. paper, if they are provided in a format burden on electronic commerce and will
that the consumer may retain or obtain not increase the material risk of harm toSection .40 What a Covered Person
later, for example, by printing or storing 19consumers. The Agencies inviteMust Disclose
electronically, such as by downloading. comment on whether—and, if so, how—
In addition to prohibiting the Under § .40(b)(2)(ii), if the sale of an they should address the requirements of
misrepresentations outlined above, insurance product or annuity is the E-Sign Act in the context of these
section 47(c) of the FDIA requires a conducted entirely through the use of proposed rules.
covered person to make affirmative electronic media and written
Disclosures Must Be Readilydisclosures in connection with the disclosures are provided electronically,
Understandable, Designed To Callinitial purchase of an insurance product a covered person is not required to
Attention to the Information, andor annuity. The proposed rules require provide disclosures orally. A covered
Meaningfulthe following disclosures: person must also comply with all other
(1) The insurance product or annuity requirements imposed by law or Section 47 of the FDIA requires the
is not a deposit or other obligation of, regulation for providing disclosures Agencies to promulgate regulations
or guaranteed by, the depository encouraging the use of disclosures thatelectronically.
institution or (if applicable) an affiliate; If a covered person takes an are conspicuous, simple, direct, and
(2) The insurance product or annuity application for credit by telephone, readily understandable. Proposed
is not insured by the Federal Deposit § .40(b)(1) provides that the covered § .40(b)(4) contains this requirement
Insurance Corporation (FDIC) or any person may provide the written and further requires that the disclosures
other agency of the United States, the disclosure required by paragraph (a)(4) must also be designed to call attention
depository institution, or (if applicable) by mail, provided the covered person to the nature and significance of the
an affiliate; mails it to the consumer within three
17 Pub. L. 106–229, 114 Stat. 464 (June 30, 2000).(3) In the case of an insurance product days, excluding Sundays and the legal
The E-Sign Act generally takes effect on October 1,or annuity that involves an investment public holidays specified in 5 U.S.C.
2000, although there are delayed effective dates for
risk, there is investment risk associated 6103(a). Nevertheless, disclosures under provisions other than those discussed in the text.
with the product, including the possible § .40(a)(1)–(4) must be made in 18 See Pub. L. 106–229, sec. 101(c)(1).
19loss of value; and writing before completion of the initial Id. at § 104(d)(1).
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llllllllllllllllllllllllllll50886 Federal Register/Vol. 65, No. 162/Monday, August 21, 2000/Proposed Rules
information provided. For example, a advertisements and sales. The FTC institution identify areas where
covered person may use the following guidance establishes several key factors insurance product or annuity sales
short-form disclosures as may be to consider when evaluating the clarity activities occur and clearly delineate
appropriate: and conspicuousness of Internet and distinguish them from the areas
disclosures including: where the institution’s retail deposit-• Not a Deposit
(1) The placement of the disclosures taking activities occur, in accordance• Not FDIC-Insured
in the advertisement and the with section 47(d)(2)(A) of the FDIA.• Not insured by any Federal
Proposed § .50(b) implementsdisclosures’ proximity to the relevantGovernment Agency
section 47(d)(2)(B) of the FDIA,claim;• Not Guaranteed by the Bank [or
(2) The prominence of the disclosure concerning referrals to insurance andSavings Association]
and whether other features in the annuity sales personnel by a person• May Go Down in Value
advertisement distract attention from who accepts deposits from the public.The Agencies invite comment on
the disclosure; Any person who accepts deposits fromwhether the final rule should provide
(3) How often the disclosures should the public in an area where suchspecific methods of calling attention to
be repeated relative to the length of the transactions are routinely conducted inthe material contained in the
advertisement; and a depository institution may refer adisclosures. For example, the final rule
(4) Whether audio disclosures are consumer who seeks to purchase ancould provide that the disclosures are
presented in an adequate volume and insurance product or annuity to adesigned to call attention to the nature
cadence that consumers can hear and qualified person who sells that product.and significance of the information
understand. The guidance also suggests The person making the referral mayprovided if they use:
evaluating whether visual disclosures only receive a one-time, nominal fee of• A plain-language heading to call
appear for a sufficient duration a fixed dollar amount for each referral.attention to the disclosures;
appropriate for consumers to notice, The fee may not depend on whether the• A typeface and font or type size that
referral results in a and understand. The Agencies seekare easy to read;
comment on whether the type of detail• Wide margins and ample line Section .60 Qualification and
provided in the FTC guidance isspacing; Licensing Requirements for Insurance
necessary in these proposed rules.• Boldface or italics for key words; Sales Personnel
and Consumer Acknowledgment Section 47(d)(2)(C) of the FDIA
• Distinctive type or font size, style,
requires that the Agencies’ regulationsUnder proposed § .40(b)(5), aand graphic devices, such as shading or
prohibit any depository institution fromcovered person must obtain from thesidebars, when the disclosures are
permitting any person to sell or offer forconsumer, at the time the consumercombined with other information.
sale any insurance product in any partreceives the disclosures set forth inFurther, as provided in proposed
of any office of the institution, or onproposed § .40(a), a written§ .40(b)(4), a disclosure generally is
behalf of the institution, unless suchacknowledgment by the consumer thatnot ‘‘meaningfully’’ provided if a
person is appropriately qualified andthe consumer received the disclosures.covered person merely tells the
licensed. Thus, under proposedIn keeping with the allowance underconsumer that the disclosures are
§ .60, a depository institution maysection 47 for adjustments to theavailable in printed material without
not permit any person to sell or offer forG–L–B Act’s requirements for salesalso providing the material and orally
sale any insurance product or annuity inconducted by electronic media and thedisclosing the information to the
any part of its office or on its behalf,E-Sign Act, proposed § .40(b)(5)consumer. Similarly, a disclosure made
unless the person is at all timesfurther provides that a consumer whothrough electronic media is not
appropriately qualified and licensedhas received disclosures throughmeaningfully provided if the consumer
under applicable State insuranceelectronic media may acknowledgemay bypass the visual text of the
licensing standards with regard to thereceipt of the disclosures electronicallydisclosure before purchasing an
specific products being sold oror in paper product or annuity.
The Agencies invite comment on Advertisements and Other Promotional
whether these standards will adequately Appendix—Consumer GrievanceMaterial
address situations where disclosures are Process
In accordance with section 47(c)(1)(C)
made through electronic media. For Section 47(f) of the FDIA requires thatof the FDIA, proposed § .40(c)
example, the Federal Trade Commission the Agencies jointly establish aclarifies that the disclosures required by
(FTC) recently released guidance on consumer complaint mechanism forproposed § .40 are not required in
online advertising and sales reiterating addressing consumer complaintsadvertisements of a general nature
that many of the general principles of alleging violations of these proposeddescribing or listing the services or
advertising law apply to Internet rules. Each agency has procedures inproducts offered by the depository
advertisements, but recognizing that place to handle consumer complaints.institution.
developing technology raises new The Agencies will apply those
20issues. The FTC guidance describes Section .50 Where Insurance procedures to complaints involving
information businesses should consider Activities May Take Place these proposed rules. The Appendix to
when developing their online Section 47(d)(1) of the FDIA requires each agency’s proposed rule contains
advertisements to ensure compliance that the Agencies’ regulations include the name and address of each agency’s
with consumer protection laws with a provisions to ensure that the routine consumer complaint office. Any
particular focus on providing clear and acceptance of deposits is kept, to the consumer who believes that a
conspicuous disclosures in Internet extent practicable, physically segregated depository institution or any other
from insurance product activity. person selling, soliciting, advertising, or
20 The FTC’s guidance, Dot Com Disclosures: Proposed § .50(a) sets forth this offering insurance products or annuities
Information about Online Advertising is available at
general rule. It further requires that, to to the consumer at an office of
index.html. the extent practicable, a depository institution or on behalf of the institution
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llllllllllllllllllllllFederal Register/Vol. 65, No. 162/Monday, August 21, 2000/Proposed Rules 50887
has violated the requirements of these (2) The accuracy of each Agency’s regulation. The OCC estimates the
proposed rules should contact the estimate of the burden of the proposed burden associated with this start-up
consumer complaint office listed in the information collections; requirement as follows:
(3) Ways to enhance the quality,Appendix. Each agency already has Estimated number of respondents:
utility, and clarity of the information toentered into, or is developing, 1,949.
be collected;agreements with State insurance Estimated number of responses:
(4) Ways to minimize the burden ofcommissioners regarding the sharing of 1,949.
the information collections onconsumer complaints. Consumer Estimated burden hours per response:
respondents, including the use ofcomplaints alleging violations of these 10.
automated collection techniques orproposed rules that raise issues under Estimated total burden: 19,490 hours.
other forms of information technology;State and local law will be shared with This estimate assumes 10 hours would
andState regulators pursuant to those be involved in the development of the
(5) Estimates of capital or start-upagreements. disclosures required by this part for
costs and costs of operation,
each national bank that sells insurance.Effect on Other Authority maintenance, and purchases of services
The total burden will exceed 19,490
to provide information.
Section 47(g) sets forth a general hours, however, because the proposalRespondents are not required to
framework for determining the effect of also requires that disclosures berespond to these collections of
these proposed rules on State law. provided to individual consumers ininformation unless they display a
Under that framework, the Agencies’ connection with particular transactions.currently valid Office of Management
insurance consumer protection rules Estimation of this burden requires theand Budget (OMB) control number. The
will not apply in a State where the State OCC to estimate the number ofAgencies are currently requesting their
has in effect statutes, regulations, consumer transactions per bank (orrespective control numbers for these
orders, or interpretations that are entity selling on behalf of a bank) perinformation collections from OMB.
inconsistent with or contrary to the year in which disclosures are requiredThis proposed regulation contains
provisions of the Agencies’ rules. If the to be provided and the amount of timerequirements to make disclosure at two
Board, FDIC and OCC jointly determine, per transaction providing thedifferent times. The respondents must
however, that the protection afforded by disclosures will take. The OCC does notprepare and provide certain disclosures
a provision of these proposed rules is currently collect this type ofto consumers: (1) Before the completion
greater than the protection provided by information. We invite comment onof the initial sale of an insurance
comparable state law or rulings, these what assumption we should use inproduct or annuity to a consumer; and
proposed rules shall preempt the arriving at a revised estimate of total(2) at the time of application for the
contrary or inconsistent State law or burden for purposes of the final rule.extension of credit (if insurance
ruling. Prior to making this Board: In accordance with sectionproducts or annuities are solicited,
determination, the Board, FDIC and 3506 of the Paperwork Reduction Act ofoffered or sold in connection with an
OCC must notify the appropriate State 1995 (44 U.S.C. Ch. 35; 5 CFR part 1320,extension of credit) (proposed
regulatory authority in writing, and the appendix A1), the Board reviewed the§ .40(b)(1)). The Agencies request
Board, FDIC and OCC will consider notice of proposed rulemaking underpublic comment on all aspects of the
comments submitted by the appropriate the authority delegated to the Board bycollections of information contained in
State regulatory authorities. If the Board, the OMB. Comments on the collectionsthese proposed rules.
FDIC and OCC determine that a of information should be sent to MaryOCC: The collection of information
provision of these proposed rules M. West, Federal Reserve Boardrequirements contained in this notice of
affords greater protection than State Clearance Officer, Division of Researchproposed rulemaking will be submitted
provisions, the Board, FDIC and OCC and Statistics, Mail Stop 97, Board ofto the Office of Management and Budget
will send a written preemption notice to Governors of the Federal Reservefor review in accordance with the
the appropriate State insurance System, Washington, DC 20551, with aPaperwork Reduction Act of 1995 (44
authority that the provision of these copy to the Office of Management andU.S.C. 3507(d)). Comments on the
proposed rules will be applicable unless Budget, Paperwork Reduction Projectcollections of information should be
the State adopts legislation within three (7100-to be assigned), Washington, DCsent to Jessie Dunaway, Legislative and
years to override the preemption notice. 20503.Regulatory Activities Division, Office of
The likely respondents are statethe Comptroller of the Currency, 250 EThe Board, FDIC and OCC invite
member banks and any other personsStreet, SW, Washington, DC 20219, withcomment on whether it would be
selling, soliciting, advertising, ora copy to the Office of Management andhelpful to include a second appendix
offering insurance products or annuitiesBudget, Paperwork Reduction Projectrestating these statutory requirements or
at an office of a state member bank or(1557-to be assigned), Washington, DCwhether such a restatement would be
on behalf of a state member bank.20503.confusing absent a determination
The likely respondents are national Estimated number of respondents:regarding the applicability of specific
banks, District of Columbia banks, and 1,010.State laws.
Federal branches and agencies of foreign Estimated number of responses:
Regulatory Analysis banks and any other persons selling, 553,079.
soliciting, advertising, or offering Estimated burden hours per response:A. Paperwork Reduction Act
insurance products or annuities at an 5 minutes.
The Agencies invite comment on: office of a national bank or on behalf of Estimated total burden: 46,090 hours.
(1) Whether the collections of a national bank. The proposal would FDIC: The collections of information
information contained in this notice of impose two types of information contained in the notice of proposed
proposed rulemaking are necessary for collection requirements on national rulemaking will be submitted to the
the proper performance of each banks. The first is the requirement that OMB in accordance with the Paperwork
Agency’s functions, including whether printed disclosure materials be modified Reduction Act of 1995, 44 U.S.C. 3507.
the information has practical utility; to conform to the requirements of the Comments on the collections of
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ll50888 Federal Register/Vol. 65, No. 162/Monday, August 21, 2000/Proposed Rules
information should be sent to Steven F. proposal on which to base estimates of large quantities to obtain reduced rates
Hanft, Office of the Executive Secretary, cost. For this reason, the OCC has on printing—would therefore incur
Federal Deposit Insurance Corporation, prepared the following IRFA. We invite costs as a result of this requirement.
There are approximately 25 national550 17th Street, NW, Washington, DC comment on whether the assumptions
banks that sell insurance products over20429, with a copy to the Office of used in the IRFA are accurate, as well
the Internet. Our experience has beenManagement and Budget, Paperwork as any compliance cost estimate that
that Internet banks regularly upgradeReduction Project (3064-to be assigned), national banks can provide.
their web sites. Adding the requiredWashington, DC 20503.
Reasons, Objectives, and Legal Basis for disclosures could be done as part of aThe likely respondents are insured
the Proposal regular upgrade and would thereforenonmember banks and any other
The OCC is issuing this proposal to present only minimal additional costs topersons selling, soliciting, advertising,
implement section 305 of the G–L–B the bank.or offering insurance products or
Act. A fuller discussion of the reasons The primary cost associated with theannuities at an office of an insured
for, objectives of, and legal basis for the requirement that a bank obtain from thenonmember bank or on behalf of an
proposed rules appears elsewhere in the consumer a written acknowledgment ofinsured nonmember bank.
Supplementary Information. the consumer’s receipt of theEstimated number of respondents:
disclosures is, in the OCC’s opinion,5800. Reporting, Recordkeeping, and
likely to be the cost of developing theEstimated number of responses: Compliance Requirements of the
written acknowledgment. Banks that920,000. Proposal
sell insurance products over the InternetEstimated burden hours per response:
The proposal requires national banks should, as part of a regularly scheduled5 minutes.
(and entities acting on behalf of nationalEstimated total burden: 76,667 hours. upgrade, be able to revise their web sites
banks) to amend the written materialsOTS: The collection of information to include a series of ‘‘click throughs’’
and Internet web sites they use inrequirements contained in the notice of that will require affirmation from the
connection with the retail sale,proposed rulemaking will be submitted customer that he or she has received the
solicitation, advertising, or offer ofto the OMB in accordance with the required disclosures.
insurance products to consumers. ThePaperwork Reduction Act of 1995. 44 Description of the Small Entities toproposal also requires national banksU.S.C. 3507. Comments on the Which the Proposal Would Apply(and entities acting on their behalf) tocollection of information should be sent
obtain from consumers acknowledgment As of January, 1999, 1,949 nationalto the Dissemination Branch (1550-to be
that the consumer has received certain banks or national bank subsidiariesassigned), Office of Thrift Supervision,
disclosures. The substance of these were engaged in insurance activities1700 G Street, NW, Washington, DC
requirements is described in detail that would bring them within the scope20552, with a copy to the Office of
elsewhere in the SUPPLEMENTARY of coverage of the proposed rule. WeManagement and Budget, Paperwork
21INFORMATION. estimate that 976 of the national banksReduction Project (1550-to be assigned),
The OCC believes that most national that sold insurance as of January, 1999,Washington, DC 20503.
22banks will be able to satisfy the had $100 million or less in assets.The likely respondents are savings
disclosure provisions by including theassociations and any other persons Significant Alternatives to the Proposalinformation required to be disclosed inselling, soliciting, advertising, or
their written materials with minimal Section 305 of the G–L–B Actoffering insurance products or annuities
cost. We estimate that most banks expressly prescribes the content of itsat an office of a savings association or
maintain a 3 to 4 month inventory of implementing regulations. The OCC’son behalf of a savings association.
those materials. The OCC expects that proposal does not depart materiallyEstimated number of respondents:
from the requirements of the statute.there will be several months between1,097.
The statute does not authorize the OCCpublication of this proposal and theEstimated number of responses:
to provide exemptions or exceptions toeffective date of the final rules, which567,432.
its requirements for small nationalshould allow for most banks to use upEstimated average hours per response:
banks.their inventory of printed materials5 minutes.
In preparing the proposal, the OCCbefore the final rules take effect.Estimated total burden: 47,286 hours.
has considered the burden on smallNevertheless, our analysis assumes that
B. Regulatory Flexibility Act national banks to the extent that it hassome banks may need to amend the
the discretion to do so. Thewritten materials they have in inventoryOCC: The Regulatory Flexibility Act
Supplementary Information describesduring an interim period between therequires federal agencies either to certify
and solicits comment on a number ofeffective date of the final rule and thethat a proposed rule would not, if
alternatives that would reduce thenext regularly scheduled printing ofadopted in final form, have a significant
regulatory burden. These includethose materials because theirimpact on a substantial number of small
providing a more expansive definitioninventories will not be depleted duringentities or to prepare an initial
of ‘‘electronic media’’ to allow eventhat time. These banks—which areregulatory flexibility analysis (IRFA) of
more flexibility in meeting theprobably smaller banks that orderthe proposal and publish the analysis
disclosure and consumerwritten materials infrequently and infor comment. See 5 U.S.C. 603, 605. On
acknowledgment requirements, andthe basis of the information currently
21 ensuring that covered persons may fullyThe proposed rule also requires national banksavailable, the OCC is of the opinion that
to keep the area where the bank conducts insurance utilize electronic signatures and otherthis proposal is unlikely to have a
transactions physically separate from the areas provisions of the E-Sign Act.significant impact on a substantial where retail deposits are routinely accepted from The OCC requests comment onnumber of small entities if it is adopted the general public ‘‘to the extent practicable.’’ This
whether these, or other approaches thatrequirement, which is worded like the requirementin final form. Because the proposal
in the statute, leaves significant discretion to eachimplements new legislation, however,
22national bank to determine what costs, if any, the For Regulatory Flexibility Act purposes, small
the OCC lacks historical information bank must incur in order to avoid customer national banks are generally defined as those with
specific to the requirements in the confusion. assets under $100 million.
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