Department of the Treasury€¦ · Treasury Office of the Comptroller of the Currency Office of Thrift Supervision Federal Reserve System Federal Deposit Insurance Corporation

Monday,

December 4, 2000

Part II

Department of theTreasuryOffice of the Comptroller of theCurrency

Office of Thrift Supervision

Federal ReserveSystemFederal DepositInsuranceCorporation12 CFR Parts 14, 208, 343, and 536

Consumer Protections for DepositoryInstitution Sales of Insurance; Final Rule

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75822 Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Rules and Regulations

1 ‘‘Depository institution’’ means national banksin the case of institutions supervised by the Officeof the Comptroller of the Currency (OCC), statemember banks in the case of the Board of Governorsof the Federal Reserve System (Board), statenonmember banks in the case of the Federal DepositInsurance Corporation (FDIC), and savingsassociations in the case of the Office of ThriftSupervision (OTS).

2 Pub. L. 106–102, sec. 305, 113 Stat. 1338, 1410–15 (codified at 12 U.S.C. 1831x).

3 A summary of the Agencies’ consultations withthe NAIC is available in the rule-making file.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of theCurrency

12 CFR Part 14

[Docket No. 00–26]

RIN 1557–AB81

FEDERAL RESERVE SYSTEM

12 CFR Part 208

[Docket No. R–1079]

FEDERAL DEPOSIT INSURANCECORPORATION

12 CFR Part 343

RIN 3064–AC37

DEPARTMENT OF THE TREASURY


12 CFR Part 536

[Docket No. 2000–97]

RIN 1550–AB34

Consumer Protections for DepositoryInstitution Sales of Insurance

AGENCIES: Office of the Comptroller ofthe Currency, Treasury; Board ofGovernors of the Federal ReserveSystem; Federal Deposit InsuranceCorporation; and Office of ThriftSupervision, Treasury.ACTION: Final rule.

SUMMARY: The Office of the Comptrollerof the Currency, Board of Governors ofthe Federal Reserve System, FederalDeposit Insurance Corporation, and theOffice of Thrift Supervision,(collectively, the Agencies) arepublishing final insurance consumerprotection rules. These rules arepublished pursuant to section 47 of theFederal Deposit Insurance Act (FDIA),which was added by section 305 of theGramm-Leach-Bliley Act (the G–L–BAct or Act). Section 47 directs theAgencies jointly to prescribe andpublish consumer protection regulationsthat apply to retail sales practices,solicitations, advertising, or offers ofany insurance product by a depositoryinstitution 1 or any person that is

engaged in such activities at an office ofthe institution or on behalf of theinstitution.EFFECTIVE DATE: April 1, 2001.FOR FURTHER INFORMATION CONTACT:OCC: Stuart Feldstein, AssistantDirector, or Michele Meyer, SeniorAttorney, Legislative and RegulatoryActivities Division, (202) 874–5090; AsaChamberlayne, Senior Attorney,Securities and Corporate PracticesDivision, (202) 874–5210; StephanieBoccio, Asset Management, (202) 874–4447; Barbara Washington, Core PolicyDevelopment (202) 874–6037, Office ofthe Comptroller of the Currency, 250 EStreet, SW., Washington, DC 20219.

Board: Richard M. Ashton, AssociateGeneral Counsel, Legal Division, (202)452–3750; Angela Desmond, SpecialCounsel, Division of BankingSupervision and Regulation, (202) 452–3497; David A. Stein, Attorney, Divisionof Consumer and Community Affairs,(202) 452–3667, Board of Governors ofthe Federal Reserve System, 20th and CStreets, NW, Washington, DC 20551. Forthe hearing impaired only,Telecommunications Device for the Deaf(TDD), contact Janice Simms, (202) 872–4984.

FDIC: Keith A. Ligon, Chief, PolicyUnit, 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 DepositInsurance Corporation, 550 17th Street,NW, Washington, DC 20429.

OTS: Robyn Dennis, Manager,Supervision Policy, (202) 906–5751;Richard Bennett, Counsel (Banking andFinance), (202) 906–7409; Sally Watts,Counsel (Banking and Finance), (202)906–7380; Mary Jane Cleary, InsuranceRisk Management Specialist, (202) 906–7048, Office of Thrift Supervision, 1700G Street, NW., Washington, DC 20552.SUPPLEMENTARY INFORMATION:

Background

On November 12, 1999, PresidentClinton signed the G–L–B Act into law.Section 305 of the Act 2 added newsection 47 to the FDIA, captioned‘‘Insurance Customer Protections.’’ Thissection requires the Agencies jointly toprescribe and publish consumerprotection regulations that apply toretail sales practices, solicitations,advertising, or offers of insuranceproducts by depository institutions orpersons engaged in these activities at anoffice of the institution or on behalf of

the institution. Section 47 directs theAgencies to include specific provisionsrelating to sales practices, disclosuresand advertising, the physical separationof banking and nonbanking activities,and domestic violence discrimination.

Section 47 also requires the Agenciesto consult with the State insuranceregulators, as appropriate. The NationalAssociation of Insurance Commissioners(NAIC) has submitted a comment letterin connection with the proposed rules.In preparing the proposed rules andthese final rules, the Agencies also havemet and consulted with the NAIC.3These final rules reflect these meetingswith, and comments from, the NAIC.

The texts of the Agencies’ final rulesare substantially identical. Anydifferences in style or terms are notintended to create substantivedifferences in the requirements imposedby the regulations.

Overview of Comments ReceivedOn August 21, 2000, the Agencies

published a joint notice of proposedrulemaking (the proposed rules) in theFederal Register (65 FR 50882). TheAgencies received approximately 75comments in response to the proposedrules.

The majority of comments werereceived from depository institutions.These commenters offered a largenumber of suggested changes, with themost commonly advanced suggestionsincluding: modifying the ‘‘coveredperson’’ definition; excepting varioustypes of insurance from coverage by thefinal rules; eliminating certaindisclosure requirements; and limitingthe physical separation requirements tothe teller area of an institution.

The NAIC submitted a comment onbehalf of the State insurance authoritiesthat generally supported the Agencies’proposed rules. The NAIC advised theAgencies to clarify in the final rules therole of the States in regulating insurancesales. The NAIC also requested moredetailed guidance in the ConsumerGrievance Appendix to the final rules.Finally, the NAIC expressed its viewthat the lending area of a depositoryinstitution should be separated from thearea in which insurance is sold.

The Agencies have modified certainprovisions of the proposed rules in lightof the comments received. The mostsignificant comments, and the Agencies’responses, are discussed in thefollowing section-by-section analysis.As was done in the preamble discussionof the proposed rules, the citations areto sections only, leaving blank the


75823Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Rules and Regulations

4 The Board’s rule is a new subpart of the Board’sexisting Regulation H, and not a separate regulation.Accordingly, the sections of the Board’s rule arenumbered consecutively.

5 12 U.S.C. 4802.6 These rules are not intended to have any effect

on whether annuities are considered to beinsurance products for purposes of any othersection of the G–L–B Act or other laws. Thatquestion depends on the terms and purposes ofthose laws, as interpreted by the appropriate agencyand the courts.

7 OTS does not intend the requirements of thispart to apply to other savings association operatingsubsidiaries or service corporations by operation of12 CFR 559.3(h). The OCC does not intend therequirements of this part to apply to other nationalbank operating subsidiaries by operation of 12 CFR5.34(e)(3).

8 65 FR 35162 (June 1, 2000).9 12 CFR 226.2(a)(12)(‘‘Consumer credit means

credit offered or extended to a consumer primarilyfor personal, family, or household purposes.’’)

citations to the part numbers used byeach agency.4

The Agencies also received severalcomments requesting the Agencies todelay the effective date of these rules.The commenters state that institutionswill need time to modify existingdisclosure forms, train personnel andimplement system changes. Indetermining the effective date andadministrative compliance requirementsfor new regulations, the Agencies arerequired to consider any administrativeburden that the regulations would placeon depository institutions and to delaythe effective date until at least the firstday of a calendar quarter that begins onor after the date on which theregulations are published.5 TheAgencies recognize that ‘‘lead time’’ isnecessary for some institutions coveredby the final rules to adjust their systemsto comply, although others have systemsthat already conform to some extent tothe requirements of the rules. TheAgencies therefore have made theeffective date April 1, 2001.

Section-by-Section AnalysisThe discussion that follows applies to

each of the Agencies’ final rules.

Section ll.10 Purpose and ScopeProposed §ll.10 identified the

purposes and scope of the rules. Asstated in the proposal, the rules areintended to establish consumerprotections in connection with retailsales of insurance products andannuities 6 to consumers by anydepository institution or by any personthat is engaged in these activities at anoffice of the institution or on behalf ofthe institution. These rules addresscertain consumer protection concernsthat arise from the conduct of insuranceactivities by a depository institution, atan office of the institution, or on behalfof the institution and are not intendedto authorize new activities. These rulesare not exclusive and, for example,applicable State laws administered byState insurance commissioners mayapply, as provided by sections 104 and305 of the G–L–B Act.

The Agencies received severalcomments on the proposed scope ofthese rules. Some of these commenters

noted that the Interagency Statement onRetail Sales of Nondeposit InvestmentProducts (February 15, 1994)(Interagency Statement) also may applyin certain circumstances to sales ofinsurance or annuities by depositoryinstitutions. These commentersrequested clarification on how theAgencies will apply the InteragencyStatement to those products subject toboth these rules and the InteragencyStatement. The Agencies note that in theevent of a conflict between theInteragency Statement and the finalrules, the rules will prevail.

Certain of the definitions contained inthe final rules also address thecircumstances under which the ruleswill apply. Under the proposed rules,only subsidiaries that are sellinginsurance products or annuities at anoffice of the institution or acting ‘‘onbehalf of’’ the depository institution asdefined in the rules 7 would be subjectto the requirements of the rules. Section47 gives the Agencies discretion todetermine whether the Act’s consumerprotections should extend to adepository institution’s subsidiary inother circumstances. The Agenciesreceived only one comment supportingbroader application of the final rules todepository institution subsidiaries. TheAgencies believe that extending therules to a depository institution’ssubsidiary in circumstances other thanwhen the subsidiary is selling insuranceproducts or annuities at an office of theinstitution or acting ‘‘on behalf of’’ thedepository institution is unnecessaryand, therefore, the final rules retain theapproach taken in the proposed rules onthis issue. A more complete discussionof when a person is engaged ininsurance activities ‘‘on behalf’’ of thedepository institution is set forth belowin the definition of ‘‘covered person.’’

Section ll.20 DefinitionsThe proposed rules contained several

definitions about which the Agenciesreceived little or no comment. The finalrules therefore retain the definitions of‘‘affiliate,’’ ‘‘company,’’ ‘‘control,’’‘‘domestic violence,’’ and ‘‘subsidiary’’set forth in the proposed rules. Thedefinitions about which the Agenciesreceived more substantial comment arediscussed below.

Consumer (§ll.20(d)). Theproposed rules defined ‘‘consumer’’ asan individual who obtains, applies for,

or is solicited to obtain insuranceproducts or annuities from a coveredperson. The final rules make a clarifyingchange by replacing the term ‘‘obtains’’with ‘‘purchases’’ in the definition of‘‘consumer.’’ A purchase includes anytransaction where there is a cost to theconsumer for the insurance eitherdirectly or indirectly such as a higherinterest rate on a loan.

Several commenters asked theAgencies to distinguish between theterms ‘‘consumer’’ and ‘‘customer’’ inthe same way as the Final Rules on thePrivacy of Consumer FinancialInformation (Privacy Rules).8 However,unlike the Privacy Rules, section 47uses the terms ‘‘consumer’’ and‘‘customer’’ interchangeably withoutdistinguishing between the two terms.For this reason, the Agencies believethat Congress did not intend todistinguish between consumers andcustomers for purposes of section 47.Thus, the Agencies have determined tocontinue to use the single term‘‘consumer’’ in the final rules.

The Agencies also requested commenton whether the final rules shouldexpand the definition of ‘‘consumer’’ toinclude small businesses. The majorityof those commenting on this issuebelieved that the Agencies should notexpand the definition to include smallbusinesses because most Federalconsumer protection statutes apply onlyto individuals. The Agencies agree withthese commenters and therefore havenot changed the definition of‘‘consumer’’ to include smallbusinesses.

The Agencies also invited commenton whether to limit the definition ofconsumer to individuals who ‘‘obtain orapply for insurance products orannuities primarily for personal, family,or household purposes.’’ One effect ofthis change would be to exclude entitiessuch as sole proprietorships andpartnerships from the scope of the rules.

Several commenters preferredlimiting the definition in this manner tobe consistent with the Truth in Lendingregulation’s definition of ‘‘consumercredit.’’ 9 The Agencies agree with thecommenters that depository institutionsare familiar with this approach becauseit is used in other consumer protectionrules. Thus, the final rules apply to anindividual ‘‘who purchases or appliesfor insurance products or annuitiesprimarily for personal, family, orhousehold purposes.’’



Covered person or you (§ll.20(e)).The proposal used the term ‘‘coveredperson,’’ or ‘‘you,’’ to determine towhom the requirements in these rulesapply. As defined in the proposed rules,a covered person means any depositoryinstitution or any other person selling,soliciting, advertising, or offeringinsurance products or annuities to aconsumer at an office of the institutionor on behalf of the institution. A‘‘covered person’’ includes any person,including a subsidiary or other affiliate,if that person or one of its employeessells, solicits, advertises, or offersinsurance products or annuities at anoffice of an institution or on behalf of aninstitution.

For purposes of this definition, theproposed rules provided that a person’sactivities are ‘‘on behalf of’’ a depositoryinstitution if:

(1) The person represents to aconsumer that the sale, solicitation,advertisement, or offer of any insuranceproduct or annuity is by or on behalf ofthe institution;

(2) The depository institution receivescommissions or fees, in whole or inpart, derived from the sale of aninsurance product or annuity as a resultof cross-marketing or referrals by theinstitution or an affiliate;

(3) Documents evidencing the sale,solicitation, advertising, or offer of aninsurance product or annuity identify orrefer to the institution or use itscorporate logo or corporate name; or

(4) The sale, solicitation, advertising,or offer of an insurance product orannuity takes place at an off-premisessite, such as a kiosk, that identifies orrefers to the institution or uses itscorporate logo or corporate name.

In the preamble to the proposed rules,the Agencies noted that the secondprong of the ‘‘on behalf of’’ test—thereceipt of commissions or fees—did notinclude situations in which theinstitution receives a fee solely forperforming a separate service orfunction that may relate to an insurancesale (such as processing a credit cardcharge for the insurance premium, orperforming recordkeeping or paymentfunctions on behalf of the affiliate)where the fee is based on that service orfunction and is not calculated as a shareof the commissions or fees derived fromthe insurance product or annuity sale.

The Agencies sought comment on theproposed definition of covered personand specifically on those activities thatwould cause a person to be consideredto be acting ‘‘on behalf of’’ aninstitution. The Agencies also invitedcomment on whether the followingshould be considered an activity onbehalf of the institution:

• The use of the name or corporatelogo of the holding company or otheraffiliate, as opposed to the name orcorporate logo of the depositoryinstitution in documents evidencing thesale, solicitation, advertising, or offer ofan insurance product or annuity.

• The sale, solicitation, advertising,or offer of an insurance product orannuity at an off-premises site thatidentifies or refers to the holdingcompany or other affiliate, as opposedto the depository institution, or uses thename or corporate logo of the holdingcompany or other affiliate.

The Agencies received severalcomments on the proposed definition ofcovered person. Many commenters didnot believe that the second prong of the‘‘on behalf of’’ test should include adepository institution’s receipt ofcommissions or fees as a result of crossmarketing. Those commenters suggestedthat the risk of customer confusion issmall because a consumer typicallywould not know about the receipt ofthese fees. These commenters believedthat requiring disclosures in thesesituations might actually result inincreased customer confusion. TheAgencies agree and therefore delete thereference to cross-marketing in the finalrules. Thus, for example, while thesharing of customer lists with anunaffiliated third party would triggercertain requirements under the PrivacyRules, it would not trigger therequirements under any of the prongs inthese final rules. The Agencies also notethat the institution’s receipt ofdividends from a subsidiary, or aholding company’s receipt of dividendsfrom an affiliate, does not constitutereceipt of ‘‘commissions or fees’’ withinthe meaning of this paragraph.

Several commenters also contendedthat the term ‘‘on behalf of’’ should notinclude sales of insurance products orannuities that result from a referral to anunaffiliated insurance agency by anemployee of a depository institution.Unlike cross-marketing, a depositoryinstitution making a referral is in aposition to influence a consumer’schoice of insurance providers.Therefore, the final rules retain thereference to ‘‘referrals’’ in the secondprong of the ‘‘on behalf of’’ test, butwith an important modification.

Rather than applying to anycommission or fee derived from a saleresulting from a referral, the secondprong of the ‘‘on behalf of’’ test in thefinal rules applies only when adepository institution has a contractualarrangement with an insurance providerto receive those fees. This is meant todistinguish referral fees andcommissions received by a depository

institution under an arrangement basedon sales with an insurance providerfrom those referral fees received by ateller, which are limited by §ll.50(b).Under §ll.50(b), any person whoaccepts deposits from the public in anarea where such transactions areroutinely conducted may receive areferral fee if it is a one-time, nominalfee of a fixed dollar amount for eachreferral that does not depend onwhether the referral results in atransaction.

A number of commenters alsocontended that the third prong of the‘‘on behalf of’’ test should not coversituations where documents or othercommunications use the depositoryinstitution’s corporate logo or corporatename (a common logo or name used bythe corporate family and not just by thedepository institution). Thosecommenters believe that thesecircumstances alone are insufficient tocreate a level of confusion that warrantsimposing the requirements under thisrule. Moreover, extending the rules inthis manner would cover transactions inwhich a depository institution has noinvolvement in the sale of insurance.The Agencies agree with thesecommenters, and therefore, the thirdprong of the ‘‘on behalf of’’ test in thefinal rules has been modified so that itdoes not cover documents that use acorporate logo or corporate name. Itdoes, however, cover documentsevidencing the sale, solicitation,advertising, or offer of an insuranceproduct or annuity that identify or referto the depository institution. Under thefinal rules, insurance activities areconducted on behalf of a depositoryinstitution if the documents evidencingthe activity identify or refer to theinstitution. In the Agencies’ view, thecircumstances when the relevantdocuments refer to the institution forpurposes of this test will depend on thefacts involved.

The final rules also delete the fourthprong of the proposed ‘‘on behalf of’’test because it is covered by the threeremaining revised prongs. As revised,the Agencies believe that the remainingthree prongs capture the appropriatecircumstances under which a personcould be said to be acting ‘‘on behalf of’’a depository institution for purposes ofthese rules.

Several commenters also noted thatthe definition of ‘‘covered person’’ or‘‘you’’ could be read to mean that oncea person is a ‘‘covered person,’’ allinsurance sales, solicitations,advertisements or offers by that personwould be subject to these rules, whetheror not these activities are conducted atan office of, or on behalf of, a depository



10 Most of the comments concerning electronicmedia were raised in the context of disclosures andacknowledgments and are, therefore, discussed inthe sections below concerning those requirements.

11 12 U.S.C. 1972. Section 106(b) of the BankHolding Company Act Amendments of 1970 doesnot apply to savings associations. Those institutionsare, however, subject to comparable prohibitions ontying and coercion, under section 5(q) of the HomeOwners’ Loan Act (HOLA), 12 U.S.C. 1464(q).Accordingly, OTS’s final rule cites the HOLAprovision.

institution. The Agencies do not intendthis result and have changed theproposal to clarify that a covered personis: (1) A depository institution; or (2)any other person only when the personsells, solicits, advertises or offers aninsurance product or annuity to aconsumer at an office of the institutionor on behalf of the institution.

Finally, in the preamble to theproposed rules, the Agencies noted thatthe use of electronic media may presentspecial issues in the application of the‘‘on behalf of test’’ of the covered persondefinition. The Agencies invitedcomment on whether, and under whatcircumstances, to require disclosures forsales or solicitations by electronicmedia.

Several commenters suggested thatthe purposes of the statute and therules—to avoid customer confusionabout the nature of the products offeredthat arises because of the identity of theseller or marketer—is not implicated inall cases where a depository institutionacts solely to bring together buyers andsellers of insurance products. Forexample, the Agencies believe that linksestablished from depository institutionweb sites through the Internet orwireless services generally do not comewithin the scope of the covered persondefinition. To the extent there is a riskof possible consumer confusion when acustomer leaves an institution’s website, the nature or type of thesedisclosures may differ and is betteraddressed in subsequent guidance orrulemaking.

Electronic media (§ll.20(g)).Section 47 permits the Agencies to makeadjustments to the Act’s requirementsfor sales conducted in person, bytelephone, or by electronic media toprovide for the most appropriate andcomplete form of disclosure andconsumer acknowledgment of thereceipt of such disclosures. Theproposed rules set forth special rules forelectronic disclosures and consumeracknowledgments. A discussion ofchanges made to these provisions in thefinal rules is set forth below. Seeproposed §ll.40.

In addition, the proposed rulesrecognized the need for flexibility toaccommodate rapid changes incommunications technologies and thusdefined ‘‘electronic media’’ broadly toinclude any means for transmittingmessages electronically between acovered person and a consumer in aformat that allows visual text to bedisplayed on equipment, such as apersonal computer. The Agenciesinvited comment on this proposeddefinition and on whether a moreexpansive definition would be

consistent with the G–L–B Act’srequirement for both written and oraldisclosures. The majority of commenterssupported the proposed definition of‘‘electronic media’’ 10 because itprovided sufficient flexibility to addressfuture innovation. The final rule,therefore, retains the proposeddefinition of ‘‘electronic media.’’

Office (§ll.20(h)). The proposedrules defined ‘‘office’’ as the premises ofan institution where retail deposits areaccepted from the public. The Agenciesreceived several comments requestingthat this definition be limited to deposittaking areas. The Agencies note thatspecific provisions in these rulesrelating to the physical separation of theinsurance activities and permissibilityof referral fees are limited to areaswhere deposits are routinely taken.However, the Agencies do not believethat the overall protections afforded bythese rules should be limited in thismanner and, therefore, retain in thefinal rules the definition of ‘‘office’’ setforth in the proposed rules.

The proposed rules did not define theterm ‘‘insurance product.’’ As explainedin the preamble to the proposed rules,the Agencies recognize that there is nosingle standard for defining the term‘‘insurance’’ and that its definition mayvary significantly depending on thecontext in which it is used. Forexample, section 302 of G–L–B Act listscertain types of products that are firstoffered after January 1, 1999 that mayconstitute insurance for purposes ofdetermining when a national bank mayunderwrite, rather than sell, insurance.Thus, the Agencies indicated that theywill look to a variety of sources indetermining whether a given product iscovered by the proposed rules,including section 302(c), commonusage, conventional definitions, judicialinterpretations, and other Federal laws.The Agencies invited comment on theseand other sources for determiningwhether a product comes within thescope of the proposed rules, or,alternatively, whether the rule shouldinclude a specific definition of the term‘‘insurance.’’

Few commenters requested a specificdefinition of insurance. Manycommenters, however, asked that weexclude certain products from coverageor at least not require certain disclosuresfor those products. For example, thosecommenters believe that the rulesshould not cover credit insurance andproperty and casualty insurance because

these products do not have aninvestment component and have beensold by and on behalf of depositoryinstitutions for years without consumerconfusion. Section 47 of the G–L–B Act,however, does not distinguish betweentypes of insurance products nor are theconsumer protections under the statutelimited to instances where there is a riskof investment loss or consumerconfusion. The final rules therefore donot define the term ‘‘insurance’’ but, asexplained in the discussion of §ll.40,provide more guidance on when certaindisclosures are required.

Section ll.30 Prohibited Practices

Under section 47(b) of the FDIA, theAgencies’ regulations must prohibit acovered person from engaging in anypractice that would lead a consumer tobelieve that an extension of credit, inviolation of the anti-tying provisions ofsection 106(b) of the Bank HoldingCompany Act Amendments of 1970, 11

is conditional upon either:(1) The purchase of an insurance

product or annuity from the depositoryinstitution or any of its affiliates; or

(2) An agreement by the consumer notto obtain, or a prohibition on theconsumer from obtaining, an insuranceproduct or annuity from an unaffiliatedentity. These prohibitions on tying andcoercion were set forth in proposed§ll.30(a).

Section 47(c)(2) of the FDIA alsorequires the Agencies’ regulations toprohibit a covered person from engagingin any practice at any office of, or onbehalf of, a depository institution or asubsidiary of a depository institutionthat could mislead any person orotherwise cause a reasonable person toreach an erroneous belief with respectto:

(1) The uninsured nature of anyinsurance product or annuity offered forsale by the covered person orsubsidiary;

(2) In the case of an insurance productor annuity that involves investment risk,the investment risk associated with anysuch product; or

(3) The fact that the approval of anextension of credit to a consumer by theinstitution or subsidiary may not beconditioned on the purchase of aninsurance product or annuity from theinstitution or subsidiary, and that theconsumer is free to purchase the



12 The Agencies note that other provisions, suchas the prohibitions on misrepresentations andcertain required disclosures, also generally addresssituations relating to consumer coercion.

insurance product or annuity fromanother source.

These prohibitions onmisrepresentations were set forth in§ll.30(b) of the proposed rules.

The Agencies received severalcomments on these prohibitions. A fewcommenters asserted that theprohibitions on tying an extension ofcredit to the purchase of insuranceshould apply only to depositoryinstitutions and not all covered personsbecause section 106(b) of the BankHolding Company Amendments of 1970applies only to depository institutions.Therefore, the commenters requestedthe Agencies to amend proposed§ll.30(a) to delete references toparties other than depositoryinstitutions.

The commenter’s proposed changes to§ll.30(a) are not supported by thestatutory language, however. Section47(c)(2) is not limited to depositoryinstitutions but also expressly applies topersons selling at an office of adepository institution or on behalf of theinstitution. In addition, §ll.30(a) isnot a restatement of the section 106(b)prohibition on coercion by depositoryinstitutions. Rather, it is a prohibitionon misleading a consumer into believingthat an extension of credit could beconditioned in a manner that isprohibited by section 106(b). Section47(c) of the G–L–B Act recognizes thateither a depository institution, orsomeone selling at an office of adepository institution or on its behalfcould mislead a consumer in this way.Therefore, the Agencies decline to limit§ll.30(a) to depository institutions. 12

One commenter also questionedwhether §§ll.30 (a) and (b) wouldapply to ‘‘force placed’’ insurance.‘‘Force placed’’ is a term used todescribe a situation in which adepository institution purchasesinsurance, and bills the customer for it,because the customer has failed toobtain, or allowed to lapse, requiredinsurance coverage for an asset used ascollateral for a secured loan. TheAgencies do not intend these final rulesto apply to force placed insurancepurchases since they are made bydepository institutions to protect loancollateral rather than by consumers.

Finally, proposed §ll.30(c)implemented section 47(e) of the FDIA,which, as already noted, prohibits acovered person from considering aperson’s status as a victim of domesticviolence or a provider of services to

domestic violence victims in makingdecisions regarding certain types ofinsurance products. One commenterstated that this provision could bedifficult to comply with where acovered person sells or offers for saleinsurance products for which a thirdparty makes the decisions regarding theunderwriting, pricing, renewal, scope ofcoverage, or payment of claims.However, the statute provides noexception from the prohibition ondomestic violence discrimination inthese circumstances. Therefore, the finalrules as modified prohibit a coveredperson from selling or offering for sale,as principal, agent, or broker, any life orhealth insurance product if the status ofthe applicant or insured as a victim ofdomestic violence or as a provider ofservices to victims of domestic violenceis considered as a criterion in anydecision with regard to insuranceunderwriting, pricing, renewal, or scopeof coverage of such product, or withregard to the payment of insuranceclaims on such product, except asrequired or expressly permitted underState law.

Section ll.40 What a Covered PersonMust Disclose

In addition to prohibiting themisrepresentations outlined above,section 47(c) of the FDIA requires theAgencies’ regulations to mandate that acovered person make affirmativedisclosures in connection with theinitial purchase of an insurance productor annuity. The proposed rules requiredthe following disclosures:

(1) The insurance product or annuityis not a deposit or other obligation of,or guaranteed by, the depositoryinstitution or (if applicable) an affiliate;

(2) The insurance product or annuityis not insured by the Federal DepositInsurance Corporation (FDIC) or anyother agency of the United States, thedepository institution, or (if applicable)an affiliate;

(3) In the case of an insurance productor annuity that involves an investmentrisk, there is investment risk associatedwith the product, including the possibleloss of value; and

(4) The depository institution may notcondition an extension of credit oneither the consumer’s purchase of aninsurance product or annuity from thedepository institution or any of itsaffiliates or the consumer’s agreementnot to obtain, or a prohibition on theconsumer from obtaining, an insuranceproduct or annuity from an unaffiliatedentity.

Several commenters believed that thefirst disclosure—that the insuranceproduct or annuity is not a deposit or

other obligation of, or guaranteed by, thedepository institution—is unnecessaryand not required by section 47. Thesecommenters asserted that there isminimal risk that a customer willconfuse an insurance product or annuitywith a deposit. The Agencies disagreewith this contention, particularly wherethe product has a savings component.Although the first disclosure is notexpressly required by the statute,section 47 requires the Agencies to issueregulations that are consistent with therequirements of the G–L–B Act andprovide ‘‘additional protections forcustomers’’ as necessary. The Agenciesbelieve that requiring a covered personto disclose that the insurance product orannuity is not a deposit is necessary toprotect consumers from confusion aboutthe nature of the product offered.

There are, however, some instanceswhere the first and second disclosuresmay not be accurate. Severalcommenters noted that the seconddisclosure—that a product is notinsured by the depository institution oran agency of the United States—wouldnot be true for Federal Crop Insuranceand Federal Flood Insurance, both ofwhich are insured by United Statesagencies. To address these concerns andto ensure that the disclosures requiredby §ll.40(a) are only made whereaccurate, the Agencies have modified§ll.40(a) to require a covered personto make the disclosures except to theextent the disclosures would not beaccurate.

Several commenters also suggestedremoving certain types of insurance,such as property and casualty insuranceand credit-related insurance, from therequirement to disclose that the productis not FDIC-insured. These commenterscontend that there is little risk ofconfusion in these circumstances andthat such disclosures may serve toincrease customer confusion about thenature of the product offered. TheAgencies disagree with this contentionand favor requiring this disclosure inconnection with the sale of anyinsurance product to prevent possibleconfusion about the nature of theproduct offered. The Agencies, however,will review this requirement on an on-going basis and make future changes ifnecessary.

Several commenters objected to therequirement that a covered person givethe anti-coercion disclosures twice(once before the insurance sale andagain if the consumer applies for credit).These commenters argued that section47(a)(1)(A) provides that the Agencies’regulations only require the anti-coercion disclosure be made at the timeof an application for credit. The



13 Pub. L. 106–229, 114 Stat. 464 (June 30, 2000)(codified at 12 U.S.C. 7001 et seq.) The E-Sign Actgenerally took effect on October 1, 2000, althoughthere are delayed effective dates for provisionsother than those discussed in the text.

14 See 12 U.S.C. 7001(c)(1).15 12 U.S.C. 7004(d)(1).

Agencies agree that this is a permissibleinterpretation of the statute and believethat the anti-coercion disclosure is mostmeaningful and relevant at the time aconsumer is applying for credit. For thisreason, the final rules only require thatthe anti-coercion disclosure be given atthe time of application for credit. TheAgencies have redesignated thisprovision as §ll.40(b) in the finalrules.

Timing and Method of DisclosuresUnder proposed §ll.40(b)(1), a

covered person must provide thedisclosures described in §ll.40(a)orally and in writing before thecompletion of the sale of an insuranceproduct or annuity to a consumer. Thedisclosures concerning the prohibitionon tying an extension of credit to aninsurance product or annuity purchase(proposed §ll.40(a)(4)) also must bemade orally and in writing at the timethe consumer applies for an extension ofcredit in connection with which aninsurance product or annuity will besolicited, offered, or sold. Section 47 ofthe FDIA authorizes the Agencies tomake necessary adjustments to the G–L–B Act’s requirements for salesconducted in person, by telephone, orby electronic media. Section 47(a)(1)also requires the Agencies to publishfinal rules in a form that the Agenciesjointly determine to be appropriate.Proposed §§ll.40(b)(2) set forthspecial timing and method of disclosurerules for electronic and telephonedisclosures. Because the Agenciesmodified the anti-coercion disclosureand redesignated it as §ll.40(b), thetiming and method of disclosure rulesare contained in §ll.40(c).

The Agencies received severalcomments on the timing and method ofdisclosures. A few commenterscontended that it would be difficult ifnot impossible to provide the requiredoral disclosures in connection withdirect mail solicitations. The Agenciesrecognize that providing oraldisclosures in circumstances likethese—where there is no means ofcommunicating orally at the time of thesales presentation—would beimpracticable. Therefore, the final ruleprovides that if the sale of an insuranceproduct or annuity is conducted bymail, a covered person that sells, solicitsor offers an insurance product orannuity by mail is not required to makethe oral disclosures required by§ll.40(a). The final rule furtherprovides that if a covered personreceives an application for credit bymail, the covered person is not requiredto make the oral disclosure required by§ll.40(b). The Agencies also intend

this exception from the oral disclosurerequirements to apply to a situationsuch as a ‘‘take one’’ credit application,where the consumer picks up a blankapplication form, completes theapplication at home, and mails it backto the institution.

A similar situation arises with respectto offers, solicitations or sales bytelephone. Under the proposed rules, acovered person who takes anapplication for credit by telephone mayprovide the written anti-coerciondisclosure by mail, if the covered personmails it to the consumer within threedays starting on the next business day,excluding Sundays and the legal publicholidays specified in 5 U.S.C. 6103(a).Several commenters requested theAgencies extend this flexible approachto all of the written disclosures, not justthe anti-coercion disclosure, whentransactions are conducted bytelephone. The Agencies agree with thisconcern and have changed the finalrules relating to telephone transactionsto extend the option of providing anywritten disclosures by mail within athree-day time period.

Under proposed §ll.40(b)(2)(i),where the consumer affirmativelyconsents, a covered person may providethe written disclosures required by§ll.40(a) through electronic mediainstead of on paper, if they are providedin a format that the consumer mayretain or obtain later, for example, byprinting or storing electronically, suchas by downloading. Under proposed§ll.40(b)(2)(ii), if the sale of aninsurance product or annuity isconducted entirely through the use ofelectronic media and writtendisclosures are provided electronically,a covered person is not required toprovide disclosures orally. The proposalalso required a covered person tocomply with all other requirementsimposed by law or regulation forproviding disclosures electronically.

In the preamble to the proposed rules,the Agencies also noted that newlegislation addressing the use ofelectronic signatures and electronicrecords may affect institutions thatprovide disclosures and obtainacknowledgments electronically. TheElectronic Signatures in Global andNational Commerce Act (the E-SignAct) 13 contains, among other things,Federal rules governing the use ofelectronic records for providingrequired information to consumers. Aninstitution may satisfy a legal

requirement that the institution providewritten disclosures by using anelectronic disclosure if the consumeraffirmatively consents and if certainother requirements of the E-Sign Act aremet. For example, the E-Sign Actrequires that, before a consumerconsents to receive electronicallyinformation that is otherwise legallyrequired to be provided in writing, theconsumer must receive a ‘‘clear andconspicuous statement’’ containingcertain information prescribed by thestatute.14 The statute authorizes Federalregulatory agencies to exempt specifiedcategories or types of records from theE-Sign Act requirements relating toconsumer consent only if an exemptionis necessary to eliminate a substantialburden on electronic commerce and willnot increase the material risk of harm toconsumers.15 The Agencies invitedcomment on whether—and, if so, how—they should address the requirements ofthe E-Sign Act in the context of theseproposed rules.

Two commenters suggested thatproviding disclosures consistent withthe E-Sign Act should suffice.Commenters did not support othermodifications of the final rule to addressthe E-Sign requirements. The Agenciesbelieve electronic disclosures in lieu ofwritten disclosures are appropriate ifthey meet the requirements of the E-Sign Act. Thus, the final rules providethat, subject to the requirements ofsection 101(c) of the E-Sign Act, acovered person may provide the writtendisclosures required by sectionll.40(a) and (b) through electronicmedia if the consumer affirmativelyconsents to receiving disclosureselectronically and if the disclosures areprovided in a format that the consumermay retain or obtain later. This optionis not limited to situations where thesale is conducted entirely through theuse of electronic media, as in theproposed rule. Moreover, under thefinal rules, any disclosures required byll.40(a) and (b) that are provided byelectronic media are not required to beprovided orally.

The Agencies made one additionalclarifying change to the timing andmethod of the disclosure provisions toavoid an open-ended time frame fordisclosures. The proposed rulesrequired a covered person to make theanti-coercion disclosure ‘‘at the time theconsumer applies for an extension ofcredit in connection with which aninsurance product or annuity will besolicited, offered, or sold.’’ Sectionll.40(c)(1) requires that this



16 The FTC’s guidance, Dot Com Disclosures:Information about Online Advertising is available atwww.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.html.

disclosure be made ‘‘at the time theconsumer applies for an extension ofcredit in connection with which aninsurance product or annuity issolicited, offered, or sold.’’ In addition,if a solicitation, offer, or sale occurs inconnection with an application forcredit that is pending with thedepository institution, a covered personmust make the disclosure when thesolicitation, offer, or sale occurs.

The Agencies note that, consistentwith section 47(c), the final rulesrequire a covered person to provide thedisclosures in connection with the‘‘initial purchase’’ of an insuranceproduct or annuity. Accordingly, whilenew disclosures are not required whena consumer simply renews an insurancepolicy or annuity, disclosures arerequired if a consumer purchases adifferent insurance product or annuity.

Disclosures Must Be ReadilyUnderstandable, Designed To CallAttention to the Information, andMeaningful

Section 47 of the FDIA requires theAgencies to promulgate regulationsencouraging the use of disclosures thatare conspicuous, simple, direct, andreadily understandable. Proposed§ll.40(b)(3) contained thisrequirement and further required thatthe disclosures also must be designed tocall attention to the nature andsignificance of the informationprovided. For example, the proposedrules provided that a covered personmay use the following short-formdisclosures 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 thatthe Agencies clarify the circumstancesin which a covered person may use theshort form disclosures. The Agenciesbelieve that provisions in the JointInterpretations of the InteragencyStatement on Retail Sales of NondepositInvestment Products (September 12,1995) for use of short form disclosuresprovide useful guidance on this issue.Therefore, the final rules are changed toprovide that short form disclosures maybe used in visual media, such astelevision broadcasts, ATM screens,billboards, signs, posters, and in writtenadvertisements and promotionalmaterials, such as brochures. TheAgencies note that it may be appropriateto use the short form disclosures inother circumstances. The Agencies will

monitor use of these disclosures andissue further guidance if necessary.

In addition, several commentersrequested that the final rules provide ashort form of the anti-coerciondisclosures. However, the commenters’suggested short form anti-coerciondisclosure did not adequately captureall of the information contained in theform set forth in §ll.40(b) of the finalrules. Moreover, the Agencies believethat requiring the full anti-coerciondisclosure is not particularlyburdensome because the final rulesrequire the disclosure to be made onlyin circumstances involving aconsumer’s application for credit inconnection with which insurance issolicited, offered, or sold. Therefore, thefinal rules do not provide a short formof the anti-coercion disclosure.

The Agencies also invited commenton whether the final rule shouldprovide specific methods of callingattention to the material contained inthe disclosures. For example, theAgencies suggested that the final rulecould provide that the disclosures aredesigned to call attention to the natureand significance of the informationprovided if they use:

• A plain-language heading to callattention to the disclosures;

• A typeface and type size that areeasy to read;

• Wide margins and ample linespacing;

• Boldface or italics for key words;and

• Distinctive type size, style, andgraphic devices, such as shading orsidebars, when the disclosures arecombined with other information.

Some commenters expressed concernthat including these examples in theregulation would be viewed as addingnew requirements. These concerns,however, are unfounded. The Agenciesbelieve that providing examples ofpossible methods of calling attention tothe material contained in thedisclosures will provide useful guidanceto the industry. The Agencies thereforehave included these methods in thefinal rules as examples of ways in whicha covered person could call aconsumer’s attention to the nature andsignificance of the information providedin the required disclosures. Theseexamples are not binding requirements.

Further, as provided in §ll.40(c)(6)of the final rules, a disclosure is not‘‘meaningfully’’ provided if a coveredperson merely tells the consumer thatthe disclosures are available in printedmaterial without also providing thematerial and orally disclosing theinformation to the consumer. Similarly,a disclosure made through electronic

media is not meaningfully provided ifthe consumer may bypass the visual textof the disclosure before purchasing aninsurance product or annuity.

The Agencies invited comment onwhether these standards wouldadequately address situations wheredisclosures are made through electronicmedia. For example, the Federal TradeCommission (FTC) recently releaseddetailed guidance on online advertisingand sales reiterating that many of thegeneral principles of advertising lawapply to Internet advertisements, butrecognizing that developing technologyraises new issues.16 The Agenciessought comment on whether the type ofdetail provided in the FTC guidance isnecessary in these proposed rules.

The Agencies received severalcomments on this issue, none of whichfavored providing the type of detailprovided in the FTC guidance.Accordingly, the final rule does notinclude this level of detail.

Consumer Acknowledgment

Under the proposal, a covered personmust obtain from the consumer, at thetime the consumer receives thedisclosures set forth in proposed§ll.40(a), the consumer’sacknowledgment of receipt. In keepingwith section 47’s express provision foradjustments to the G–L–B Act’srequirements for sales conducted byelectronic media and the E-Sign Act, theproposal further provided that aconsumer who has received disclosuresthrough electronic media mayacknowledge receipt of the disclosureselectronically or in paper form.

Several commenters noted that itwould be difficult to comply with theconsumer acknowledgment requirementin situations other than face-to-facetransactions. In mail or telephonetransactions, for example, a coveredperson cannot control whether aconsumer completes and returns awritten acknowledgment. Thesecommenters requested that the Agenciesmodify the proposed consumeracknowledgment provision to waive thewritten acknowledgment requirement intransactions that are not face-to-face.The Agencies appreciate the difficultieswith obtaining consumeracknowledgments in non-face-to-facetransactions but note that section 47 ofthe G-L-B Act contains no waiver forconsumer acknowledgments in thosesituations. To address this problem, theAgencies have modified the consumer



17 E.g., OTS Customer Service Plan atwww.ots.treas.gov/consass/html.

acknowledgment provision to providethat, if the disclosures required under§ll.40(a) or (b) are provided inconnection with a transaction that isconducted by telephone, a coveredperson must: (1) Obtain an oralacknowledgment of receipt of thedisclosures and maintain sufficientdocumentation to show that theacknowledgment was given; and (2)make reasonable efforts to obtain awritten acknowledgment from theconsumer. The final rules also clarifythat a covered person may in allcircumstances permit a consumer toacknowledge receipt of the disclosureelectronically or in paper form. TheAgencies intend that theimplementation of this consumeracknowledgment requirement will notaffect the substantive requirements ofthe parties pursuant to contracts for thesale of insurance products and annuitiesunder applicable State law.

Advertisements and Other PromotionalMaterial for Insurance Products orAnnuities

In accordance with section 47(c)(1)(C)of the FDIA, proposed §ll.40(c)clarified that the disclosures describedin proposed §ll.40 are not requiredin advertisements of a general naturedescribing or listing the services orproducts offered by the depositoryinstitution. The final rules modify thissection slightly, and redesignate it as§ll.40(d), to clarify that the exclusionof the disclosure requirements does notapply to all advertisements andpromotional material for insuranceproducts or annuities but only to suchmaterial that is of a general nature,describing or listing the services orproducts offered by the depositoryinstitution. Further, §ll.40(d) refersonly to the disclosures described in§ll.40(a). The Agencies believe thatbecause the anti-coercion disclosure setforth in §ll.40(b) is required to bemade only in the context of anapplication for credit, it could beconfusing to the consumer if thedisclosures were required in alladvertisements and promotionalmaterial for insurance products orannuities.

Section ll.50 Where InsuranceActivities May Take Place

Section 47(d)(1) of the FDIA requiresthat the Agencies’ regulations includeprovisions to ensure that the routineacceptance of deposits is kept, to theextent practicable, physically segregatedfrom insurance product activity.Proposed §ll.50(a) set forth thisgeneral rule. It further required that, tothe extent practicable, a depository

institution identify areas whereinsurance product or annuity salesactivities occur and clearly delineateand distinguish them from the areaswhere the institution’s retail deposit-taking activities occur, in accordancewith section 47(d)(2)(A) of the FDIA.

The Agencies received severalcomments on this provision, most ofwhich asked for clearer guidance onwhat constitutes the area where depositsare routinely accepted. Several assertedthat the physical segregationrequirement should not apply to aninstitution’s ‘‘platform’’ areas andshould only apply to teller windows.‘‘Platform’’ areas are typically areas ofan institution’s premises in whichemployees other than tellers engage ina variety of activities, including theorigination of loans, the sale ofinsurance and annuity products, andoccasionally, the acceptance of deposits.The Agencies wish to clarify forpurposes of these final rules that theareas where retail deposits are routinelyaccepted from the general public aregenerally limited to traditional tellerwindows and teller lines.

One commenter also recommendedphysically segregating the area wherelending activities occur from the areawhere insurance products or annuitiessales occur. The Agencies decline tomake this change because it wouldextend significantly beyond therestrictions set forth in the statute.

Proposed §ll.50(b) implementedsection 47(d)(2)(B) of the FDIA,concerning referrals to insuranceproduct and annuity sales personnel bya person who accepts deposits from thepublic. Under that proposed section,any person who accepts deposits fromthe public in an area where suchtransactions are routinely conducted ina depository institution may refer aconsumer who seeks to purchase aninsurance product or annuity to aqualified person who sells that product.The person making the referral mayonly receive a one-time, nominal fee ofa fixed dollar amount for each referral.The fee may not depend on whether thereferral results in a transaction. TheAgencies received several commentsrequesting that the limits on referral feesapply only to tellers. The Agenciesbelieve that the person described in theregulation text—that is, a person ‘‘whoaccepts deposits from the public in anarea where such transactions areroutinely conducted’’ will typically be ateller. The Agencies also believe that adescription by function is preferablebecause it is more precise. We havetherefore retained the language asproposed.

Section ll.60 Qualification andLicensing Requirements for InsuranceSales Personnel

Section 47(d)(2)(C) of the FDIArequires that the Agencies’ regulationsprohibit any depository institution frompermitting any person to sell or offer forsale any insurance product in any partof any office of the institution, or onbehalf of the institution, unless suchperson is appropriately qualified andlicensed. Thus, proposed sectionll.60 provided that a depositoryinstitution may not permit any person tosell or offer for sale any insuranceproduct or annuity in any part of itsoffice or on its behalf, unless the personis at all times appropriately qualifiedand licensed under applicable Stateinsurance licensing standards withregard to the specific products beingsold or recommended. One commenterexpressed the opinion that thisprovision is unnecessary because eachstate’s insurance licensing agency isalready policing its licensing andqualification requirements. TheAgencies retain this provision because itis required by the statute.

Appendix—Consumer GrievanceProcess

Section 47(f) of the FDIA requires thatthe Agencies jointly establish aconsumer complaint mechanism foraddressing consumer complaintsalleging violations of these rules. Eachagency has procedures in place tohandle consumer complaints theyreceive directly.17 The Agencies willapply those procedures to complaintsinvolving these rules. The Appendix toeach agency’s final rule contains thename and address of each agency’sconsumer complaint office. Anyconsumer who believes that adepository institution or any otherperson selling, soliciting, advertising, oroffering insurance products or annuitiesto the consumer at an office of theinstitution or on behalf of the institutionhas violated the requirements of theserules may contact the consumercomplaint office listed in the Appendix.

Each agency already has entered into,or is developing, agreements with Stateinsurance commissioners regarding thesharing of consumer complaints. It isexpected that these agreements willfacilitate prompt resolution of consumercomplaints and ensure that incomingcomplaints are directed to theappropriate agency. Consumercomplaints alleging violations of theserules that raise issues under State and



local law will be shared with Stateregulators pursuant to those agreements.

Effect on Other AuthoritySection 47(g) sets forth a general

framework for determining the effect ofthese final rules on State law. Underthat framework, the Agencies’ insuranceconsumer protection rules will notapply in a State where the State has ineffect statutes, regulations, orders, orinterpretations that are inconsistentwith or contrary to the provisions of theAgencies’ rules. If the Board, FDIC andOCC jointly determine, however, thatthe protection afforded by a provision ofthese final rules is greater than theprotection provided by comparable statelaw or rulings, these final rules shallpreempt the contrary or inconsistentState law or ruling. Prior to making thisdetermination, the Board, FDIC andOCC must notify the appropriate Stateregulatory authority in writing, and theBoard, FDIC and OCC will considercomments submitted by the appropriateState regulatory authorities. If the Board,FDIC and OCC determine that aprovision of these final rules affordsgreater protection than State provisions,the Board, FDIC and OCC will send awritten preemption notice to theappropriate State insurance authoritythat the provision of these final ruleswill be applicable unless the Stateadopts legislation within three years tooverride the preemption notice.

In the preamble to the proposed rules,the Board, FDIC and OCC invitedcomment on whether it would behelpful to include a second appendixrestating these statutory requirements orwhether such a restatement would beconfusing absent a determinationregarding the applicability of specificState laws. The comments generally didnot support the inclusion in the finalrules of a preemption appendix. TheAgencies do not believe it would beuseful to include such an appendix.

Regulatory Analysis

A. Paperwork Reduction Act

The Agencies may not conduct orsponsor, and respondents are notrequired to respond to, an informationcollection unless it displays a currentlyvalid Office of Management and Budget(OMB) control number. The OMBcontrol numbers and clearanceexpiration 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 requirementsto make disclosure at two differenttimes. The respondents must prepare

and provide certain disclosures toconsumers: (1) Before the completion ofthe initial sale of an insurance productor annuity to a consumer; and (2) at thetime of application for the extension ofcredit (if insurance products orannuities are solicited, offered or sold inconnection with an extension of credit)(§§ll. 40(a) and (b)).

The Agencies received one commentthat addressed a perceived low burdenestimate stemming from thesedisclosures. The commenter, however,provided no suggestion as to anappropriate higher estimate. Othercomments regarding the informationcollection are discussed above in thepreamble discussion of §§ll.20,ll.40 (a) and (b).

OCC: The respondents are nationalbanks, District of Columbia banks, andFederal branches and agencies of foreignbanks and any other persons selling,soliciting, advertising, or offeringinsurance products or annuities at anoffice of a national bank or on behalf ofa national bank. OMB has reviewed andapproved the collections of informationcontained in the rule under controlnumber 1557–0220, in accordance withthe Paperwork Reduction Act of 1995(44 U.S.C. 3501 et seq.). There are 1,949respondents with a total annual burdenof 19,490 hours.

Board: The respondents are statemember banks and any other personsselling, soliciting, advertising, oroffering insurance products or annuitiesat an office of a state member bank oron behalf of a state member bank. Inaccordance with the PaperworkReduction Act of 1995 (44 U.S.C. 3506;5 CFR 1320 Appendix A.1), the Boardapproved the rule under the authoritydelegated to the Board by OMB. TheOMB control number is 7100–0295.There are 1,010 respondents with a totalannual burden of 46,090 hours.

FDIC: The respondents are insurednonmember banks and any otherpersons selling, soliciting, advertising,or offering insurance products orannuities at an office of an insurednonmember bank or on behalf of aninsured nonmember bank. OMB hasreviewed and approved the collectionsof information contained in the ruleunder control number 3064–0140, inaccordance with the PaperworkReduction Act of 1995 (44 U.S.C. 3501et seq.). There are 5,800 respondentswith a total annual burden of 76,667hours.

OTS: The respondents are savingsassociations and any other personsselling, soliciting, advertising, oroffering insurance products or annuitiesat an office of a savings association oron behalf of a savings association. OMB

has reviewed and approved thecollections of information contained inthe rule under control number 1550–0106, in accordance with the PaperworkReduction Act of 1995 (44 U.S.C. 3501et seq.). There are 1,097 respondentswith a total annual burden of 47,286hours.

The Agencies have a continuinginterest in the public’s opinionregarding collections of information.Members of the public may submitcomments, at any time, regarding anyaspect of these collections ofinformation. Comments may be sent to:

OCC: Jessie Dunaway, ClearanceOfficer, Office of the Comptroller of theCurrency, 250 E Street, SW, Mailstop 8–4, Washington, DC 20219.

Board: Mary M. West, Federal ReserveBoard Clearance Officer, Mailstop 97,Division of Research and Statistics,Board of Governors of the FederalReserve System, Washington, DC 20551.

FDIC: Steven F. Hanft, AssistantExecutive Secretary (RegulatoryAnalysis), Federal Deposit InsuranceCorporation, Room F–4080, 550 17thStreet, NW, Washington, DC 20429.

OTS: Dissemination Branch (1550–0106), Office of Thrift Supervision, 1700G Street, NW, Washington, DC 20552.

B. Regulatory Flexibility Act

OCC: The Regulatory Flexibility Act(5 U.S.C. 601–612) requires federalagencies either to provide a FinalRegulatory Flexibility Analysis (FRFA)with a final rule or certify that the finalrule ‘‘will not, if promulgated,’’ have asignificant economic impact on asubstantial number of small entities. Onthe basis of the information currentlyavailable, the OCC is of the opinion thatthis final rule is unlikely to have asignificant impact on a substantialnumber of small entities. Because thefinal rules implement new legislation,however, the OCC lacks historicalinformation specific to the requirementsin the final rules on which to baseestimates of cost. For this reason, theOCC has prepared the following FRFA.

Reasons, Objectives, and Legal Basis forthe Final Rule

The OCC is issuing this final rule toimplement section 47 of the FDIA. Afuller discussion of the reasons for,objectives of, and legal basis for, thefinal rule appears elsewhere in theSupplementary Information.

Description of the Small Entities toWhich the Final Rule Would Apply

The final rule would apply to anational bank or any ‘‘other person’’who, at an office of a national bank oron behalf of a national bank, sells,



18 The final rule also requires national banks tokeep the area where the bank conducts insurancetransactions physically separate from the areaswhere retail deposits are routinely accepted fromthe general public ‘‘to the extent practicable.’’ Thisrequirement, which is worded like the requirementin the statute, leaves significant discretion to eachnational bank to determine what costs, if any, thebank must incur in order to avoid customerconfusion.

solicits, advertises, or offers insuranceproducts or annuities to consumers. Thefinal rule would apply regardless of thesize of the bank or other organization forwhich a person worked.

Small national banks are generallydefined, for Regulatory Flexibility Actpurposes, as those with assets of $100million or less. 13 CFR 121.201,Division H (2000). As of January, 1999,1,949 national banks or national banksubsidiaries were engaged in insuranceactivities that would bring them withinthe scope of coverage of the final rule.We estimated in the preamble to theproposed rule that 976 of the nationalbanks that sold insurance as of January,1999, had $100 million or less in assets.We received no comment on thisestimate and believe it to be accurate.

Reporting, Recordkeeping, andCompliance Requirements of the FinalRule

The final rule requires national banks(and entities acting on behalf of nationalbanks) to amend the written materialsand Internet web sites they use inconnection with the retail sale,solicitation, advertising, or offer ofinsurance products to consumers. Thefinal rule also requires national banks(and entities acting on their behalf) toobtain from consumers acknowledgmentthat the consumer has received certaindisclosures. The substance of theserequirements is described in detailelsewhere in the SupplementaryInformation.18

The OCC believes that most nationalbanks will be able to satisfy thedisclosure provisions by including theinformation required to be disclosed intheir written materials with minimalcost. We estimate that most banksmaintain a 3 to 4 month inventory ofthose materials. This final rule will notbecome effective until April 1, 2001,which should allow ample time for mostbanks to exhaust their inventory ofprinted materials and prepare newmaterials. Nevertheless, our analysisassumes that some banks may need toamend the written materials they havein inventory during an interim periodbetween the effective date of the finalrule and the next regularly scheduledprinting of those materials because theirinventories will not be depleted duringthat time. These banks—which are

probably smaller banks that orderwritten materials infrequently and inlarge quantities to obtain reduced rateson printing—would therefore incurcosts as a result of this requirement.

There are approximately 25 nationalbanks that sell insurance products overthe Internet. Our experience has beenthat Internet banks regularly upgradetheir web sites. Adding the requireddisclosures could be done as part of aregular upgrade and would thereforepresent only minimal additional costs tothe bank.

The primary cost associated with therequirement that a bank obtain from theconsumer a written acknowledgment ofthe consumer’s receipt of thedisclosures is, in the OCC’s opinion,likely to be the cost of developing thewritten acknowledgment. Banks thatsell insurance products over the Internetshould, as part of a regularly scheduledupgrade, be able to revise their web sitesto include a series of ‘‘click throughs’’that will require affirmation from thecustomer that he or she has received therequired disclosures.

Summary of Significant Issues Raised bythe Public Comments in Response toInitial Regulatory Flexibility Analysisand Description of Steps the AgencyHas Taken To Minimize Burden

The issues raised by the commentersare described more fully elsewhere inthe Supplementary Information. Theissues that were raised by commentersabout the proposal’s impact on smallbusinesses were the following:

• The requirement that a coveredperson obtain a writtenacknowledgment of receipt ofdisclosures for a telephone transactioncould require significant effort andadditional correspondence if thecustomer does not return theacknowledgment with other paperworkfor the policy. This effort would be asignificant burden for small financialinstitutions.

• The requirement that suchinsurance as credit and mortgageinsurance be sold in an area of the officeseparate from where deposits areroutinely taken poses a particularhardship for small financial institutionswhere deposits and loan applicationsare taken at the same place.

The OCC considered how to tailor theform of disclosures andacknowledgments to the form of thesales transaction and how to make therecord of acknowledgment functional,within the statutory constraints. In thecase of telephone applications for credit,the proposed rule permitted the anti-coercion disclosure due at the time ofapplications to be given orally and

followed with written disclosuresmailed within three days. To extend theprinciple more broadly, the final ruleapplies this form of providing writtendisclosures for telephone sales to all therequired disclosures. The timing hasbeen clarified to be three business days,starting with the first business day afterthe telephone transaction. With respectto telephone sales, the final rule permitsan oral acknowledgment of thedisclosures if the covered persondocuments the acknowledgment. In thatcase, the final rule requires the coveredperson also to make reasonable efforts toobtain a written acknowledgment.

We have made an additional changeaffecting disclosures relevant to salesinitiated by telephone. The proposedrule limited the use of electronicdisclosures to those transactions takingplace entirely electronically.Commenters were concerned that theproposed rule did not permit electronicdisclosures to be used in transactionsthat may have started with a telephonecontact. To address this concern, thefinal rule provides that, if a transactioninvolves telephone contact, but theconsumer affirmatively consents totransmission of disclosures throughelectronic media instead of on paper,the covered person may provide the‘‘written’’ disclosures electronically. Ofcourse, these electronic disclosuresmust satisfy the rule’s requirement thatthe format of disclosure be one thatpermits the consumer to retain or toobtain later, such as by printing orstoring electronically. Wheredisclosures are made electronically, therule already provided that the consumercould acknowledge them electronically.Electronic acknowledgment ofelectronic disclosures applies under thefinal rule to these mixed mediatransactions, as well. The final rule alsoprovides that oral disclosures are notrequired where disclosures are providedelectronically. This exception appliesnot only to disclosures provided in thesale of insurance and annuities as in theproposed rule, but also to the anti-coercion disclosure provided withcredit applications.

In response to the concern expressedabout the difficulty of separatingfunctions in a small office, we haveclarified in the preamble to this finalrule that generally the location wheredeposits are routinely taken is the tellerwindow and teller line. This distinctionpermits a savings association to sellinsurance products and annuities fromthe ‘‘platform area,’’ where loantransactions may routinely beconducted, if the savings associationdistinguishes that area from the tellerwindow area. The regulation also



requires this segregation of functionsinto separate areas ‘‘to the extentpracticable.’’ If it is not practicable fora small institution to have separateareas, it could make other efforts tosatisfy the separation of functionsbetween deposit taking and selling ofinsurance.

We note that in addition to thesespecific responses to concernsexpressed with reference to impact onsmall entities, we have limited thescope of the rule in other ways tominimize compliance burdens. Thefinal rule:

• Only applies to retail sales,solicitations, advertisements, or offers ofinsurance products or annuities toindividuals purchasing for personal,family, or household use. The Agencieshave determined, after requestingcomment on whether to also includesmall business insurance purchases, notto broaden the coverage.

• Does not apply to subsidiaries ofdepository institutions, except wherethe subsidiaries are selling, soliciting,advertising, or offering insuranceproducts or annuities to consumers atan office of a savings association or onbehalf of a savings association.

• Clarifies the scope of the rule andthe definition of ‘‘you’’ to apply only totransactions conducted by the personthat are by, at an office of, or on behalfof, the savings association.

• Defines ‘‘office’’ narrowly toinclude only premises where retaildeposits are accepted from the public.

• Clarifies when certain disclosuresmust be provided, including that adisclosure such as ‘‘not insured by anyfederal agency’’ is not to be given whereit would be inaccurate (as in the case offederally-insured crop insurance orflood insurance).

• Only requires the anti-coerciondisclosure to be made once, instead oftwice per transaction.

• Provides flexibility for coveredpersons to use a variety of means toprovide disclosures that are readilyunderstandable and call attention to theinformation.

• Provides that, in the case oftelephone sales, the duty to obtain aconsumer’s acknowledgment ofreceiving the disclosures may besatisfied by an oral acknowledgment ofdisclosures combined with reasonableefforts to obtain a writtenacknowledgment.

• Does not require disclosures inadvertisements of a general naturedescribing or listing the services orproducts offered by the savingsassociation.

• Provides for a delayed effectivedate, requiring compliance by April 1,

2001, to permit adequate time to preparedisclosures and acknowledgmentmaterials and train staff.

Significant Alternatives to the FinalRule

Section 305 of the G-L-B Actexpressly prescribes the content of itsimplementing regulations. The OCC’sfinal rule does not depart materiallyfrom the requirements of the statute.The statute does not authorize the OCCto provide exemptions or exceptions toits requirements for small nationalbanks.

In preparing the final rule, the OCChas considered the burden on smallnational banks to the extent that it hasthe discretion to do so. As set forthabove in the discussion of significantissues raised in response to the InitialRegulatory Flexibility Analysis, theAgencies have modified the final rulesto minimize burden.

Duplicative, Overlapping, or ConflictingFederal Rules

As used in the Interagency Statement,the term ‘‘nondeposit investmentproducts,’’ includes some products,such as annuities, that are covered bysection 47 of FDIA and these proposedrules. The Interagency Statementprovides, among other things, thatinstitutions should disclose tocustomers that such products are notinsured by the FDIC or the depositoryinstitution and are subject to investmentrisk including possible loss of principal.It also provides that institutions shouldobtain acknowledgments fromcustomers verifying that they havereceived and understand thedisclosures. The Interagency Statementfurther provides that retail sales orrecommendations of nondepositinvestment products should beconducted in a location physicallydistinct from where retail deposits aretaken, that nondeposit investmentproduct sales personnel should receiveadequate training, and that referral feesshould be limited. The final rules do notappear to conflict materially with theInteragency Statement.

Board: The Regulatory Flexibility Act(5 U.S.C. 601–12) requires federalagencies either to provide a FinalRegulatory Flexibility Analysis with afinal rule or to certify that the final rulewill not have a significant economicimpact on a substantial number of smallentities. Based on available data, theBoard is unable to determine at thistime whether the final rule would havea significant impact on a substantialnumber of small entities. For thisreason, the Board has prepared the

following Final Regulatory FlexibilityAnalysis.

Reasons, Objectives, and Legal Basis forthe Final Rule

A description of the reasons why theBoard is adopting this final rule and astatement of the need for, and theobjectives of, the final rule arecontained in the supplementarymaterials provided above. The Board’sfinal rule is virtually identical to thefinal rules being adopted by the otherFederal banking agencies for thedepository institutions over which theyhave primary supervisory authority.


The final rule applies to all statemember banks and any other personwhen that person sells, solicits,advertises, or offers an insuranceproduct or annuity to an individual forpersonal, family, or household purposesat an office of a state member bank oron behalf of the bank. As of year-end1999, there were approximately 1,010state member banks. The Boardestimates that approximately 480 statemember banks have assets less than$100 million. Based on available data,the Board is unable to estimate thenumber of other persons who engage inretail insurance activities at an office ofa state member bank or on behalf of thebank, or how many of these otherpersons are small entities.

Summary of Significant Issues Raised bythe Public Comments in Response toInitial Regulatory Flexibility Analysisand Description of Steps the Agency hasTaken to Minimize Burden

The issues raised by the commentersgenerally are described more fully in thesupplementary material provided above.The issues that were raised bycommenters in connection with impacton small businesses, specifically, werethe following:


• The requirement that suchinsurance as credit and mortgageinsurance be sold in an area of the officeseparate from where deposits areroutinely taken poses a particularhardship for small financial institutions



where deposits and loan applicationsare taken at the same place.

The Board considered how to tailorthe form of disclosures andacknowledgments to the form of thesales transaction and how to make therecord of acknowledgment functional,within the statutory constraints. In thecase of telephone applications for credit,the proposed rule permitted the anti-coercion disclosure due at the time ofapplications to be given orally andfollowed with written disclosuresmailed within three days. To extend theprinciple more broadly, the final ruleapplies this form of providing writtendisclosures for telephone sales to all therequired disclosures. The timing hasbeen clarified to be three business days,starting with the first business day afterthe telephone transaction. With respectto telephone sales, the final rule permitsan oral acknowledgment of thedisclosures if the acknowledgment isdocumented. In that case, the final rulerequires also that reasonable efforts bemade to obtain a writtenacknowledgment.

We have made an additional changeaffecting disclosures relevant to salesinitiated by telephone. The proposedrule limited the use of electronicdisclosures to those transactions takingplace entirely electronically.Commenters were concerned that theproposed rule did not permit electronicdisclosures to be used in transactionsthat may have started with a telephonecontact. To address this concern, thefinal rule provides that, if a transactioninvolves telephone contact, but theconsumer affirmatively consents totransmission of disclosures throughelectronic media instead of on paper,the covered person may provide the‘‘written’’ disclosures electronically. Ofcourse, these electronic disclosuresmust satisfy the rule’s requirement thatthe format of disclosure be one thatpermits the consumer to retain or toobtain later, such as by printing orstoring electronically. Wheredisclosures are made electronically, therule already provided that the consumercould acknowledge them electronically.Electronic acknowledgment ofelectronic disclosures applies under thefinal rule to these mixed mediatransactions, as well.

In response to the concern expressedabout the difficulty of separatingfunctions in a small office, we haveclarified in the preamble to this finalrule that generally the location wheredeposits are routinely taken is the tellerwindow and teller line. This distinctionpermits a state member bank to sellinsurance products and annuities fromthe ‘‘platform area,’’ where loan

transactions may routinely beconducted, if the state member bankdistinguishes that area from the tellerwindow area. The regulation alsorequires this segregation of functionsinto separate areas ‘‘to the extentpracticable.’’ If it is not practicable fora small institution to have separateareas, it could make other efforts tosatisfy the separation of functionsbetween deposit taking and selling ofinsurance.


• Only applies to retail sales,solicitations, advertisements, or offers ofinsurance products or annuities toindividuals purchasing for personal,family, or household use. The Agencieshave determined, after requestingcomment on whether to also includesmall business insurance purchases, notto broaden the coverage.

• Does not apply to subsidiaries ofdepository institutions, except wherethe subsidiaries are selling, soliciting,advertising, or offering insuranceproducts or annuities to consumers atan office of a state member bank or onbehalf of a state member bank.

• Clarifies the scope of the rule andthe definition of ‘‘you’’ to apply only totransactions conducted by the personthat are by, at an office of, or on behalfof, the state member bank.






• Does not require disclosures inadvertisements of a general naturedescribing or listing the services or

products offered by the state memberbank.

• Provides for a delayed effectivedate, requiring compliance by April 1,2001, to permit adequate time to preparedisclosures and acknowledgmentmaterials and train staff.

Reporting, Recordingkeeping, andCompliance Requirements of the FinalRule

The final rule requires a depositoryinstitution to make required disclosuresin connection with insurance activitiesand applications for credit if insuranceis sold or solicited in connection withthe credit. Some insurance products orannuities that are covered by the finalregulation may also be subject to theInteragency Statement. The InteragencyStatement provides for consumerdisclosure, acknowledgment, separationof activities, and personnel qualificationrequirements that are similar to theprovisions of the final rule. The Boarddoes not believe that the final rulewould conflict materially with theInteragency Statement.

The final rule also prohibits certainpractices in the sale of insurance, suchas the tying of credit and insurance,making misrepresentations, anddiscriminating against the victims ofdomestic violence. These prohibitionsincorporate the existing statutoryprohibition on tying arrangements insection 106(b) of the Bank HoldingCompany Amendments of 1970 (12U.S.C. 1972). Existing laws also banmany types of discrimination. To someextent, therefore, state member banksmay already have the professional skillsneeded to comply with the requirementsof the final rule.


As explained above, the substantiveprovisions of the final rule are requiredby section 47 of the FDIA. The final ruledoes not impose any new substantiverequirements that are not mandated bythe statute. Section 47 applies to alldepository institutions, regardless ofsize, and does not provide the Agencieswith the authority to exempt a smallinstitution from the requirements of thestatute. Thus, the Board has onlylimited discretion to consideralternatives to minimize the economicimpact on small entities. As explainedabove, the Agencies have made somemodifications to the proposed rule toaccommodate existing methods ofsoliciting and selling insuranceproducts and annuities and to reduceregulatory burden.

FDIC: The Regulatory Flexibility Act(‘‘RFA’’), 5 U.S.C. 601–612, requires



19 The RFA defines the term ‘‘small entity’’ in 5U.S.C. 601 by reference to definitions published bythe Small Business Administration (SBA). The SBAhas defined a ‘‘small entity of banking purposes asa national or commercial, savings institution orcredit union with less than $100 million in assets.’’See 13 CFR 121.201.

20 The final rule also requires banks to keep thearea where the bank conducts insurancetransactions physically separate from the areaswhere retail deposits are routinely accepted fromthe general public ‘‘to the extent practicable.’’ Thisrequirement, which is worded like the requirementin the statute, leaves significant discretion to eachbank to determine what costs, if any, the bank mustincur in order to avoid customer confusion.

federal agencies either to provide aFinal Regulatory Flexibility Analysis(FRFA) with a final rule or certify thatthe final rule ‘‘will not, if promulgated,’’have a significant economic impact ona substantial number of small entities.On the basis of the informationcurrently available, the FDIC believesthat this final rule is unlikely to have asignificant impact on a substantialnumber of small entities. Because thefinal rules implement new legislation,however, the FDIC lacks historicalinformation specific to the requirementsin the final rules on which to baseestimates of cost. For this reason, theFDIC has prepared the following FRFA.

Reasons, Objectives, and Legal Basis forthe Final Rule.

The FDIC is issuing this final rule toimplement section 47 of the FDIA. Afuller discussion of the reasons for,objectives of, and legal basis for, thefinal rule appears elsewhere in theSupplementary Information.


The FDIC’s final rule applies to allFDIC-insured, state-chartered banks thatare not members of the Federal ReserveSystem (approximately 5800) and any‘‘other person’’ who, at an office of thebank or on behalf of the bank, sells,solicits, advertises, or offers insuranceproducts or annuities to consumers. Thefinal rule applies regardless of the sizeof the bank or other organization forwhich a person worked. The FDICestimated in the preamble to theproposed rule that approximately 3700of this total are ‘‘small entities’’ asdefined by the RFA 19 We received nocomment on this estimate and believe itto be accurate.

Reporting, Recordkeeping, andCompliance Requirements of the FinalRule

The final rule requires banks (andentities acting on behalf of banks) toamend the written materials andInternet web sites they use inconnection with the retail sale,solicitation, advertising, or offer ofinsurance products and annuities toconsumers. The final rule also requiresbanks (and entities acting on theirbehalf) to obtain from consumersacknowledgment that the consumer hasreceived certain disclosures. The

substance of these requirements isdescribed in detail elsewhere in theSupplementary Information. 20

The FDIC believes that most bankswill be able to satisfy the disclosureprovisions by including the informationrequired to be disclosed in their writtenmaterials with minimal cost. Weestimate that most banks maintain a 3 to4 month inventory of those materials.This final rule will not become effectiveuntil April 1, 2001, which should allowample time for most banks to use uptheir inventory of printed materials andprepare new materials. Nevertheless,our analysis assumes that some banksmay need to amend the writtenmaterials they have in inventory duringan interim period between the effectivedate of the final rule and the nextregularly scheduled printing of thosematerials because their inventories willnot be depleted during that time. Thesebanks—which are probably smallerbanks that order written materialsinfrequently and in large quantities toobtain reduced rates on printing—would therefore incur costs as a resultof this requirement.

The primary cost associated with therequirement that a bank obtain from theconsumer a written acknowledgment ofthe consumer’s receipt of thedisclosures is, in the FDIC’s opinion,likely to be the cost of developing thewritten acknowledgment. Banks thatsell insurance products over the Internetshould, as part of a regularly scheduledupgrade, be able to revise their web sitesto include a series of ‘‘click throughs’’that will require affirmation from thecustomer that he or she has received therequired disclosures.

Summary of Significant Issues Raised bythe Public Comments in Response toInitial Regulatory Flexibility Analysisand Description of Steps the AgencyHas Taken To Minimize Burden


• The requirement that a coveredperson obtain a writtenacknowledgment of receipt ofdisclosures for a telephone transaction

could require significant effort andadditional correspondence if thecustomer does not return theacknowledgment with other paperworkfor the policy. This effort would be asignificant burden for small financialinstitutions.


The FDIC seriously considered how totailor the form of disclosures andacknowledgments to the form of thesales transaction and how to make therecord of acknowledgment functional,within the statutory constraints. In thecase of telephone applications for credit,the proposed rule permitted the anti-coercion disclosure due at the time ofapplications to be given orally andfollowed with written disclosuresmailed within three days. To extend theprinciple more broadly, the final ruleapplies this form of providing writtendisclosures for telephone sales to all therequired disclosures. The timing hasbeen clarified to be three business days,starting with the first business day afterthe telephone transaction. With respectto telephone sales, the final rule permitsan oral acknowledgment of thedisclosures if the covered persondocuments the acknowledgment. In thatcase, the final rule requires the coveredperson also to make reasonable efforts toobtain a written acknowledgment.

We have made an additional changeaffecting disclosures relevant to salesinitiated by telephone. The proposedrule limited the use of electronicdisclosures to those transactions takingplace entirely electronically.Commenters were concerned that theproposed rule did not permit electronicdisclosures to be used in transactionsthat may have started with a telephonecontact. To address this concern, thefinal rule provides that, if a transactioninvolves telephone contact, but theconsumer affirmatively consents totransmission of disclosures throughelectronic media instead of on paper,the covered person may provide the‘‘written’’ disclosures electronically. Ofcourse, these electronic disclosuresmust satisfy the rule’s requirement thatthe format of disclosure be one thatpermits the consumer to retain or toobtain later, such as by printing orstoring electronically. Wheredisclosures are made electronically, therule already provided that the consumercould acknowledge them electronically.Electronic acknowledgment of



electronic disclosures applies under thefinal rule to these mixed mediatransactions, as well. The final rule alsoprovides that oral disclosures are notrequired where disclosures are providedelectronically. This exception appliesnot only to disclosures provided in thesale of insurance and annuities as in theproposed rule, but also to the anti-coercion disclosure provided withcredit applications.

In response to the concern expressedabout the difficulty of separatingfunctions in a small office, we haveclarified in the preamble to this finalrule that generally the location wheredeposits are routinely taken is the tellerwindow and teller line. This distinctionpermits a depository institution to sellinsurance products and annuities fromthe ‘‘platform area,’’ where loantransactions may routinely beconducted, if the savings associationdistinguishes that area from the tellerwindow area. The regulation alsorequires this segregation of functionsinto separate areas ‘‘to the extentpracticable.’’ If it is not practicable fora small institution to have separateareas, it could make other efforts tosatisfy the separation of functionsbetween deposit taking and selling ofinsurance.


• Only applies to retail sales,solicitations, advertisements, or offers ofinsurance products or annuities toindividuals purchasing for personal,family, or household use. The Agencieshave determined, after requestingcomment on whether to also includesmall business purchase, not to broadenthe coverage.

• Does not apply to subsidiaries ofdepository institutions, except wherethe subsidiaries are selling, soliciting,advertising, or offering insuranceproducts or annuities to consumers atan office of a bank or on behalf of abank. The FDIC is adopting thisapproach even though, under section47(a)(2) of FDIA, the FDIC could applythe requirements to subsidiaries if itdetermined that doing so was necessaryto ensure the consumer protectionsprovided by the statute.

• Clarifies the scope of the rule andthe definition of ‘‘you’’ to apply only totransactions conducted by the personthat are by, at an office of, or on behalfof, the bank.






• Does not require disclosures inadvertisements of a general naturedescribing or listing the services orproducts offered by the bank.



Section 305 of the G–L–B Actexpressly prescribes the content of itsimplementing regulations. The FDIC’sfinal rule does not depart materiallyfrom the requirements of the statute.The statute does not authorize the FDICto provide exemptions or exceptions toits requirements for small banks.

In preparing the final rule, the FDIChas considered the burden on smallbanks to the extent that it has thediscretion to do so. As set forth abovein the discussion of significant issuesraised in response to the InitialRegulatory Flexibility Analysis, theAgencies have modified the final rulesto minimize burden.

Duplicative, Overlapping, or ConflictingFederal Rules

As used in the Interagency Statement,the term ‘‘nondeposit investmentproducts,’’ includes some products,such as annuities, that are covered bysection 47 of FDIA and these proposedrules. The Interagency Statementprovides, among other things, thatinstitutions should disclose tocustomers that such products are notinsured by the FDIC or the depositoryinstitution and are subject to investment

risk including possible loss of principal.It also provides that institutions shouldobtain acknowledgments fromcustomers verifying that they havereceived and understand thedisclosures. The Interagency Statementfurther provides that retail sales orrecommendations of nondepositinvestment products should beconducted in a location physicallydistinct from where retail deposits aretaken, that nondeposit investmentproduct sales personnel should receiveadequate training, and that referral feesshould be limited. The final rules do notappear to conflict materially with theInteragency Statement.

OTS: The Regulatory Flexibility Act(5 U.S.C. 601–612) requires federalagencies to prepare a final regulatoryflexibility analysis (RFA) with a finalrule, unless the agency certifies that therule will not have a significanteconomic impact on a substantialnumber of small entities. OTS believesthat this rule will not have a significanteconomic impact on a substantialnumber of small thrifts or other smallentities because the burden imposed onsmall entities stems in large part fromthe G-L-B Act rather than from the finalrule. This final rule restates and clarifiesthe statutory requirements. Theseclarifications should reduce the burdenof complying with the G-L-B Actprovisions. OTS has revised theproposed rule to reduce the regulatoryburden on financial institutions of allsizes, as discussed below. However,OTS has prepared the following finalRFA, because the G-L-B Act createsrequirements that, in part, are new tothe OTS, the thrift industry, and others,and because OTS is uncertain of theeconomic impact of compliance withthe new requirements.

1. Statement of Need and ObjectivesA description of the reasons why OTS

is adopting this final rule and astatement of the objectives of, and legalbasis for, the final rule, are contained inthe supplementary materials providedabove.

2. Small Entities to Which the FinalRule Would Apply

The final rule would apply to asavings association or any ‘‘otherperson’’ who, at an office of a savingsassociation or on behalf of a savingsassociation, sells, solicits, advertises, oroffers insurance products or annuities toconsumers. The final rule would applyregardless of the size of the savingsassociation or other organization forwhich a person worked.

Small savings associations aregenerally defined, for Regulatory



Flexibility Act purposes, as those withassets of $100 million or less. 13 CFR121.201, Division H (2000). As of thepublication of the proposed rule, OTScalculated that of the approximately1,097 savings associations, a maximumof 482 were small savings associations.Currently, OTS calculates that of theapproximately 1,091 savingsassociations, a maximum of 476 aresmall savings associations. OTSestimates that all of the small savingsassociations sell, solicit, advertise, oroffer insurance products or annuities toconsumers.

OTS does not collect data on howmany ‘‘covered persons’’ that are notsavings associations sell, solicit,advertise, or offer insurance products orannuities to consumers at an office of asavings association or on behalf of asavings association, or on how many ofthem are small entities. The initial RFApublished in the proposed rule soughtinformation about impact on entitiesother than savings associations affectedby the rule to permit OTS to betteranalyze the effect. Although OTSreceived comments on the proposedrule from insurance industryrepresentatives, who might have datawith respect to their members, none ofthem provided information on thenumber or size of entities other thansavings associations affected by the rule.As a result, OTS is unable to determinethe number or size of entities other thansavings associations affected by thisfinal rule.

3. Significant Issues Raised in Responseto Initial Regulatory Flexibility Analysisand Changes Made To Minimize Burden




OTS seriously considered how totailor the form of disclosures andacknowledgments to the form of thesales transaction and how to make therecord of acknowledgment functional,within the statutory constraints. In thecase of telephone applications for credit,the proposed rule permitted thedisclosure on anti-tying due at the timeof applications to be given orally andfollowed with written disclosures bymail, provided that the writtendisclosures were mailed within threedays. To extend the principle morebroadly, the final rule applies this formof providing written disclosures fortelephone sales to all the requireddisclosures. The timing has beenclarified to be three business days,starting with the first business day afterthe telephone transaction. With respectto telephone sales, the final rule permitsan oral acknowledgment of thedisclosures if the covered persondocuments the acknowledgment. In thatcase, the final rule requires the coveredperson to make reasonable efforts toobtain a written acknowledgment, aswell.

We have made an additional changeaffecting disclosures relevant to salesinitiated by telephone. In response toconcerns expressed about the proposedrule’s limitation of using electronicdisclosures to those transactions takingplace entirely electronically, and notpermitting them to be used intransactions that may have started witha telephone contact, we have removedthat limitation. Thus, if a transactioninvolves telephone contact, but theconsumer affirmatively consents totransmission of disclosures throughelectronic media instead of on paper,the covered person may provide the‘‘written’’ disclosures electronically. Ofcourse, these electronic disclosuresmust satisfy the rule’s requirement thatthe format of disclosure be one thatpermits the consumer to retain or toobtain later, such as by printing orstoring electronically. Wheredisclosures are made electronically, therule already provided that the consumercould acknowledge them electronically.Electronic acknowledgment ofelectronic disclosures applies under thefinal rule to these mixed mediatransactions, as well. The final rule alsoprovides that oral disclosures are notrequired where disclosures are providedelectronically. This exception appliesnot only to disclosures provided in thesale of insurance and annuities as in theproposed rule, but also to the anti-coercion disclosure provided withcredit applications.

In response to the concern expressedabout the difficulty of separating

functions in a small office, we haveclarified in the preamble to this finalrule that generally the location wheredeposits are routinely taken is the tellerwindow and teller line. This distinctionpermits a savings association to sellinsurance products and annuities fromthe ‘‘platform area’’ where loantransactions may routinely beconducted, if the savings associationdistinguishes that area from the tellerwindow area. The regulation alsorequires this segregation of functionsinto separate areas ‘‘to the extentpracticable.’’ If it is not practicable fora small institution to have separateareas, it could make other efforts tosatisfy the separation of functionsbetween deposit taking and selling ofinsurance.


• Only applies to retail sales,solicitations, advertisements, or offers ofinsurance products or annuities toindividuals purchasing for personal,family, or household use. The Agencieshave determined, after requestingcomment on whether to also includesmall business purchase, not to broadenthe coverage.

• Does not apply to subsidiaries ofdepository institutions, except wherethe subsidiaries are selling, soliciting,advertising, or offering insuranceproducts or annuities to consumers atan office of a savings association or onbehalf of a savings association. OTS isadopting this approach even though,under section 47(a)(2) of FDIA, OTScould apply the requirements tosubsidiaries if it determined that doingso was necessary to ensure theconsumer protections provided by thestatute.

• Clarifies the scope of the rule andthe definition of ‘‘you’’ to apply only totransactions conducted by the personthat are by, at an office of, or on behalfof, the savings association.








• Does not require disclosures inadvertisements of a general naturedescribing or listing the services orproducts offered by the savingsassociation.


4. Projected Reporting, Recordkeepingand Other Compliance Requirements

While the scope of the final ruleimplementing section 47 of FDIA isunique, there is some overlap withcertain prior guidance and Federalstatutes and rules. As used in theInteragency Statement on Retail Sales ofNondeposit Investment Products(February 15, 1994) (‘‘InteragencyStatement’’), the term ‘‘nondepositinvestment products’’ includes someproducts, such as annuities, that arecovered by section 47 of FDIA and thisfinal rule. The Interagency Statementprovides, among other things, thatinstitutions should disclose tocustomers that such products are notinsured by the FDIC or the depositoryinstitution and are subject to investmentrisk including possible loss of principal.It also provides that institutions shouldobtain acknowledgments fromcustomers verifying that they havereceived and understand thedisclosures. The Interagency Statementfurther provides that retail sales orrecommendations of nondepositinvestment products should beconducted in a location physicallydistinct from where retail deposits aretaken, that nondeposit investmentproduct sales personnel should receiveadequate training, and that referral feesshould be limited.

Other federal authorities that overlapwith the final rule include the statutoryprohibition on tying arrangements insection 5(q) of the Home Owners’ LoanAct (12 U.S.C. 1464(q)), and OTS’sregulation prohibiting advertising that isinaccurate or makes misrepresentations(12 CFR 563.27). State consumerprotection rules also may apply to sales,solicitations, advertisements, and offers

of insurance products or annuities. Thefinal rule does not appear to conflictmaterially with the InteragencyStatement or these other authorities.

As a result of the overlap of the rule’srequirements with the provisions of theInteragency Statement and other federalauthorities discussed above, manysavings associations and other personsmay already be partly or fully preparedto meet the requirements of the finalrule. Persons selling, soliciting,advertising, or offering insuranceproducts or annuities may have to reviseprinted materials and modify Internetweb sites. Compliance with otherrequirements, such as the prohibition ondomestic violence discrimination, willcall for similar types of resources as areused to comply with other existingnondiscrimination statutes such as theEqual Credit Opportunity Act, 15 U.S.C.1691–1691f, and the Fair Housing Act,42 U.S.C. 3601 et seq. Covered personsmay need to provide further training oradditional personnel, includingpersonnel skilled in clerical, computer,compliance, and legal matters. Thedelayed effective date of the final ruleshould provide adequate time for theaffected parties to develop revisedmaterials and to modify web sites, asnecessary.

5. Significant AlternativesThe requirements in the final rule

parallel those in section 47 of FDIA. Thefinal rule clarifies the statutoryrequirements in some areas and restatesthe requirements in a moreunderstandable manner in other areas.The final rule does not impose anyrequirements that differ substantiallyfrom the statute. Since the requirementsare set by statute, OTS has only limiteddiscretion to consider alternatives. Tothe extent that OTS does havediscretion, it has exercised thatdiscretion to minimize the burden asdiscussed in section 3 above.

Congress has decided that ‘‘anydepository institution’’ and ‘‘anyperson’’ that is engaged in retail sales,solicitations, advertising, or offers ofinsurance products (or annuities), at theoffice or on behalf of a depositoryinstitution, must comply with thesedisclosure requirements. The G-L-B Actdoes not expressly authorize OTS toexempt small savings associations,affiliates, or persons from theserequirements. OTS does not interpretthe statute to permit such an exemption.

C. Executive Order 12866OCC: The OCC has determined that

this final rule does not constitute a‘‘significant regulatory action’’ for thepurposes of Executive Order 12866.

While the OCC’s cost estimates arenecessarily imprecise because therequirements included in the final ruleresult from new legislation, under themost conservative cost scenarios thatthe OCC can develop on the basis ofavailable information, the impact of thefinal rule falls well short of thethresholds established by the ExecutiveOrder.

OTS: OTS has determined that thisfinal rule does not constitute a‘‘significant regulatory action’’ for thepurposes of Executive Order 12866. Therule follows closely the requirements ofsection 305 of the G–L–B Act. Since theG–L–B Act establishes the minimumrequirements for this activity, OTS haslittle discretion to propose regulatoryoptions that might significantly reducecosts or other burdens. OTS believesthat the impact of the rule would notmeet the thresholds of the ExecutiveOrder, and consequently OMB review isnot necessary.

D. Unfunded Mandates Act of 1995Section 202 of the Unfunded

Mandates Reform Act of 1995, 2 U.S.C.1532 (Unfunded Mandates Act),requires that an agency prepare abudgetary impact statement beforepromulgating any rule likely to result ina Federal mandate that may result in theexpenditure by State, local, and tribalgovernments, in the aggregate, or by theprivate sector, of $100 million or morein any one year. If a budgetary impactstatement is required, section 205 of theUnfunded Mandates Act also requiresthe agency to identify and consider areasonable number of regulatoryalternatives before promulgating therule. However, an agency is not requiredto assess the effects of its regulatoryactions on the private sector to theextent that such regulations incorporaterequirements specifically set forth inlaw. 2 U.S.C. 1531. Section 305(e) of theG–L–B Act imposes the requirementscontained in the final rules concerningdomestic violence even without theissuance of regulations. Sections 305(a)–(d) of the G–L–B Act direct the Agenciesto issue regulations implementingdisclosure requirements andrequirements to segregate the areas inwhich insurance activities areconducted from the areas wheredeposits are routinely accepted. Theburden the rules place on the privatesector is almost entirely attributable tothe G–L–B Act. Therefore, the OCC andOTS have determined that the finalrules will not result in expenditures byState, local, and tribal governments, inthe aggregate, or by the private sector, of$100 million or more in any one year.Accordingly, the OCC and OTS have not



prepared a budgetary impact statementor specifically addressed the regulatoryalternatives considered.

E. Executive Order 13132—FederalismOCC: Executive Order 13132 imposes

certain requirements when an agencyissues a regulation that has federalismimplications or that preempts State law.Under the Executive Order, a regulationhas federalism implications if it hassubstantial direct effects on the States,on the relationship between the nationalgovernment and the States, or on thedistribution of power andresponsibilities among the variouslevels of government. In general, theExecutive Order requires the agency toadhere strictly to federal constitutionalprinciples in developing rules that havefederalism implications; providesguidance about an agency’sinterpretation of statutes that authorizeregulations that preempt State law; andrequires consultation with State officialsbefore the agency issues a final rule thathas federalism implications or thatpreempts State law.

This final rule satisfies therequirements of the Executive Order. Ifan agency promulgates a regulation thathas federalism implications andpreempts State law, the Executive Orderimposes upon the agency requirementsto consult with State and local officials;to publish a ‘‘federalism summaryimpact statement,’’ and to make writtencomments from State and local officialsavailable to the Director of the Office ofManagement and Budget (OMB).

In the OCC’s opinion, it is not clearthat Executive Order 13132 applies tothe OCC’s rules implementing section305 of the G–L–B Act because thestatute itself directs most of thesignificant policy choices that theAgencies have made—that is, the statuteexpressly prescribes both thesubstantive content and the preemptiveeffect of the rules. Moreover, the impactof the language of the expresspreemption provision in section 305 isto preserve State laws, subject to certainexceptions, rather than to preemptthem. Under that provision, theinsurance customer protections in theAgencies’ rules generally will not havepreemptive effect in a State where theState has in effect statutes, rules,regulations, orders, or interpretationsthat are inconsistent with or contrary tothe regulations prescribed by theAgencies unless a provision in theAgencies’ rules affords greaterprotection to customers than is affordedby a comparable State law. Section 305prescribes a process for the Agencies touse in order to determine jointlywhether a provision in the Agencies’

regulations satisfies this ‘‘greaterprotection’’ standard. If the Agenciesmake that joint determination, andprovide written notice to the affectedState that its law is preempted, then thatprovision of State law will bepreempted unless, within 3 years afterthe date that the Agencies issue thewritten notice, the State adoptslegislation that overrides thepreemption.

As we indicated in theSupplementary Information thataccompanied the proposal, thefederalism implications and thepreemptive effect of the OCC’s rulesimplementing section 305 depend, inthe first instance, on how the Agencies’final rules compare with a particularState’s laws and, ultimately, on whethera State adopts the ‘‘opt-out’’ legislationthat section 305 permits.

Separately, section 305 of the G–L–BAct requires the Agencies to consultwith State insurance regulators beforeissuing final implementing regulations.As described elsewhere in theSupplementary Information, the OCCand the other Agencies have consultedwith the NAIC in preparing this finalrule. The Agencies have provided theOMB a copy of the NAIC’s writtencomments on the proposed rule.

OTS: Executive Order 13132 imposescertain requirements on an agency whenformulating and implementing policiesthat will have substantial direct effectson the States, on the relationshipbetween the national government andthe States, or on the distribution ofpower and responsibilities among thevarious levels of government, or takingactions that preempt state law. Section47(g) of FDIA, 12 U.S.C. 1831x, as addedby section 305 of the G–L–B Act,provides that the insurance consumerprotections in the Agencies’ rulesgenerally will not apply to retail salespractices, solicitations, advertising, oroffers of any insurance product orannuity to a consumer by any savingsassociation or any person that isengaged in such activities at an office ofthe savings association or on behalf ofthe savings association in a State wherethe State has in effect statutes,regulations, orders, or interpretationsthat are inconsistent with or contrary tothe provisions of the federal regulations.However, if the federal regulationsafford greater protection for insuranceconsumers than a comparable State law,rule, regulation, order, or interpretation,the State provision may be preemptedby the Board, the OCC, and the FDIC inaccordance with certain specifiedprocedures described in greater detail inthe OCC’s statement on Executive Order13132 above.

OTS has determined that applicationof these statutorily-mandated provisionswill have federalism implications andmay result in the preemption of statelaw. Section 47(a) of FDIA obligatesOTS to issue this regulation toimplement section 305 of the G–L–BAct, which includes section 47(g) ofFDIA. Consistent with section 47(a)(3)of FDIA and section 6(c) of ExecutiveOrder 13132, OTS and the otherAgencies have consulted with theNational Association of InsuranceCommissioners (NAIC), as indicated inthe Supplementary Information above.As noted above, the Agenciesconsidered and responded to the NAIC’scomments. The Agencies also providedan advance copy of the final rule to theNAIC and OTS has provided an advancecopy of the final rule to the Conferenceof State Bank Supervisors. The Agenciesexpect to consult with the NAIC andState insurance regulators as decisionsare made concerning preemption inparticular states.

Solicitation of Comments on Use of‘‘Plain Language’’

Section 722 of the G–L–B Act requiresthat the Federal banking Agencies use‘‘plain language’’ in all proposed andfinal rules published after January 1,2000. We invited your comments onhow to make the proposed rules easierto understand. We received nocomments on this general topic, only onways to clarify the meaning of suchterms as ‘‘covered person.’’ We didmake revisions in response to thosespecific types of comments, asdiscussed above.

List of Subjects

12 CFR Part 14

Banks, banking, Insurance consumerprotection, National banks.

12 CFR Part 208

Accounting, Agriculture, Banks,banking, Confidential businessinformation, Crime, Currency, FederalReserve System, Insurance consumerprotection, Mortgages, Reporting andrecordkeeping requirements, Securities.

12 CFR Part 343

Banks, banking, consumer protection,Insurance, Reporting and recordkeepingrequirements.

12 CFR Part 536

Consumer protection, Insurance,Reporting and recordkeepingrequirements, Savings associations.



Office of the Comptroller of theCurrency

12 CFR Chapter I

Authority and Issuance

For the reasons set out in the jointpreamble, the OCC amends chapter I oftitle 12 of the Code of FederalRegulations by adding a new part 14 toread as follows:

PART 14—CONSUMER PROTECTIONIN 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 salespersonnel.

Appendix A to Part 14—Consumer GrievanceProcess

Authority: 12 U.S.C. 1 et seq., 24(Seventh),92, 93a, 1818, and 1831x.

§ 14.10 Purpose and scope.(a) General rule. This part establishes

consumer protections in connectionwith retail sales practices, solicitations,advertising, or offers of any insuranceproduct 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 bankor on behalf of the bank.

(b) Application to operatingsubsidiaries. For purposes of § 5.34(e)(3)of this chapter, an operating subsidiaryis subject to this part only to the extentthat it sells, solicits, advertises, or offersinsurance products or annuities at anoffice of a bank or on behalf of a bank.

§ 14.20 Definitions.As used in this part:(a) Affiliate means a company that

controls, is controlled by, or is undercommon control with another company.

(b) Bank means a national bank or aFederal branch, or agency of a foreignbank as defined in section 1 of theInternational Banking Act of 1978 (12U.S.C. 3101, et seq.)

(c) Company means any corporation,partnership, business trust, associationor similar organization, or any othertrust (unless by its terms the trust mustterminate within twenty-five years ornot later than twenty-one years and tenmonths after the death of individualsliving on the effective date of the trust).It does not include any corporation themajority of the shares of which areowned by the United States or by anyState, or a qualified family partnership,as defined in section 2(o)(10) of the

Bank Holding Company Act of 1956, asamended (12 U.S.C. 1841(o)(10)).

(d) Consumer means an individualwho purchases, applies to purchase, oris solicited to purchase from a coveredperson insurance products or annuitiesprimarily for personal, family, orhousehold purposes.

(e) Control of a company has the samemeaning as in section 3(w)(5) of theFederal Deposit Insurance Act (12U.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, oroffers an insurance product or annuityto a consumer at an office of the bankor on behalf of a bank.

(2) For purposes of this definition,activities on behalf of a bank includeactivities where a person, whether at anoffice of the bank or at another locationsells, solicits, advertises, or offers aninsurance product or annuity and atleast one of the following applies:

(i) The person represents to aconsumer that the sale, solicitation,advertisement, or offer of any insuranceproduct or annuity is by or on behalf ofthe bank;

(ii) The bank refers a consumer to aseller of insurance products or annuitiesand the bank has a contractualarrangement to receive commissions orfees derived from a sale of an insuranceproduct or annuity resulting from thatreferral; or

(iii) Documents evidencing the sale,solicitation, advertising, or offer of aninsurance product or annuity identify orrefer to the bank.

(g) Domestic violence means theoccurrence of one or more of thefollowing acts by a current or formerfamily member, household member,intimate partner, or caretaker:

(1) Attempting to cause or causing orthreatening another person physicalharm, severe emotional distress,psychological trauma, rape, or sexualassault;

(2) Engaging in a course of conduct orrepeatedly committing acts towardanother person, including following theperson without proper authority, undercircumstances that place the person inreasonable fear of bodily injury orphysical harm;

(3) Subjecting another person to falseimprisonment; or

(4) Attempting to cause or causingdamage to property so as to intimidateor attempt to control the behavior ofanother person.

(h) Electronic media includes anymeans for transmitting messageselectronically between a covered personand a consumer in a format that allows

visual text to be displayed onequipment, for example, a personalcomputer monitor.

(i) Office means the premises of abank where retail deposits are acceptedfrom the public.

(j) Subsidiary has the same meaningas in section 3(w)(4) of the FederalDeposit Insurance Act (12 U.S.C.1813(w)(4)).

§ 14.30 Prohibited practices.(a) Anticoercion and antitying rules. A

covered person may not engage in anypractice that would lead a consumer tobelieve that an extension of credit, inviolation of section 106(b) of the BankHolding Company Act Amendments of1970 (12 U.S.C. 1972), is conditionalupon either:

(1) The purchase of an insuranceproduct or annuity from the bank or anyof its affiliates; or

(2) An agreement by the consumer notto obtain, or a prohibition on theconsumer from obtaining, an insuranceproduct or annuity from an unaffiliatedentity.

(b) Prohibition on misrepresentationsgenerally. A covered person may notengage in any practice or use anyadvertisement at any office of, or onbehalf of, the bank or a subsidiary of thebank that could mislead any person orotherwise cause a reasonable person toreach an erroneous belief with respectto:

(1) The fact that an insurance productor annuity sold or offered for sale by acovered person or any subsidiary of thebank is not backed by the Federalgovernment or the bank, or the fact thatthe insurance product or annuity is notinsured by the Federal DepositInsurance Corporation;

(2) In the case of an insurance productor annuity that involves investment risk,the fact that there is an investment risk,including the potential that principalmay be lost and that the product maydecline in value; or

(3) In the case of a bank or subsidiaryof the bank at which insurance productsor annuities are sold or offered for sale,the fact that:

(i) The approval of an extension ofcredit to a consumer by the bank orsubsidiary may not be conditioned onthe purchase of an insurance product orannuity by the consumer from the bankor a subsidiary of the bank; and

(ii) The consumer is free to purchasethe insurance product or annuity fromanother source.

(c) Prohibition on domestic violencediscrimination. A covered person maynot sell or offer for sale, as principal,agent, or broker, any life or healthinsurance product if the status of the



applicant or insured as a victim ofdomestic violence or as a provider ofservices to victims of domestic violenceis considered as a criterion in anydecision with regard to insuranceunderwriting, pricing, renewal, or scopeof coverage of such product, or withregard to the payment of insuranceclaims on such product, except asrequired or expressly permitted underState law.

§ 14.40 What a covered person mustdisclose.

(a) Insurance disclosures. Inconnection with the initial purchase ofan insurance product or annuity by aconsumer from a covered person, acovered person must disclose to theconsumer, except to the extent thedisclosure would not be accurate, that:

(1) The insurance product or annuityis not a deposit or other obligation of,or guaranteed by, the bank or an affiliateof the bank;

(2) The insurance product or annuityis not insured by the Federal DepositInsurance Corporation (FDIC) or anyother agency of the United States, thebank, or (if applicable) an affiliate of thebank; and

(3) In the case of an insurance productor annuity that involves an investmentrisk, there is investment risk associatedwith the product, including the possibleloss of value.

(b) Credit disclosure. In the case of anapplication for credit in connectionwith which an insurance product orannuity is solicited, offered, or sold, acovered person must disclose that thebank may not condition an extension ofcredit on either:

(1) The consumer’s purchase of aninsurance product or annuity from thebank or any of its affiliates; or

(2) The consumer’s agreement not toobtain, or a prohibition on the consumerfrom obtaining, an insurance product orannuity from an unaffiliated entity.

(c) Timing and method of disclosures.(1) In general. The disclosures requiredby paragraph (a) of this section must beprovided orally and in writing beforethe completion of the initial sale of aninsurance product or annuity to aconsumer. The disclosure required byparagraph (b) of this section must bemade orally and in writing at the timethe consumer applies for an extension ofcredit in connection with which aninsurance product or annuity issolicited, offered, or sold.

(2) Exception for transactions by mail.If a sale of an insurance product orannuity is conducted by mail, a coveredperson is not required to make the oraldisclosures required by paragraph (a) ofthis section. If a covered person takes an

application for credit by mail, thecovered person is not required to makethe oral disclosure required byparagraph (b).

(3) Exception for transactions bytelephone. If a sale of an insuranceproduct or annuity is conducted bytelephone, a covered person mayprovide the written disclosures requiredby paragraph (a) of this section by mailwithin 3 business days beginning on thefirst business day after the sale,excluding Sundays and the legal publicholidays specified in 5 U.S.C. 6103(a). Ifa covered person takes an applicationfor credit by telephone, the coveredperson may provide the writtendisclosure required by paragraph (b) ofthis section by mail, provided thecovered person mails it to the consumerwithin three days beginning the firstbusiness day after the application istaken, excluding Sundays and the legalpublic holidays specified in 5 U.S.C.6103(a).

(4) Electronic form of disclosures. (i)Subject to the requirements of section101(c) of the Electronic Signatures inGlobal and National Commerce Act (12U.S.C. 7001(c)), a covered person mayprovide the written disclosures requiredby paragraph (a) and (b) of this sectionthrough electronic media instead of onpaper, if the consumer affirmativelyconsents to receiving the disclosureselectronically and if the disclosures areprovided in a format that the consumermay retain or obtain later, for example,by printing or storing electronically(such as by downloading).

(ii) Any disclosures required byparagraphs (a) or (b) of this section thatare provided by electronic media are notrequired to be provided orally.

(5) Disclosures must be readilyunderstandable. The disclosuresprovided shall be conspicuous, simple,direct, readily understandable, anddesigned to call attention to the natureand significance of the informationprovided. For instance, a coveredperson may use the followingdisclosures in visual media, such astelevision broadcasting, ATM screens,billboards, signs, posters and writtenadvertisements and promotionalmaterials, as appropriate and consistentwith paragraphs (a) and (b) of thissection:• 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 thedisclosures required by paragraphs (a)

and (b) of this section in a meaningfulform. Examples of the types of methodsthat could call attention to the natureand significance of the informationprovided include:

(A) A plain-language heading to callattention to the disclosures;

(B) A typeface and type size that areeasy to read;

(C) Wide margins and ample linespacing;

(D) Boldface or italics for key words;and

(E) Distinctive type style, and graphicdevices, such as shading or sidebars,when the disclosures are combined withother information.

(ii) A covered person has notprovided the disclosures in ameaningful form if the covered personmerely states to the consumer that therequired disclosures are available inprinted material, but does not providethe printed material when required anddoes not orally disclose the informationto the consumer when required.

(iii) With respect to those disclosuresmade through electronic media forwhich paper or oral disclosures are notrequired, the disclosures are notmeaningfully provided if the consumermay bypass the visual text of thedisclosures before purchasing aninsurance product or annuity.

(7) Consumer acknowledgment. Acovered person must obtain from theconsumer, at the time a consumerreceives the disclosures required underparagraphs (a) or (b) of this section, orat the time of the initial purchase by theconsumer of an insurance product orannuity, a written acknowledgment bythe consumer that the consumerreceived the disclosures. A coveredperson may permit a consumer toacknowledge receipt of the disclosureselectronically or in paper form. If thedisclosures required under paragraphs(a) or (b) of this section are provided inconnection with a transaction that isconducted by telephone, a coveredperson must:

(i) Obtain an oral acknowledgment ofreceipt of the disclosures and maintainsufficient documentation to show thatthe acknowledgment was given; and

(ii) Make reasonable efforts to obtaina written acknowledgment from theconsumer.

(d) Advertisements and otherpromotional material for insuranceproducts or annuities. The disclosuresdescribed in paragraph (a) of thissection are required in advertisementsand promotional material for insuranceproducts or annuities unless theadvertisements and promotionalmaterials are of a general nature



describing or listing the services orproducts offered by the bank.

§ 14.50 Where insurance activities maytake place.

(a) General rule. A bank must, to theextent practicable, keep the area wherethe bank conducts transactionsinvolving insurance products orannuities physically segregated fromareas where retail deposits are routinelyaccepted from the general public,identify the areas where insuranceproduct or annuity sales activitiesoccur, and clearly delineate anddistinguish those areas from the areaswhere the bank’s retail deposit-takingactivities occur.

(b) Referrals. Any person who acceptsdeposits from the public in an areawhere such transactions are routinelyconducted in the bank may refer aconsumer who seeks to purchase aninsurance product or annuity to aqualified person who sells that productonly if the person making the referralreceives no more than a one-time,nominal fee of a fixed dollar amount foreach referral that does not depend onwhether the referral results in atransaction.

§ 14.60 Qualification and licensingrequirements for insurance salespersonnel.

A bank may not permit any person tosell or offer for sale any insuranceproduct or annuity in any part of itsoffice or on its behalf, unless the personis at all times appropriately qualifiedand licensed under applicable Stateinsurance licensing standards withregard to the specific products beingsold or recommended.

Appendix A to Part 14—ConsumerGrievance Process

Any consumer who believes that any bankor any other person selling, soliciting,advertising, or offering insurance products orannuities to the consumer at an office of thebank or on behalf of the bank has violated therequirements of this part should contact theCustomer Assistance Group, Office of theComptroller 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 FederalReserve System

12 CFR Chapter II


For the reasons set out in the jointpreamble, the Board amends part 208,chapter II, title 12 of the Code of FederalRegulations as follows:

PART 208—MEMBERSHIP OF STATEBANKING INSTITUTIONS IN THEFEDERAL RESERVE SYSTEM(REGULATION H)

1. The authority citation for part 208is 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 assubpart I.

3. A new subpart H is added to readas follows:

Subpart H—Consumer Protection inSales 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



Appendix A to Subpart H—ConsumerGrievance Process

§ 208.81 Purpose and scope.This subpart establishes consumer

protections in connection with retailsales practices, solicitations,advertising, or offers of any insuranceproduct or annuity to a consumer by:

(a) Any state member bank; or(b) Any other person that is engaged


§ 208.82 Definitions for purposes of thissubpart.

As used in this subpart:(a) Affiliate means a company that


(b) Bank means a state member bank.(c) Company means any corporation,

partnership, business trust, associationor similar organization, or any othertrust (unless by its terms the trust mustterminate within twenty-five years ornot later than twenty-one years and tenmonths after the death of individualsliving on the effective date of the trust).It does not include any corporation themajority of the shares of which areowned by the United States or by any

State, or a qualified family partnership,as defined in section 2(o)(10) of theBank Holding Company Act of 1956, asamended (12 U.S.C. 1841(o)(10)).

(d) Consumer means an individualwho purchases, applies to purchase, oris solicited to purchase from youinsurance products or annuitiesprimarily for personal, family, orhousehold purposes.


(f) Domestic violence means theoccurrence of one or more of thefollowing acts by a current or formerfamily member, household member,intimate partner, or caretaker:





(g) Electronic media includes anymeans for transmitting messageselectronically between you and aconsumer in a format that allows visualtext to be displayed on equipment, forexample, a personal computer monitor.

(h) Office means the premises of abank where retail deposits are acceptedfrom the public.

(i) Subsidiary has the same meaningas in section 3(w)(4) of the FederalDeposit Insurance Act (12 U.S.C.1813(w)(4)).

(j)(1) You means:(i) A bank; or(ii) Any other person only when the






(ii) If the bank refers a consumer to aseller of insurance products or annuitiesand the bank has a contractualarrangement to receive commissions orfees derived from the sale of aninsurance product or annuity resultingfrom that referral; or


§ 208.83 Prohibited practices.(a) Anticoercion and antitying rules.

You may not engage in any practice thatwould lead a consumer to believe thatan extension of credit, in violation ofsection 106(b) of the Bank HoldingCompany Act Amendments of 1970 (12U.S.C. 1972), is conditional upon either:



(b) Prohibition on misrepresentationsgenerally. You may not engage in anypractice or use any advertisement at anyoffice of, or on behalf of, the bank or asubsidiary of the bank that couldmislead any person or otherwise causea reasonable person to reach anerroneous belief with respect to:

(1) The fact that an insurance productor annuity sold or offered for sale byyou or any subsidiary of the bank is notbacked by the Federal government orthe bank or the fact that the insuranceproduct or annuity is not insured by theFederal Deposit Insurance Corporation;





(c) Prohibition on domestic violencediscrimination. You may not sell oroffer for sale, as principal, agent, orbroker, any life or health insuranceproduct if the status of the applicant orinsured as a victim of domestic violenceor as a provider of services to victims of

domestic violence is considered as acriterion in any decision with regard toinsurance underwriting, pricing,renewal, or scope of coverage of suchproduct, or with regard to the paymentof insurance claims on such product,except as required or expresslypermitted under State law.

§ 208.84 What you must disclose.(a) Insurance disclosures. In

connection with the initial purchase ofan insurance product or annuity by aconsumer from you, you must discloseto the consumer, except to the extent thedisclosure would not be accurate, that:




(b) Credit disclosure. In the case of anapplication for credit in connectionwith which an insurance product orannuity is solicited, offered, or sold, youmust disclose that the bank may notcondition an extension of credit oneither:



(c) Timing and method of disclosures.(1) In general. The disclosures requiredby paragraph (a) of this section must beprovided orally and in writing beforethe completion of the initial sale of aninsurance product or annuity to aconsumer. The disclosure required byparagraph (b) of this section must bemade orally and in writing at the timethe consumer applies for an extension ofcredit in connection with whichinsurance is solicited, offered, or sold.

(2) Exceptions for transactions bymail. If a sale of an insurance productor annuity is conducted by mail, you arenot required to make the oraldisclosures required by paragraph (a) ofthis section. If you take an applicationfor credit by mail, you are not requiredto make the oral disclosure required byparagraph (b) of this section.

(3) Exception for transactions bytelephone. If a sale of an insuranceproduct or annuity is conducted by

telephone, you may provide the writtendisclosures required by paragraph (a) ofthis section by mail within 3 businessdays beginning on the first business dayafter the sale, excluding Sundays andthe legal public holidays specified in 5U.S.C 6103(a). If you take an applicationfor such credit by telephone, you mayprovide the written disclosure requiredby paragraph (b) of this section by mail,provided you mail it to the consumerwithin three days beginning the firstbusiness day after the application istaken, excluding Sundays and the legalpublic holidays specified in 5 U.S.C.6103(a).

(4) Electronic form of disclosures. (i)Subject to the requirements of section101(c) of the Electronic Signatures inGlobal and National Commerce Act (12U.S.C. 7001(c)), you may provide thewritten disclosures required byparagraphs (a) and (b) of this sectionthrough electronic media instead of onpaper, if the consumer affirmativelyconsents to receiving the disclosureselectronically and if the disclosures areprovided in a format that the consumermay retain or obtain later, for example,by printing or storing electronically(such as by downloading).

(ii) Any disclosures required byparagraphs (a) or (b) of this section thatare provided by electronic media are notrequired to be provided orally.

(5) Disclosures must be readilyunderstandable. The disclosuresprovided shall be conspicuous, simple,direct, readily understandable, anddesigned to call attention to the natureand significance of the informationprovided. For instance, you may use thefollowing disclosures, in visual media,such as television broadcasting, ATMscreens, billboards, signs, posters andwritten advertisements and promotionalmaterials, as appropriate and consistentwith paragraphs (a) and (b) of thissection:• 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 disclosuresrequired by paragraphs (a) and (b) ofthis section in a meaningful form.Examples of the types of methods thatcould call attention to the nature andsignificance of the information providedinclude:







(E) Distinctive type size, style, andgraphic devices, such as shading orsidebars, when the disclosures arecombined with other information.

(ii) You have not provided thedisclosures in a meaningful form if youmerely state to the consumer that therequired disclosures are available inprinted material, but you do not providethe printed material when required anddo not orally disclose the information tothe consumer when required.


(7) Consumer acknowledgment. Youmust obtain from the consumer, at thetime a consumer receives thedisclosures required under paragraphs(a) or (b) of this section, or at the timeof the initial purchase by the consumerof an insurance product or annuity, awritten acknowledgment by theconsumer that the consumer receivedthe disclosures. You may permit aconsumer to acknowledge receipt of thedisclosures electronically or in paperform. If the disclosures required underparagraphs (a) or (b) of this section areprovided in connection with atransaction that is conducted bytelephone, you must:



(d) Advertisements and otherpromotional material for insuranceproducts or annuities. The disclosuresdescribed in paragraph (a) of thissection are required in advertisementsand promotional material for insuranceproducts or annuities unless theadvertisements and promotionalmaterials are of a general naturedescribing or listing the services orproducts offered by the bank.


(a) General rule. A bank must, to theextent practicable, keep the area wherethe bank conducts transactionsinvolving insurance products orannuities physically segregated fromareas where retail deposits are routinelyaccepted from the general public,identify the areas where insuranceproduct or annuity sales activities

occur, and clearly delineate anddistinguish those areas from the areaswhere the bank’s retail deposit-takingactivities occur.



A bank may not permit any person tosell or offer for sale any insuranceproduct or annuity in any part of itsoffice or on its behalf, unless the personis at all times appropriately qualifiedand licensed under applicable Stateinsurance licensing standards withregard to the specific products beingsold or recommended.

Appendix A to Subpart H—ConsumerGrievance Process

Any consumer who believes that any bankor any other person selling, soliciting,advertising, or offering insurance products orannuities to the consumer at an office of thebank or on behalf of the bank has violated therequirements of this subpart should contactthe Consumer Complaints Section, Divisionof Consumer and Community Affairs, Boardof Governors of the Federal Reserve Systemat the following address: 20th & C Streets,NW, Washington, D.C. 20551.

By order of the Board of Governors of theFederal Reserve System, November, 21, 2000.Jennifer J. Johnson,Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III


For the reasons set out in the jointpreamble, the Federal Deposit InsuranceCorporation amends chapter III of title12 of the Code of Federal Regulations byadding a new part 343 to read asfollows:


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 licensingrequirements for insurance salespersonnel.


Authority: 12 U.S.C. 1819 (Seventh andTenth); 12 U.S.C. 1831x.

§ 343.10 Purpose and scope.

This part establishes consumerprotections in connection with retailsales practices, solicitations,advertising, or offers of any insuranceproduct or annuity to a consumer by:

(a) Any bank; or(b) Any other person that is engaged


§ 343.20 Definitions.As used in this part:(a) Affiliate means a company that


(b) Bank means an FDIC-insured,state-chartered commercial or savingsbank that is not a member of the FederalReserve System and for which the FDICis the appropriate federal bankingagency pursuant to section 3(q) of theFederal Deposit Insurance Act (12U.S.C. 1813(q)).

(c) Company means any corporation,partnership, business trust, associationor similar organization, or any othertrust (unless by its terms the trust mustterminate within twenty-five years ornot later than twenty-one years and tenmonths after the death of individualsliving on the effective date of the trust).It does not include any corporation themajority of the shares of which areowned by the United States or by anyState, or a qualified family partnership,as defined in section 2(o)(10) of theBank Holding Company Act of 1956, asamended (12 U.S.C. 1841(o)(10)).

(d) Consumer means an individualwho purchases, applies to purchase, oris solicited to purchase from youinsurance products or annuitiesprimarily for personal, family, orhousehold purposes.


(f) Domestic violence means theoccurrence of one or more of thefollowing acts by a current or formerfamily member, household member,intimate partner, or caretaker:


(2) Engaging in a course of conduct orrepeatedly committing acts toward



another person, including following theperson without proper authority, undercircumstances that place the person inreasonable fear of bodily injury orphysical harm;



(g) Electronic media includes anymeans for transmitting messageselectronically between you and aconsumer in a format that allows visualtext to be displayed on equipment, forexample, a personal computer monitor.

(h) Office means the premises of abank where retail deposits are acceptedfrom the public.

(i) Subsidiary has the same meaningas in section 3(w)(4) of the FederalDeposit Insurance Act (12 U.S.C.1813(w)(4)).

(j) (1) You means:(i) A bank; or(ii) Any other person only when the




(ii) The bank refers a consumer to aseller of insurance products or annuitiesand the bank has a contractualarrangement to receive commissions orfees derived from a sale of an insuranceproduct or annuity resulting from thatreferral; or



You may not engage in any practice thatwould lead a consumer to believe thatan extension of credit, in violation ofsection 106(b) of the Bank HoldingCompany Act Amendments of 1970 (12U.S.C. 1972), is conditional upon either:


(2) An agreement by the consumer notto obtain, or a prohibition on theconsumer from obtaining, an insurance

product or annuity from an unaffiliatedentity.

(b) Prohibition on misrepresentationsgenerally. You may not engage in anypractice or use any advertisement at anyoffice of, or on behalf of, the bank or asubsidiary of the bank that couldmislead any person or otherwise causea reasonable person to reach anerroneous belief with respect to:

(1) The fact that an insurance productor annuity sold or offered for sale byyou or any subsidiary of the bank is notbacked by the Federal government orthe bank, or the fact that the insuranceproduct or annuity is not insured by theFederal Deposit Insurance Corporation;





(c) Prohibition on domestic violencediscrimination. You may not sell oroffer for sale, as principal, agent, orbroker, any life or health insuranceproduct if the status of the applicant orinsured as a victim of domestic violenceor as a provider of services to victims ofdomestic violence is considered as acriterion in any decision with regard toinsurance underwriting, pricing,renewal, or scope of coverage of suchproduct, or with regard to the paymentof insurance claims on such product,except as required or expresslypermitted under State law.

§ 343.40 What you must disclose.(a) Insurance disclosures. In

connection with the initial purchase ofan insurance product or annuity by aconsumer from you, you must discloseto the consumer, except to the extent thedisclosure would not be accurate, that:




(b) Credit disclosure. In the case of anapplication for credit in connectionwith which an insurance product orannuity is solicited, offered, or sold, youmust disclose that the bank may notcondition an extension of credit oneither:




(2) Exception for transactions by mail.If a sale of an insurance product orannuity is conducted by mail, you arenot required to make the oraldisclosures required by paragraph (a) ofthis section. If you take an applicationfor credit by mail, you are not requiredto make the oral disclosure required byparagraph (b).

(3) Exception for transactions bytelephone. If a sale of an insuranceproduct or annuity is conducted bytelephone, you may provide the writtendisclosures required by paragraph (a) ofthis section by mail within 3 businessdays beginning on the first business dayafter the sale, excluding Sundays andthe legal public holidays specified in 5U.S.C. 6103(a). If you take anapplication for credit by telephone, youmay provide the written disclosurerequired by paragraph (b) of this sectionby mail, provided you mail it to theconsumer within three days beginningthe first business day after theapplication is taken, excluding Sundaysand the legal public holidays specifiedin 5 U.S.C. 6103(a).

(4) Electronic form of disclosures. (i)Subject to the requirements of section101(c) of the Electronic Signatures inGlobal and National Commerce Act (12U.S.C. 7001(c)), you may provide thewritten disclosures required byparagraph (a) and (b) of this sectionthrough electronic media instead of onpaper, if the consumer affirmatively



consents to receiving the disclosureselectronically and if the disclosures areprovided in a format that the consumermay retain or obtain later, for example,by printing or storing electronically(such as by downloading).

(ii) Any disclosure required byparagraphs (a) or (b) of this section thatis provided by electronic media is notrequired to be provided orally.

(5) Disclosures must be readilyunderstandable. The disclosuresprovided shall be conspicuous, simple,direct, readily understandable, anddesigned to call attention to the natureand significance of the informationprovided. For instance, you may use thefollowing disclosures in visual media,such as television broadcasting, ATMscreens, billboards, signs, posters andwritten advertisements and promotionalmaterials, as appropriate and consistentwith paragraphs (a) and (b) of thissection:• NOT A DEPOSIT• NOT FDIC-INSURED• NOT INSURED BY ANY FEDERAL

GOVERNMENT AGENCY• NOT GUARANTEED BY THE BANK• MAY GO DOWN IN VALUE







(ii) You have not provided thedisclosures in a meaningful form if youmerely state to the consumer that therequired disclosures are available inprinted material, but do not provide theprinted material when required and donot orally disclose the information tothe consumer when required.


(7) Consumer acknowledgment. Youmust obtain from the consumer, at the

time a consumer receives thedisclosures required under paragraphs(a) or (b) of this section, or at the timeof the initial purchase by the consumerof an insurance product or annuity, awritten acknowledgment by theconsumer that the consumer receivedthe disclosures. You may permit aconsumer to acknowledge receipt of thedisclosures electronically or in paperform. If the disclosures required underparagraphs (a) or (b) of this section areprovided in connection with atransaction that is conducted bytelephone, you must:



(d) Advertisements and otherpromotional material for insuranceproducts or annuities. The disclosuresdescribed in paragraph (a) of thissection are required in advertisementsand promotional material for insuranceproducts or annuities unless theadvertisements and promotionalmaterials are of a general naturedescribing or listing the services orproducts offered by the bank.


(a) General rule. A bank must, to theextent practicable, keep the area wherethe bank conducts transactionsinvolving insurance products orannuities physically segregated fromareas where retail deposits are routinelyaccepted from the general public,identify the areas where insuranceproduct or annuity sales activitiesoccur, and clearly delineate anddistinguish those areas from the areaswhere the bank’s retail deposit-takingactivities occur.



A bank may not permit any person tosell or offer for sale any insuranceproduct or annuity in any part of its

office or on its behalf, unless the personis at all times appropriately qualifiedand licensed under applicable Stateinsurance licensing standards withregard to the specific products beingsold or recommended.


Any consumer who believes that any bankor any other person selling, soliciting,advertising, or offering insurance products orannuities to the consumer at an office of thebank or on behalf of the bank has violated therequirements of this part should contact theDivision of Compliance and ConsumerAffairs, Federal Deposit InsuranceCorporation, at the following address: 55017th Street, NW., Washington, DC 20429, ortelephone 202–942–3100 or 800–934–3342,or e-mail [email protected].

By order of the Board of Directors.Federal Deposit Insurance Corporation.

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


12 CFR Chapter V


For the reasons set out in the jointpreamble, OTS amends chapter V oftitle 12 of the Code of FederalRegulations by adding a new part 536 toread as follows:


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



Appendix A to Part 536—ConsumerGrievance Process.

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

§ 536.10 Purpose and scope.(a) General rule. This part establishes

consumer protections in connectionwith retail sales practices, solicitations,advertising, or offers of any insuranceproduct 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 asavings association or on behalf of asavings association.

(b) Application to operatingsubsidiaries. For purposes of § 559.3(h)of this chapter, an operating subsidiaryis subject to this part only to the extent



that it sells, solicits, advertises, or offersinsurance products or annuities at anoffice of a savings association or onbehalf of a savings association.

§ 536.20 Definitions.As used in this part:Affiliate means a company that


Company means any corporation,partnership, business trust, associationor similar organization, or any othertrust (unless by its terms the trust mustterminate within twenty-five years ornot later than twenty-one years and tenmonths after the death of individualsliving on the effective date of the trust).It does not include any corporation themajority of the shares of which areowned by the United States or by anyState, or a qualified family partnership,as defined in section 2(o)(10) of theBank Holding Company Act of 1956, asamended (12 U.S.C. 1841(o)(10)).

Consumer means an individual whopurchases, applies to purchase, or issolicited to purchase from a coveredperson insurance products or annuitiesprimarily for personal, family, orhousehold purposes.

Control of a company has the samemeaning as in section 3(w)(5) of theFederal Deposit Insurance Act (12U.S.C. 1813(w)(5)).

Domestic violence means theoccurrence of one or more of thefollowing acts by a current or formerfamily member, household member,intimate partner, or caretaker:





Electronic media includes any meansfor transmitting messages electronicallybetween a covered person and aconsumer in a format that allows visualtext to be displayed on equipment, forexample, a personal computer monitor.

Office means the premises of a savingsassociation where retail deposits areaccepted from the public.

Subsidiary has the same meaning asin section 3(w)(4) of the Federal DepositInsurance Act (12 U.S.C. 1813(w)(4)).

You means:(1) A savings association, as defined

in § 561.43 of this chapter; or(2) Any other person only when the

person sells, solicits, advertises, oroffers an insurance product or annuityto a consumer at an office of a savingsassociation, or on behalf of a savingsassociation. For purposes of thisdefinition, activities on behalf of asavings association include activitieswhere a person, whether at an office ofthe savings association or at anotherlocation, sells, solicits, advertises, oroffers an insurance product or annuityand at least one of the following applies:

(i) The person represents to aconsumer that the sale, solicitation,advertisement, or offer of any insuranceproduct or annuity is by or on behalf ofthe savings association;

(ii) The savings association refers aconsumer to a seller of insuranceproducts and annuities and the savingsassociation has a contractualarrangement to receive commissions orfees derived from a sale of an insuranceproduct or annuity resulting from thatreferral; or

(iii) Documents evidencing the sale,solicitation, advertising, or offer of aninsurance product or annuity identify orrefer to the savings association.


You may not engage in any practice thatwould lead a consumer to believe thatan extension of credit, in violation ofsection 5(q) of the Home Owners’ LoanAct (12 U.S.C. 1464(q)), is conditionalupon either:

(1) The purchase of an insuranceproduct or annuity from a savingsassociation or any of its affiliates; or


(b) Prohibition on misrepresentationsgenerally. You may not engage in anypractice or use any advertisement at anyoffice of, or on behalf of, a savingsassociation or a subsidiary of a savingsassociation that could mislead anyperson or otherwise cause a reasonableperson to reach an erroneous belief withrespect to:

(1) The fact that an insurance productor annuity you or any subsidiary of asavings association sell or offer for saleis not backed by the Federal governmentor a savings association, or the fact thatthe insurance product or annuity is notinsured by the Federal DepositInsurance Corporation;

(2) In the case of an insurance productor annuity that involves investment risk,

the fact that there is an investment risk,including the potential that principalmay be lost and that the product maydecline in value; or

(3) In the case of a savings associationor subsidiary of a savings association atwhich insurance products or annuitiesare sold or offered for sale, the fact that:

(i) The approval of an extension ofcredit to a consumer by the savingsassociation or subsidiary may not beconditioned on the purchase of aninsurance product or annuity by theconsumer from the savings associationor a subsidiary of a savings association;and


(c) Prohibition on domestic violencediscrimination. You may not sell oroffer for sale, as principal, agent, orbroker, any life or health insuranceproduct if the status of the applicant orinsured as a victim of domestic violenceor as a provider of services to victims ofdomestic violence is considered as acriterion in any decision with regard toinsurance underwriting, pricing,renewal, or scope of coverage of suchproduct, or with regard to the paymentof insurance claims on such product,except as required or expresslypermitted under State law.

§ 536.40 What you must disclose.

(a) Insurance disclosures. Inconnection with the initial purchase ofan insurance product or annuity by aconsumer from you, you must discloseto the consumer, except to the extent thedisclosure would not be accurate, that:

(1) The insurance product or annuityis not a deposit or other obligation of,or guaranteed by, a savings associationor an affiliate of a savings association;

(2) The insurance product or annuityis not insured by the Federal DepositInsurance Corporation (FDIC) or anyother agency of the United States, asavings association, or (if applicable) anaffiliate of a savings association; and


(b) Credit disclosures. In the case ofan application for credit in connectionwith which an insurance product orannuity is solicited, offered, or sold, youmust disclose that a savings associationmay not condition an extension of crediton either:

(1) The consumer’s purchase of aninsurance product or annuity from thesavings association or any of itsaffiliates; or





(2) Exception for transactions by mail.If you conduct an insurance product orannuity sale by mail, you are notrequired to make the oral disclosuresrequired by paragraph (a) of this section.If you take an application for credit bymail, you are not required to make theoral disclosure required by paragraph(b) of this section.

(3) Exception for transactions bytelephone. If a sale of an insuranceproduct or annuity is conducted bytelephone, you may provide the writtendisclosures required by paragraph (a) ofthis section by mail within 3 businessdays beginning on the first business dayafter the sale, solicitation, or offer,excluding Sundays and the legal publicholidays specified in 5 U.S.C. 6103(a). Ifyou take an application for credit bytelephone, you may provide the writtendisclosure required by paragraph (b) ofthis section by mail, provided you mailit to the consumer within three daysbeginning the first business day after theapplication is taken, excluding Sundaysand the legal public holidays specifiedin 5 U.S.C. 6103(a).

(4) Electronic form of disclosures. (i)Subject to the requirements of section101(c) of the Electronic Signatures inGlobal and National Commerce Act (12U.S.C. 7001(c)), you may provide thewritten disclosures required byparagraph (a) and (b) of this sectionthrough electronic media instead of onpaper, if the consumer affirmativelyconsents to receiving the disclosureselectronically and if the disclosures areprovided in a format that the consumermay retain or obtain later, for example,by printing or storing electronically(such as by downloading).

(ii) You are not required to provideorally any disclosures required byparagraphs (a) or (b) of this section thatyou provide by electronic media.

(5) Disclosures must be readilyunderstandable. The disclosuresprovided shall be conspicuous, simple,direct, readily understandable, anddesigned to call attention to the nature

and significance of the informationprovided. For instance, you may use thefollowing disclosures in visual media,such as television broadcasting, ATMscreens, billboards, signs, posters andwritten advertisements and promotionalmaterials, as appropriate and consistentwith paragraphs (a) and (b) of thissection:• NOT A DEPOSIT• NOT FDIC-INSURED• NOT INSURED BY ANY FEDERAL

GOVERNMENT AGENCY• NOT GUARANTEED BY THE SAVINGS

ASSOCIATION• MAY GO DOWN IN VALUE







(ii) You have not provided thedisclosures in a meaningful form if youmerely state to the consumer that therequired disclosures are available inprinted material, but do not provide theprinted material when required and donot orally disclose the information tothe consumer when required.


(7) Consumer acknowledgment. Youmust obtain from the consumer, at thetime a consumer receives thedisclosures required under paragraphs(a) or (b) of this section, or at the timeof the initial purchase by the consumerof an insurance product or annuity, awritten acknowledgment by theconsumer that the consumer receivedthe disclosures. You may permit aconsumer to acknowledge receipt of thedisclosures electronically or in paperform. If the disclosures required underparagraphs (a) or (b) of this section areprovided in connection with atransaction that is conducted bytelephone, you must:



(d) Advertisements and otherpromotional material for insuranceproducts or annuities. The disclosuresdescribed in paragraph (a) of thissection are required in advertisementsand promotional material for insuranceproducts or annuities unless theadvertisements and promotionalmaterial are of a general naturedescribing or listing the services orproducts offered by a savingsassociation.


(a) General rule. A savings associationmust, to the extent practicable:

(1) Keep the area where the savingsassociation conducts transactionsinvolving insurance products orannuities physically segregated fromareas where retail deposits are routinelyaccepted from the general public;

(2) Identify the areas where insuranceproduct or annuity sales activitiesoccur; and

(3) Clearly delineate and distinguishthose areas from the areas where thesavings association’s retail deposit-taking activities occur.

(b) Referrals. Any person who acceptsdeposits from the public in an areawhere such transactions are routinelyconducted in a savings association mayrefer a consumer who seeks to purchasean insurance product or annuity to aqualified person who sells that productonly if the person making the referralreceives no more than a one-time,nominal fee of a fixed dollar amount foreach referral that does not depend onwhether the referral results in atransaction.


A savings association may not permitany person to sell or offer for sale anyinsurance product or annuity in anypart of the savings association’s office oron its behalf, unless the person is at alltimes appropriately qualified andlicensed under applicable Stateinsurance licensing standards withregard to the specific products beingsold or recommended.




Any consumer who believes that anysavings association or any other personselling, soliciting, advertising, or offeringinsurance products or annuities to theconsumer at an office of the savings

association or on behalf of the savingsassociation has violated the requirements ofthis part should contact the Director,Consumer Programs, Office of ThriftSupervision, at the following address: 1700 GStreet, NW, Washington, DC 20552, ortelephone 202–906–6237 or 800–842–6929,or e-mail [email protected].

Dated: November 21, 2000.By the Office of Thrift Supervision.

Ellen Seidman,Director.[FR Doc. 00–30404 Filed 12–1–00; 8:45 am]BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P;6720–01–P
