`[Federal Register Volume 65, Number 233 (Monday, December 4, 2000)]
[Rules and Regulations]
[Pages 75822-75848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30404]



[[Page 75821]]

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Part II





Department of the Treasury





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Office of the Comptroller of the Currency



Office of Thrift Supervision



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Federal Reserve System

Federal Deposit Insurance Corporation





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12 CFR Parts 14, 208, 343, and 536



Consumer Protections for Depository Institution Sales of Insurance; 
Final Rule

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

[[Page 75822]]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 14

[Docket No. 00-26]
RIN 1557-AB81

FEDERAL RESERVE SYSTEM

12 CFR Part 208

[Docket No. R-1079]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 343

RIN 3064-AC37

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 536

[Docket No. 2000-97]
RIN 1550-AB34


Consumer Protections for Depository Institution Sales of 
Insurance

AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of 
Governors of the Federal Reserve System; Federal Deposit Insurance 
Corporation; and Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency, Board of 
Governors of the Federal Reserve System, Federal Deposit Insurance 
Corporation, and the Office of Thrift Supervision, (collectively, the 
Agencies) are publishing final insurance consumer protection rules. 
These rules are published pursuant to section 47 of the Federal Deposit 
Insurance Act (FDIA), which was added by section 305 of the Gramm-
Leach-Bliley Act (the G-L-B Act or Act). Section 47 directs the 
Agencies jointly to prescribe and publish consumer protection 
regulations that apply to retail sales practices, solicitations, 
advertising, or offers of any insurance product by a depository 
institution \1\ or any person that is engaged in such activities at an 
office of the institution or on behalf of the institution.
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    \1\ ``Depository institution'' means national banks in the case 
of institutions supervised by the Office of the Comptroller of the 
Currency (OCC), state member banks in the case of the Board of 
Governors of the Federal Reserve System (Board), state nonmember 
banks in the case of the Federal Deposit Insurance Corporation 
(FDIC), and savings associations in the case of the Office of Thrift 
Supervision (OTS).

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EFFECTIVE DATE: April 1, 2001.

FOR FURTHER INFORMATION CONTACT: OCC: Stuart Feldstein, Assistant 
Director, or Michele Meyer, Senior Attorney, Legislative and Regulatory 
Activities Division, (202) 874-5090; Asa Chamberlayne, Senior Attorney, 
Securities and Corporate Practices Division, (202) 874-5210; Stephanie 
Boccio, Asset Management, (202) 874-4447; Barbara Washington, Core 
Policy Development (202) 874-6037, Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Richard M. Ashton, Associate General Counsel, Legal 
Division, (202) 452-3750; Angela Desmond, Special Counsel, Division of 
Banking Supervision and Regulation, (202) 452-3497; David A. Stein, 
Attorney, Division of Consumer and Community Affairs, (202) 452-3667, 
Board of Governors of the Federal Reserve System, 20th and C Streets, 
NW, Washington, DC 20551. For the hearing impaired only, 
Telecommunications Device for the Deaf (TDD), contact Janice Simms, 
(202) 872-4984.
    FDIC: Keith A. Ligon, Chief, Policy Unit, Division of Supervision, 
(202) 898-3618; Michael B. Phillips, Counsel, Supervision and 
Legislation Branch, Legal Division, (202) 898-3581; Jason C. Cave, 
Senior Capital Markets Specialist, (202) 898-3548, Federal Deposit 
Insurance Corporation, 550 17th Street, NW, Washington, DC 20429.
    OTS: Robyn Dennis, Manager, Supervision Policy, (202) 906-5751; 
Richard Bennett, Counsel (Banking and Finance), (202) 906-7409; Sally 
Watts, Counsel (Banking and Finance), (202) 906-7380; Mary Jane Cleary, 
Insurance Risk Management Specialist, (202) 906-7048, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

Background

    On November 12, 1999, President Clinton signed the G-L-B Act into 
law. Section 305 of the Act \2\ added new section 47 to the FDIA, 
captioned ``Insurance Customer Protections.'' This section requires the 
Agencies jointly to prescribe and publish consumer protection 
regulations that apply to retail sales practices, solicitations, 
advertising, or offers of insurance products by depository institutions 
or persons engaged in these activities at an office of the institution 
or on behalf of the institution. Section 47 directs the Agencies to 
include specific provisions relating to sales practices, disclosures 
and advertising, the physical separation of banking and nonbanking 
activities, and domestic violence discrimination.
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    \2\ Pub. L. 106-102, sec. 305, 113 Stat. 1338, 1410-15 (codified 
at 12 U.S.C. 1831x).
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    Section 47 also requires the Agencies to consult with the State 
insurance regulators, as appropriate. The National Association of 
Insurance Commissioners (NAIC) has submitted a comment letter in 
connection with the proposed rules. In preparing the proposed rules and 
these final rules, the Agencies also have met and consulted with the 
NAIC.\3\ These final rules reflect these meetings with, and comments 
from, the NAIC.
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    \3\ A summary of the Agencies' consultations with the NAIC is 
available in the rule-making file.
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    The texts of the Agencies' final rules are substantially identical. 
Any differences in style or terms are not intended to create 
substantive differences in the requirements imposed by the regulations.

Overview of Comments Received

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

[[Page 75823]]

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

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

Section ____.10 Purpose and Scope

    Proposed Sec. ____.10 identified the purposes and scope of the 
rules. As stated in the proposal, the rules are intended to establish 
consumer protections in connection with retail sales of insurance 
products and annuities \6\ to consumers by any depository institution 
or by any person that is engaged in these activities at an office of 
the institution or on behalf of the institution. These rules address 
certain consumer protection concerns that arise from the conduct of 
insurance activities by a depository institution, at an office of the 
institution, or on behalf of the institution and are not intended to 
authorize new activities. These rules are not exclusive and, for 
example, applicable State laws administered by State insurance 
commissioners may apply, as provided by sections 104 and 305 of the G-
L-B Act.
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    \6\ These rules are not intended to have any effect on whether 
annuities are considered to be insurance products for purposes of 
any other section of the G-L-B Act or other laws. That question 
depends on the terms and purposes of those laws, as interpreted by 
the appropriate agency and the courts.
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    The Agencies received several comments on the proposed scope of 
these rules. Some of these commenters noted that the Interagency 
Statement on Retail Sales of Nondeposit Investment Products (February 
15, 1994) (Interagency Statement) also may apply in certain 
circumstances to sales of insurance or annuities by depository 
institutions. These commenters requested clarification on how the 
Agencies will apply the Interagency Statement to those products subject 
to both these rules and the Interagency Statement. The Agencies note 
that in the event of a conflict between the Interagency Statement and 
the final rules, the rules will prevail.
    Certain of the definitions contained in the final rules also 
address the circumstances under which the rules will apply. Under the 
proposed rules, only subsidiaries that are selling insurance products 
or annuities at an office of the institution or acting ``on behalf of'' 
the depository institution as defined in the rules \7\ would be subject 
to the requirements of the rules. Section 47 gives the Agencies 
discretion to determine whether the Act's consumer protections should 
extend to a depository institution's subsidiary in other circumstances. 
The Agencies received only one comment supporting broader application 
of the final rules to depository institution subsidiaries. The Agencies 
believe that extending the rules to a depository institution's 
subsidiary in circumstances other than when the subsidiary is selling 
insurance products or annuities at an office of the institution or 
acting ``on behalf of'' the depository institution is unnecessary and, 
therefore, the final rules retain the approach taken in the proposed 
rules on this issue. A more complete discussion of when a person is 
engaged in insurance activities ``on behalf'' of the depository 
institution is set forth below in the definition of ``covered person.''
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    \7\ OTS does not intend the requirements of this part to apply 
to other savings association operating subsidiaries or service 
corporations by operation of 12 CFR 559.3(h). The OCC does not 
intend the requirements of this part to apply to other national bank 
operating subsidiaries by operation of 12 CFR 5.34(e)(3).
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Section ____.20 Definitions

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

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[[Page 75824]]

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

[[Page 75825]]

institution. The Agencies do not intend this result and have changed 
the proposal to clarify that a covered person is: (1) A depository 
institution; or (2) any other person only when the person sells, 
solicits, advertises or offers an insurance product or annuity to a 
consumer at an office of the institution or on behalf of the 
institution.
    Finally, in the preamble to the proposed rules, the Agencies noted 
that the use of electronic media may present special issues in the 
application of the ``on behalf of test'' of the covered person 
definition. The Agencies invited comment on whether, and under what 
circumstances, to require disclosures for sales or solicitations by 
electronic media.
    Several commenters suggested that the purposes of the statute and 
the rules--to avoid customer confusion about the nature of the products 
offered that arises because of the identity of the seller or marketer--
is not implicated in all cases where a depository institution acts 
solely to bring together buyers and sellers of insurance products. For 
example, the Agencies believe that links established from depository 
institution web sites through the Internet or wireless services 
generally do not come within the scope of the covered person 
definition. To the extent there is a risk of possible consumer 
confusion when a customer leaves an institution's web site, the nature 
or type of these disclosures may differ and is better addressed in 
subsequent guidance or rulemaking.
    Electronic media (Sec. ____.20(g)). Section 47 permits the Agencies 
to make adjustments to the Act's requirements for sales conducted in 
person, by telephone, or by electronic media to provide for the most 
appropriate and complete form of disclosure and consumer acknowledgment 
of the receipt of such disclosures. The proposed rules set forth 
special rules for electronic disclosures and consumer acknowledgments. 
A discussion of changes made to these provisions in the final rules is 
set forth below. See proposed Sec. ____.40.
    In addition, the proposed rules recognized the need for flexibility 
to accommodate rapid changes in communications technologies and thus 
defined ``electronic media'' broadly to include any means for 
transmitting messages electronically between a covered person and a 
consumer in a format that allows visual text to be displayed on 
equipment, such as a personal computer. The Agencies invited comment on 
this proposed definition and on whether a more expansive definition 
would be consistent with the G-L-B Act's requirement for both written 
and oral disclosures. The majority of commenters supported the proposed 
definition of ``electronic media'' \10\ because it provided sufficient 
flexibility to address future innovation. The final rule, therefore, 
retains the proposed definition of ``electronic media.''
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    \10\ Most of the comments concerning electronic media were 
raised in the context of disclosures and acknowledgments and are, 
therefore, discussed in the sections below concerning those 
requirements.
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    Office (Sec. ____.20(h)). The proposed rules defined ``office'' as 
the premises of an institution where retail deposits are accepted from 
the public. The Agencies received several comments requesting that this 
definition be limited to deposit taking areas. The Agencies note that 
specific provisions in these rules relating to the physical separation 
of the insurance activities and permissibility of referral fees are 
limited to areas where deposits are routinely taken. However, the 
Agencies do not believe that the overall protections afforded by these 
rules should be limited in this manner and, therefore, retain in the 
final rules the definition of ``office'' set forth in the proposed 
rules.
    The proposed rules did not define the term ``insurance product.'' 
As explained in the preamble to the proposed rules, the Agencies 
recognize that there is no single standard for defining the term 
``insurance'' and that its definition may vary significantly depending 
on the context in which it is used. For example, section 302 of G-L-B 
Act lists certain types of products that are first offered after 
January 1, 1999 that may constitute insurance for purposes of 
determining when a national bank may underwrite, rather than sell, 
insurance. Thus, the Agencies indicated that they will look to a 
variety of sources in determining whether a given product is covered by 
the proposed rules, including section 302(c), common usage, 
conventional definitions, judicial interpretations, and other Federal 
laws. The Agencies invited comment on these and other sources for 
determining whether a product comes within the scope of the proposed 
rules, or, alternatively, whether the rule should include a specific 
definition of the term ``insurance.''
    Few commenters requested a specific definition of insurance. Many 
commenters, however, asked that we exclude certain products from 
coverage or at least not require certain disclosures for those 
products. For example, those commenters believe that the rules should 
not cover credit insurance and property and casualty insurance because 
these products do not have an investment component and have been sold 
by and on behalf of depository institutions for years without consumer 
confusion. Section 47 of the G-L-B Act, however, does not distinguish 
between types of insurance products nor are the consumer protections 
under the statute limited to instances where there is a risk of 
investment loss or consumer confusion. The final rules therefore do not 
define the term ``insurance'' but, as explained in the discussion of 
Sec. ____.40, provide more guidance on when certain disclosures are 
required.

Section ____.30 Prohibited Practices

    Under section 47(b) of the FDIA, the Agencies' regulations must 
prohibit a covered person from engaging in any practice that would lead 
a consumer to believe that an extension of credit, in violation of the 
anti-tying provisions of section 106(b) of the Bank Holding Company Act 
Amendments of 1970, \11\ is conditional upon either:
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    \11\ 12 U.S.C. 1972. Section 106(b) of the Bank Holding Company 
Act Amendments of 1970 does not apply to savings associations. Those 
institutions are, however, subject to comparable prohibitions on 
tying and coercion, under section 5(q) of the Home Owners' Loan Act 
(HOLA), 12 U.S.C. 1464(q). Accordingly, OTS's final rule cites the 
HOLA provision.
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    (1) The purchase of an insurance product or annuity from the 
depository institution or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity. These prohibitions on tying and coercion were set 
forth in proposed Sec. ____.30(a).
    Section 47(c)(2) of the FDIA also requires the Agencies' 
regulations to prohibit a covered person from engaging in any practice 
at any office of, or on behalf of, a depository institution or a 
subsidiary of a depository institution that could mislead any person or 
otherwise cause a reasonable person to reach an erroneous belief with 
respect to:
    (1) The uninsured nature of any insurance product or annuity 
offered for sale by the covered person or subsidiary;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the investment risk associated with any such product; 
or
    (3) The fact that the approval of an extension of credit to a 
consumer by the institution or subsidiary may not be conditioned on the 
purchase of an insurance product or annuity from the institution or 
subsidiary, and that the consumer is free to purchase the

[[Page 75826]]

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

Section ____.40 What a Covered Person Must Disclose

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

[[Page 75827]]

Agencies agree that this is a permissible interpretation of the statute 
and believe that the anti-coercion disclosure is most meaningful and 
relevant at the time a consumer is applying for credit. For this 
reason, the final rules only require that the anti-coercion disclosure 
be given at the time of application for credit. The Agencies have 
redesignated this provision as Sec. ____.40(b) in the final rules.
Timing and Method of Disclosures
    Under proposed Sec. ____.40(b)(1), a covered person must provide 
the disclosures described in Sec. ____.40(a) orally and in writing 
before the completion of the sale of an insurance product or annuity to 
a consumer. The disclosures concerning the prohibition on tying an 
extension of credit to an insurance product or annuity purchase 
(proposed Sec. ____.40(a)(4)) also must be made orally and in writing 
at the time the consumer applies for an extension of credit in 
connection with which an insurance product or annuity will be 
solicited, offered, or sold. Section 47 of the FDIA authorizes the 
Agencies to make necessary adjustments to the G-L-B Act's requirements 
for sales conducted in person, by telephone, or by electronic media. 
Section 47(a)(1) also requires the Agencies to publish final rules in a 
form that the Agencies jointly determine to be appropriate. Proposed 
Secs. ____.40(b)(2) set forth special timing and method of disclosure 
rules for electronic and telephone disclosures. Because the Agencies 
modified the anti-coercion disclosure and redesignated it as 
Sec. ____.40(b), the timing and method of disclosure rules are 
contained in Sec. ____.40(c).
    The Agencies received several comments on the timing and method of 
disclosures. A few commenters contended that it would be difficult if 
not impossible to provide the required oral disclosures in connection 
with direct mail solicitations. The Agencies recognize that providing 
oral disclosures in circumstances like these--where there is no means 
of communicating orally at the time of the sales presentation--would be 
impracticable. Therefore, the final rule provides that if the sale of 
an insurance product or annuity is conducted by mail, a covered person 
that sells, solicits or offers an insurance product or annuity by mail 
is not required to make the oral disclosures required by 
Sec. ____.40(a). The final rule further provides that if a covered 
person receives an application for credit by mail, the covered person 
is not required to make the oral disclosure required by 
Sec. ____.40(b). The Agencies also intend this exception from the oral 
disclosure requirements to apply to a situation such as a ``take one'' 
credit application, where the consumer picks up a blank application 
form, completes the application at home, and mails it back to the 
institution.
    A similar situation arises with respect to offers, solicitations or 
sales by telephone. Under the proposed rules, a covered person who 
takes an application for credit by telephone may provide the written 
anti-coercion disclosure by mail, if the covered person mails it to the 
consumer within three days starting on the next business day, excluding 
Sundays and the legal public holidays specified in 5 U.S.C. 6103(a). 
Several commenters requested the Agencies extend this flexible approach 
to all of the written disclosures, not just the anti-coercion 
disclosure, when transactions are conducted by telephone. The Agencies 
agree with this concern and have changed the final rules relating to 
telephone transactions to extend the option of providing any written 
disclosures by mail within a three-day time period.
    Under proposed Sec. ____.40(b)(2)(i), where the consumer 
affirmatively consents, a covered person may provide the written 
disclosures required by Sec. ____.40(a) through electronic media 
instead of on paper, if they are provided in a format that the consumer 
may retain or obtain later, for example, by printing or storing 
electronically, such as by downloading. Under proposed 
Sec. ____.40(b)(2)(ii), if the sale of an insurance product or annuity 
is conducted entirely through the use of electronic media and written 
disclosures are provided electronically, a covered person is not 
required to provide disclosures orally. The proposal also required a 
covered person to comply with all other requirements imposed by law or 
regulation for providing disclosures electronically.
    In the preamble to the proposed rules, the Agencies also noted that 
new legislation addressing the use of electronic signatures and 
electronic records may affect institutions that provide disclosures and 
obtain acknowledgments electronically. The Electronic Signatures in 
Global and National Commerce Act (the E-Sign Act) \13\ contains, among 
other things, Federal rules governing the use of electronic records for 
providing required information to consumers. An institution may satisfy 
a legal requirement that the institution provide written disclosures by 
using an electronic disclosure if the consumer affirmatively consents 
and if certain other requirements of the E-Sign Act are met. For 
example, the E-Sign Act requires that, before a consumer consents to 
receive electronically information that is otherwise legally required 
to be provided in writing, the consumer must receive a ``clear and 
conspicuous statement'' containing certain information prescribed by 
the statute.\14\ The statute authorizes Federal regulatory agencies to 
exempt specified categories or types of records from the E-Sign Act 
requirements relating to consumer consent only if an exemption is 
necessary to eliminate a substantial burden on electronic commerce and 
will not increase the material risk of harm to consumers.\15\ The 
Agencies invited comment on whether--and, if so, how--they should 
address the requirements of the E-Sign Act in the context of these 
proposed rules.
---------------------------------------------------------------------------

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

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

[[Page 75828]]

disclosure be made ``at the time the consumer applies for an extension 
of credit in connection with which an insurance product or annuity is 
solicited, offered, or sold.'' In addition, if a solicitation, offer, 
or sale occurs in connection with an application for credit that is 
pending with the depository institution, a covered person must make the 
disclosure when the solicitation, offer, or sale occurs.
    The Agencies note that, consistent with section 47(c), the final 
rules require a covered person to provide the disclosures in connection 
with the ``initial purchase'' of an insurance product or annuity. 
Accordingly, while new disclosures are not required when a consumer 
simply renews an insurance policy or annuity, disclosures are required 
if a consumer purchases a different insurance product or annuity.
Disclosures Must Be Readily Understandable, Designed To Call Attention 
to the Information, and Meaningful
    Section 47 of the FDIA requires the Agencies to promulgate 
regulations encouraging the use of disclosures that are conspicuous, 
simple, direct, and readily understandable. Proposed Sec. ____.40(b)(3) 
contained this requirement and further required that the disclosures 
also must be designed to call attention to the nature and significance 
of the information provided. For example, the proposed rules provided 
that a covered person may use the following short-form disclosures as 
may be appropriate:

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

    Several commenters requested that the Agencies clarify the 
circumstances in which a covered person may use the short form 
disclosures. The Agencies believe that provisions in the Joint 
Interpretations of the Interagency Statement on Retail Sales of 
Nondeposit Investment Products (September 12, 1995) for use of short 
form disclosures provide useful guidance on this issue. Therefore, the 
final rules are changed to provide that short form disclosures may be 
used in visual media, such as television broadcasts, ATM screens, 
billboards, signs, posters, and in written advertisements and 
promotional materials, such as brochures. The Agencies note that it may 
be appropriate to use the short form disclosures in other 
circumstances. The Agencies will monitor use of these disclosures and 
issue further guidance if necessary.
    In addition, several commenters requested that the final rules 
provide a short form of the anti-coercion disclosures. However, the 
commenters' suggested short form anti-coercion disclosure did not 
adequately capture all of the information contained in the form set 
forth in Sec. ____.40(b) of the final rules. Moreover, the Agencies 
believe that requiring the full anti-coercion disclosure is not 
particularly burdensome because the final rules require the disclosure 
to be made only in circumstances involving a consumer's application for 
credit in connection with which insurance is solicited, offered, or 
sold. Therefore, the final rules do not provide a short form of the 
anti-coercion disclosure.
    The Agencies also invited comment on whether the final rule should 
provide specific methods of calling attention to the material contained 
in the disclosures. For example, the Agencies suggested that the final 
rule could provide that the disclosures are designed to call attention 
to the nature and significance of the information provided if they use:
     A plain-language heading to call attention to the 
disclosures;
     A typeface and type size that are easy to read;
     Wide margins and ample line spacing;
     Boldface or italics for key words; and
     Distinctive type size, style, and graphic devices, such as 
shading or sidebars, when the disclosures are combined with other 
information.
    Some commenters expressed concern that including these examples in 
the regulation would be viewed as adding new requirements. These 
concerns, however, are unfounded. The Agencies believe that providing 
examples of possible methods of calling attention to the material 
contained in the disclosures will provide useful guidance to the 
industry. The Agencies therefore have included these methods in the 
final rules as examples of ways in which a covered person could call a 
consumer's attention to the nature and significance of the information 
provided in the required disclosures. These examples are not binding 
requirements.
    Further, as provided in Sec. ____.40(c)(6) of the final rules, a 
disclosure is not ``meaningfully'' provided if a covered person merely 
tells the consumer that the disclosures are available in printed 
material without also providing the material and orally disclosing the 
information to the consumer. Similarly, a disclosure made through 
electronic media is not meaningfully provided if the consumer may 
bypass the visual text of the disclosure before purchasing an insurance 
product or annuity.
    The Agencies invited comment on whether these standards would 
adequately address situations where disclosures are made through 
electronic media. For example, the Federal Trade Commission (FTC) 
recently released detailed guidance on online advertising and sales 
reiterating that many of the general principles of advertising law 
apply to Internet advertisements, but recognizing that developing 
technology raises new issues.\16\ The Agencies sought comment on 
whether the type of detail provided in the FTC guidance is necessary in 
these proposed rules.
---------------------------------------------------------------------------

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

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

[[Page 75829]]

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

Section ____.50 Where Insurance Activities May Take Place

    Section 47(d)(1) of the FDIA requires that the Agencies' 
regulations include provisions to ensure that the routine acceptance of 
deposits is kept, to the extent practicable, physically segregated from 
insurance product activity. Proposed Sec. ____.50(a) set forth this 
general rule. It further required that, to the extent practicable, a 
depository institution identify areas where insurance product or 
annuity sales activities occur and clearly delineate and distinguish 
them from the areas where the institution's retail deposit-taking 
activities occur, in accordance with section 47(d)(2)(A) of the FDIA.
    The Agencies received several comments on this provision, most of 
which asked for clearer guidance on what constitutes the area where 
deposits are routinely accepted. Several asserted that the physical 
segregation requirement should not apply to an institution's 
``platform'' areas and should only apply to teller windows. 
``Platform'' areas are typically areas of an institution's premises in 
which employees other than tellers engage in a variety of activities, 
including the origination of loans, the sale of insurance and annuity 
products, and occasionally, the acceptance of deposits. The Agencies 
wish to clarify for purposes of these final rules that the areas where 
retail deposits are routinely accepted from the general public are 
generally limited to traditional teller windows and teller lines.
    One commenter also recommended physically segregating the area 
where lending activities occur from the area where insurance products 
or annuities sales occur. The Agencies decline to make this change 
because it would extend significantly beyond the restrictions set forth 
in the statute.
    Proposed Sec. ____.50(b) implemented section 47(d)(2)(B) of the 
FDIA, concerning referrals to insurance product and annuity sales 
personnel by a person who accepts deposits from the public. Under that 
proposed section, any person who accepts deposits from the public in an 
area where such transactions are routinely conducted in a depository 
institution may refer a consumer who seeks to purchase an insurance 
product or annuity to a qualified person who sells that product. The 
person making the referral may only receive a one-time, nominal fee of 
a fixed dollar amount for each referral. The fee may not depend on 
whether the referral results in a transaction. The Agencies received 
several comments requesting that the limits on referral fees apply only 
to tellers. The Agencies believe that the person described in the 
regulation text--that is, a person ``who accepts deposits from the 
public in an area where such transactions are routinely conducted'' 
will typically be a teller. The Agencies also believe that a 
description by function is preferable because it is more precise. We 
have therefore retained the language as proposed.

Section ____.60 Qualification and Licensing Requirements for Insurance 
Sales Personnel

    Section 47(d)(2)(C) of the FDIA requires that the Agencies' 
regulations prohibit any depository institution from permitting any 
person to sell or offer for sale any insurance product in any part of 
any office of the institution, or on behalf of the institution, unless 
such person is appropriately qualified and licensed. Thus, proposed 
section ____.60 provided that a depository institution may not permit 
any person to sell or offer for sale any insurance product or annuity 
in any part of its office or on its behalf, unless the person is at all 
times appropriately qualified and licensed under applicable State 
insurance licensing standards with regard to the specific products 
being sold or recommended. One commenter expressed the opinion that 
this provision is unnecessary because each state's insurance licensing 
agency is already policing its licensing and qualification 
requirements. The Agencies retain this provision because it is required 
by the statute.

Appendix--Consumer Grievance Process

    Section 47(f) of the FDIA requires that the Agencies jointly 
establish a consumer complaint mechanism for addressing consumer 
complaints alleging violations of these rules. Each agency has 
procedures in place to handle consumer complaints they receive 
directly.\17\ The Agencies will apply those procedures to complaints 
involving these rules. The Appendix to each agency's final rule 
contains the name and address of each agency's consumer complaint 
office. Any consumer who believes that a depository institution or any 
other person selling, soliciting, advertising, or offering insurance 
products or annuities to the consumer at an office of the institution 
or on behalf of the institution has violated the requirements of these 
rules may contact the consumer complaint office listed in the Appendix.
---------------------------------------------------------------------------

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

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

[[Page 75830]]

local law will be shared with State regulators pursuant to those 
agreements.

Effect on Other Authority

    Section 47(g) sets forth a general framework for determining the 
effect of these final rules on State law. Under that framework, the 
Agencies' insurance consumer protection rules will not apply in a State 
where the State has in effect statutes, regulations, orders, or 
interpretations that are inconsistent with or contrary to the 
provisions of the Agencies' rules. If the Board, FDIC and OCC jointly 
determine, however, that the protection afforded by a provision of 
these final rules is greater than the protection provided by comparable 
state law or rulings, these final rules shall preempt the contrary or 
inconsistent State law or ruling. Prior to making this determination, 
the Board, FDIC and OCC must notify the appropriate State regulatory 
authority in writing, and the Board, FDIC and OCC will consider 
comments submitted by the appropriate State regulatory authorities. If 
the Board, FDIC and OCC determine that a provision of these final rules 
affords greater protection than State provisions, the Board, FDIC and 
OCC will send a written preemption notice to the appropriate State 
insurance authority that the provision of these final rules will be 
applicable unless the State adopts legislation within three years to 
override the preemption notice.
    In the preamble to the proposed rules, the Board, FDIC and OCC 
invited comment on whether it would be helpful to include a second 
appendix restating these statutory requirements or whether such a 
restatement would be confusing absent a determination regarding the 
applicability of specific State laws. The comments generally did not 
support the inclusion in the final rules of a preemption appendix. The 
Agencies do not believe it would be useful to include such an appendix.

Regulatory Analysis

A. Paperwork Reduction Act

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

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

    The final rule contains requirements to make disclosure at two 
different times. The respondents must prepare and provide certain 
disclosures to consumers: (1) Before the completion of the initial sale 
of an insurance product or annuity to a consumer; and (2) at the time 
of application for the extension of credit (if insurance products or 
annuities are solicited, offered or sold in connection with an 
extension of credit) (Secs. ____. 40(a) and (b)).
    The Agencies received one comment that addressed a perceived low 
burden estimate stemming from these disclosures. The commenter, 
however, provided no suggestion as to an appropriate higher estimate. 
Other comments regarding the information collection are discussed above 
in the preamble discussion of Secs. ____.20, ____.40 (a) and (b).
    OCC: The respondents are national banks, District of Columbia 
banks, and Federal branches and agencies of foreign banks and any other 
persons selling, soliciting, advertising, or offering insurance 
products or annuities at an office of a national bank or on behalf of a 
national bank. OMB has reviewed and approved the collections of 
information contained in the rule under control number 1557-0220, in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.). There are 1,949 respondents with a total annual burden of 19,490 
hours.
    Board: The respondents are state member banks and any other persons 
selling, soliciting, advertising, or offering insurance products or 
annuities at an office of a state member bank or on behalf of a state 
member bank. In accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board approved the rule 
under the authority delegated to the Board by OMB. The OMB control 
number is 7100-0295. There are 1,010 respondents with a total annual 
burden of 46,090 hours.
    FDIC: The respondents are insured nonmember banks and any other 
persons selling, soliciting, advertising, or offering insurance 
products or annuities at an office of an insured nonmember bank or on 
behalf of an insured nonmember bank. OMB has reviewed and approved the 
collections of information contained in the rule under control number 
3064-0140, in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3501 et seq.). There are 5,800 respondents with a total annual 
burden of 76,667 hours.
    OTS: The respondents are savings associations and any other persons 
selling, soliciting, advertising, or offering insurance products or 
annuities at an office of a savings association or on behalf of a 
savings association. OMB has reviewed and approved the collections of 
information contained in the rule under control number 1550-0106, in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.). There are 1,097 respondents with a total annual burden of 47,286 
hours.
    The Agencies have a continuing interest in the public's opinion 
regarding collections of information. Members of the public may submit 
comments, at any time, regarding any aspect of these collections of 
information. Comments may be sent to:
    OCC: Jessie Dunaway, Clearance Officer, Office of the Comptroller 
of the Currency, 250 E Street, SW, Mailstop 8-4, Washington, DC 20219.
    Board: Mary M. West, Federal Reserve Board Clearance Officer, 
Mailstop 97, Division of Research and Statistics, Board of Governors of 
the Federal Reserve System, Washington, DC 20551.
    FDIC: Steven F. Hanft, Assistant Executive Secretary (Regulatory 
Analysis), Federal Deposit Insurance Corporation, Room F-4080, 550 17th 
Street, NW, Washington, DC 20429.
    OTS: Dissemination Branch (1550-0106), Office of Thrift 
Supervision, 1700 G Street, NW, Washington, DC 20552.

B. Regulatory Flexibility Act

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

[[Page 75831]]

solicits, advertises, or offers insurance products or annuities to 
consumers. The final rule would apply regardless of the size of the 
bank or other organization for which a person worked.
    Small national banks are generally defined, for Regulatory 
Flexibility Act purposes, as those with assets of $100 million or less. 
13 CFR 121.201, Division H (2000). As of January, 1999, 1,949 national 
banks or national bank subsidiaries were engaged in insurance 
activities that would bring them within the scope of coverage of the 
final rule. We estimated in the preamble to the proposed rule that 976 
of the national banks that sold insurance as of January, 1999, had $100 
million or less in assets. We received no comment on this estimate and 
believe it to be accurate.
Reporting, Recordkeeping, and Compliance Requirements of the Final Rule
    The final rule requires national banks (and entities acting on 
behalf of national banks) to amend the written materials and Internet 
web sites they use in connection with the retail sale, solicitation, 
advertising, or offer of insurance products to consumers. The final 
rule also requires national banks (and entities acting on their behalf) 
to obtain from consumers acknowledgment that the consumer has received 
certain disclosures. The substance of these requirements is described 
in detail elsewhere in the Supplementary Information.\18\
---------------------------------------------------------------------------

    \18\ The final rule also requires national banks to keep the 
area where the bank conducts insurance transactions physically 
separate from the areas where retail deposits are routinely accepted 
from the general public ``to the extent practicable.'' This 
requirement, which is worded like the requirement in the statute, 
leaves significant discretion to each national bank to determine 
what costs, if any, the bank must incur in order to avoid customer 
confusion.
---------------------------------------------------------------------------

    The OCC believes that most national banks will be able to satisfy 
the disclosure provisions by including the information required to be 
disclosed in their written materials with minimal cost. We estimate 
that most banks maintain a 3 to 4 month inventory of those materials. 
This final rule will not become effective until April 1, 2001, which 
should allow ample time for most banks to exhaust their inventory of 
printed materials and prepare new materials. Nevertheless, our analysis 
assumes that some banks may need to amend the written materials they 
have in inventory during an interim period between the effective date 
of the final rule and the next regularly scheduled printing of those 
materials because their inventories will not be depleted during that 
time. These banks--which are probably smaller banks that order written 
materials infrequently and in large quantities to obtain reduced rates 
on printing--would therefore incur costs as a result of this 
requirement.
    There are approximately 25 national banks that sell insurance 
products over the Internet. Our experience has been that Internet banks 
regularly upgrade their web sites. Adding the required disclosures 
could be done as part of a regular upgrade and would therefore present 
only minimal additional costs to the bank.
    The primary cost associated with the requirement that a bank obtain 
from the consumer a written acknowledgment of the consumer's receipt of 
the disclosures is, in the OCC's opinion, likely to be the cost of 
developing the written acknowledgment. Banks that sell insurance 
products over the Internet should, as part of a regularly scheduled 
upgrade, be able to revise their web sites to include a series of 
``click throughs'' that will require affirmation from the customer that 
he or she has received the required disclosures.
Summary of Significant Issues Raised by the Public Comments in Response 
to Initial Regulatory Flexibility Analysis and Description of Steps the 
Agency Has Taken To Minimize Burden
    The issues raised by the commenters are described more fully 
elsewhere in the Supplementary Information. The issues that were raised 
by commenters about the proposal's impact on small businesses were the 
following:
     The requirement that a covered person obtain a written 
acknowledgment of receipt of disclosures for a telephone transaction 
could require significant effort and additional correspondence if the 
customer does not return the acknowledgment with other paperwork for 
the policy. This effort would be a significant burden for small 
financial institutions.
     The requirement that such insurance as credit and mortgage 
insurance be sold in an area of the office separate from where deposits 
are routinely taken poses a particular hardship for small financial 
institutions where deposits and loan applications are taken at the same 
place.
    The OCC considered how to tailor the form of disclosures and 
acknowledgments to the form of the sales transaction and how to make 
the record of acknowledgment functional, within the statutory 
constraints. In the case of telephone applications for credit, the 
proposed rule permitted the anti-coercion disclosure due at the time of 
applications to be given orally and followed with written disclosures 
mailed within three days. To extend the principle more broadly, the 
final rule applies this form of providing written disclosures for 
telephone sales to all the required disclosures. The timing has been 
clarified to be three business days, starting with the first business 
day after the telephone transaction. With respect to telephone sales, 
the final rule permits an oral acknowledgment of the disclosures if the 
covered person documents the acknowledgment. In that case, the final 
rule requires the covered person also to make reasonable efforts to 
obtain a written acknowledgment.
    We have made an additional change affecting disclosures relevant to 
sales initiated by telephone. The proposed rule limited the use of 
electronic disclosures to those transactions taking place entirely 
electronically. Commenters were concerned that the proposed rule did 
not permit electronic disclosures to be used in transactions that may 
have started with a telephone contact. To address this concern, the 
final rule provides that, if a transaction involves telephone contact, 
but the consumer affirmatively consents to transmission of disclosures 
through electronic media instead of on paper, the covered person may 
provide the ``written'' disclosures electronically. Of course, these 
electronic disclosures must satisfy the rule's requirement that the 
format of disclosure be one that permits the consumer to retain or to 
obtain later, such as by printing or storing electronically. Where 
disclosures are made electronically, the rule already provided that the 
consumer could acknowledge them electronically. Electronic 
acknowledgment of electronic disclosures applies under the final rule 
to these mixed media transactions, as well. The final rule also 
provides that oral disclosures are not required where disclosures are 
provided electronically. This exception applies not only to disclosures 
provided in the sale of insurance and annuities as in the proposed 
rule, but also to the anti-coercion disclosure provided with credit 
applications.
    In response to the concern expressed about the difficulty of 
separating functions in a small office, we have clarified in the 
preamble to this final rule that generally the location where deposits 
are routinely taken is the teller window and teller line. This 
distinction permits a savings association to sell insurance products 
and annuities from the ``platform area,'' where loan transactions may 
routinely be conducted, if the savings association distinguishes that 
area from the teller window area. The regulation also

[[Page 75832]]

requires this segregation of functions into separate areas ``to the 
extent practicable.'' If it is not practicable for a small institution 
to have separate areas, it could make other efforts to satisfy the 
separation of functions between deposit taking and selling of 
insurance.
    We note that in addition to these specific responses to concerns 
expressed with reference to impact on small entities, we have limited 
the scope of the rule in other ways to minimize compliance burdens. The 
final rule:
     Only applies to retail sales, solicitations, 
advertisements, or offers of insurance products or annuities to 
individuals purchasing for personal, family, or household use. The 
Agencies have determined, after requesting comment on whether to also 
include small business insurance purchases, not to broaden the 
coverage.
     Does not apply to subsidiaries of depository institutions, 
except where the subsidiaries are selling, soliciting, advertising, or 
offering insurance products or annuities to consumers at an office of a 
savings association or on behalf of a savings association.
     Clarifies the scope of the rule and the definition of 
``you'' to apply only to transactions conducted by the person that are 
by, at an office of, or on behalf of, the savings association.
     Defines ``office'' narrowly to include only premises where 
retail deposits are accepted from the public.
     Clarifies when certain disclosures must be provided, 
including that a disclosure such as ``not insured by any federal 
agency'' is not to be given where it would be inaccurate (as in the 
case of federally-insured crop insurance or flood insurance).
     Only requires the anti-coercion disclosure to be made 
once, instead of twice per transaction.
     Provides flexibility for covered persons to use a variety 
of means to provide disclosures that are readily understandable and 
call attention to the information.
     Provides that, in the case of telephone sales, the duty to 
obtain a consumer's acknowledgment of receiving the disclosures may be 
satisfied by an oral acknowledgment of disclosures combined with 
reasonable efforts to obtain a written acknowledgment.
     Does not require disclosures in advertisements of a 
general nature describing or listing the services or products offered 
by the savings association.
     Provides for a delayed effective date, requiring 
compliance by April 1, 2001, to permit adequate time to prepare 
disclosures and acknowledgment materials and train staff.
Significant Alternatives to the Final Rule
    Section 305 of the G-L-B Act expressly prescribes the content of 
its implementing regulations. The OCC's final rule does not depart 
materially from the requirements of the statute. The statute does not 
authorize the OCC to provide exemptions or exceptions to its 
requirements for small national banks.
    In preparing the final rule, the OCC has considered the burden on 
small national banks to the extent that it has the discretion to do so. 
As set forth above in the discussion of significant issues raised in 
response to the Initial Regulatory Flexibility Analysis, the Agencies 
have modified the final rules to minimize burden.
Duplicative, Overlapping, or Conflicting Federal Rules
    As used in the Interagency Statement, the term ``nondeposit 
investment products,'' includes some products, such as annuities, that 
are covered by section 47 of FDIA and these proposed rules. The 
Interagency Statement provides, among other things, that institutions 
should disclose to customers that such products are not insured by the 
FDIC or the depository institution and are subject to investment risk 
including possible loss of principal. It also provides that 
institutions should obtain acknowledgments from customers verifying 
that they have received and understand the disclosures. The Interagency 
Statement further provides that retail sales or recommendations of 
nondeposit investment products should be conducted in a location 
physically distinct from where retail deposits are taken, that 
nondeposit investment product sales personnel should receive adequate 
training, and that referral fees should be limited. The final rules do 
not appear to conflict materially with the Interagency Statement.
    Board: The Regulatory Flexibility Act (5 U.S.C. 601-12) requires 
federal agencies either to provide a Final Regulatory Flexibility 
Analysis with a final rule or to certify that the final rule will not 
have a significant economic impact on a substantial number of small 
entities. Based on available data, the Board is unable to determine at 
this time whether the final rule would have a significant impact on a 
substantial number of small entities. For this reason, the Board has 
prepared the following Final Regulatory Flexibility Analysis.
Reasons, Objectives, and Legal Basis for the Final Rule
    A description of the reasons why the Board is adopting this final 
rule and a statement of the need for, and the objectives of, the final 
rule are contained in the supplementary materials provided above. The 
Board's final rule is virtually identical to the final rules being 
adopted by the other Federal banking agencies for the depository 
institutions over which they have primary supervisory authority.
Description of the Small Entities to Which the Final Rule Would Apply
    The final rule applies to all state member banks and any other 
person when that person sells, solicits, advertises, or offers an 
insurance product or annuity to an individual for personal, family, or 
household purposes at an office of a state member bank or on behalf of 
the bank. As of year-end 1999, there were approximately 1,010 state 
member banks. The Board estimates that approximately 480 state member 
banks have assets less than $100 million. Based on available data, the 
Board is unable to estimate the number of other persons who engage in 
retail insurance activities at an office of a state member bank or on 
behalf of the bank, or how many of these other persons are small 
entities.
Summary of Significant Issues Raised by the Public Comments in Response 
to Initial Regulatory Flexibility Analysis and Description of Steps the 
Agency has Taken to Minimize Burden
    The issues raised by the commenters generally are described more 
fully in the supplementary material provided above. The issues that 
were raised by commenters in connection with impact on small 
businesses, specifically, were the following:
     The requirement that a covered person obtain a written 
acknowledgment of receipt of disclosures for a telephone transaction 
could require significant effort and additional correspondence if the 
customer does not return the acknowledgment with other paperwork for 
the policy. This effort would be a significant burden for small 
financial institutions.
     The requirement that such insurance as credit and mortgage 
insurance be sold in an area of the office separate from where deposits 
are routinely taken poses a particular hardship for small financial 
institutions

[[Page 75833]]

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

[[Page 75834]]

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

    \19\ The RFA defines the term ``small entity'' in 5 U.S.C. 601 
by reference to definitions published by the Small Business 
Administration (SBA). The SBA has defined a ``small entity of 
banking purposes as a national or commercial, savings institution or 
credit union with less than $100 million in assets.'' See 13 CFR 
121.201.
---------------------------------------------------------------------------

Reporting, Recordkeeping, and Compliance Requirements of the Final Rule
    The final rule requires banks (and entities acting on behalf of 
banks) to amend the written materials and Internet web sites they use 
in connection with the retail sale, solicitation, advertising, or offer 
of insurance products and annuities to consumers. The final rule also 
requires banks (and entities acting on their behalf) to obtain from 
consumers acknowledgment that the consumer has received certain 
disclosures. The substance of these requirements is described in detail 
elsewhere in the Supplementary Information. \20\
---------------------------------------------------------------------------

    \20\ The final rule also requires banks to keep the area where 
the bank conducts insurance transactions physically separate from 
the areas where retail deposits are routinely accepted from the 
general public ``to the extent practicable.'' This requirement, 
which is worded like the requirement in the statute, leaves 
significant discretion to each bank to determine what costs, if any, 
the bank must incur in order to avoid customer confusion.
---------------------------------------------------------------------------

    The FDIC believes that most banks will be able to satisfy the 
disclosure provisions by including the information required to be 
disclosed in their written materials with minimal cost. We estimate 
that most banks maintain a 3 to 4 month inventory of those materials. 
This final rule will not become effective until April 1, 2001, which 
should allow ample time for most banks to use up their inventory of 
printed materials and prepare new materials. Nevertheless, our analysis 
assumes that some banks may need to amend the written materials they 
have in inventory during an interim period between the effective date 
of the final rule and the next regularly scheduled printing of those 
materials because their inventories will not be depleted during that 
time. These banks--which are probably smaller banks that order written 
materials infrequently and in large quantities to obtain reduced rates 
on printing--would therefore incur costs as a result of this 
requirement.
    The primary cost associated with the requirement that a bank obtain 
from the consumer a written acknowledgment of the consumer's receipt of 
the disclosures is, in the FDIC's opinion, likely to be the cost of 
developing the written acknowledgment. Banks that sell insurance 
products over the Internet should, as part of a regularly scheduled 
upgrade, be able to revise their web sites to include a series of 
``click throughs'' that will require affirmation from the customer that 
he or she has received the required disclosures.
Summary of Significant Issues Raised by the Public Comments in Response 
to Initial Regulatory Flexibility Analysis and Description of Steps the 
Agency Has Taken To Minimize Burden
    The issues raised by the commenters generally are described more 
fully in the supplementary material provided above. The issues that 
were raised by commenters in connection with impact on small 
businesses, specifically, were the following:
     The requirement that a covered person obtain a written 
acknowledgment of receipt of disclosures for a telephone transaction 
could require significant effort and additional correspondence if the 
customer does not return the acknowledgment with other paperwork for 
the policy. This effort would be a significant burden for small 
financial institutions.
     The requirement that such insurance as credit and mortgage 
insurance be sold in an area of the office separate from where deposits 
are routinely taken poses a particular hardship for small financial 
institutions where deposits and loan applications are taken at the same 
place.
    The FDIC seriously considered how to tailor the form of disclosures 
and acknowledgments to the form of the sales transaction and how to 
make the record of acknowledgment functional, within the statutory 
constraints. In the case of telephone applications for credit, the 
proposed rule permitted the anti-coercion disclosure due at the time of 
applications to be given orally and followed with written disclosures 
mailed within three days. To extend the principle more broadly, the 
final rule applies this form of providing written disclosures for 
telephone sales to all the required disclosures. The timing has been 
clarified to be three business days, starting with the first business 
day after the telephone transaction. With respect to telephone sales, 
the final rule permits an oral acknowledgment of the disclosures if the 
covered person documents the acknowledgment. In that case, the final 
rule requires the covered person also to make reasonable efforts to 
obtain a written acknowledgment.
    We have made an additional change affecting disclosures relevant to 
sales initiated by telephone. The proposed rule limited the use of 
electronic disclosures to those transactions taking place entirely 
electronically. Commenters were concerned that the proposed rule did 
not permit electronic disclosures to be used in transactions that may 
have started with a telephone contact. To address this concern, the 
final rule provides that, if a transaction involves telephone contact, 
but the consumer affirmatively consents to transmission of disclosures 
through electronic media instead of on paper, the covered person may 
provide the ``written'' disclosures electronically. Of course, these 
electronic disclosures must satisfy the rule's requirement that the 
format of disclosure be one that permits the consumer to retain or to 
obtain later, such as by printing or storing electronically. Where 
disclosures are made electronically, the rule already provided that the 
consumer could acknowledge them electronically. Electronic 
acknowledgment of

[[Page 75835]]

electronic disclosures applies under the final rule to these mixed 
media transactions, as well. The final rule also provides that oral 
disclosures are not required where disclosures are provided 
electronically. This exception applies not only to disclosures provided 
in the sale of insurance and annuities as in the proposed rule, but 
also to the anti-coercion disclosure provided with credit applications.
    In response to the concern expressed about the difficulty of 
separating functions in a small office, we have clarified in the 
preamble to this final rule that generally the location where deposits 
are routinely taken is the teller window and teller line. This 
distinction permits a depository institution to sell insurance products 
and annuities from the ``platform area,'' where loan transactions may 
routinely be conducted, if the savings association distinguishes that 
area from the teller window area. The regulation also requires this 
segregation of functions into separate areas ``to the extent 
practicable.'' If it is not practicable for a small institution to have 
separate areas, it could make other efforts to satisfy the separation 
of functions between deposit taking and selling of insurance.
    We note that in addition to these specific responses to concerns 
expressed with reference to impact on small entities, we have limited 
the scope of the rule in other ways to minimize compliance burdens. The 
final rule:
     Only applies to retail sales, solicitations, 
advertisements, or offers of insurance products or annuities to 
individuals purchasing for personal, family, or household use. The 
Agencies have determined, after requesting comment on whether to also 
include small business purchase, not to broaden the coverage.
     Does not apply to subsidiaries of depository institutions, 
except where the subsidiaries are selling, soliciting, advertising, or 
offering insurance products or annuities to consumers at an office of a 
bank or on behalf of a bank. The FDIC is adopting this approach even 
though, under section 47(a)(2) of FDIA, the FDIC could apply the 
requirements to subsidiaries if it determined that doing so was 
necessary to ensure the consumer protections provided by the statute.
     Clarifies the scope of the rule and the definition of 
``you'' to apply only to transactions conducted by the person that are 
by, at an office of, or on behalf of, the bank.
     Defines ``office'' narrowly to include only premises where 
retail deposits are accepted from the public.
     Clarifies when certain disclosures must be provided, 
including that a disclosure such as ``not insured by any federal 
agency'' is not to be given where it would be inaccurate (as in the 
case of federally-insured crop insurance or flood insurance).
     Only requires the anti-coercion disclosure to be made 
once, instead of twice per transaction.
     Provides flexibility for covered persons to use a variety 
of means to provide disclosures that are readily understandable and 
call attention to the information.
     Provides that, in the case of telephone sales, the duty to 
obtain a consumer's acknowledgment of receiving the disclosures may be 
satisfied by an oral acknowledgment of disclosures combined with 
reasonable efforts to obtain a written acknowledgment.
     Does not require disclosures in advertisements of a 
general nature describing or listing the services or products offered 
by the bank.
     Provides for a delayed effective date, requiring 
compliance by April 1, 2001, to permit adequate time to prepare 
disclosures and acknowledgment materials and train staff.
Significant Alternatives to the Final Rule
    Section 305 of the G-L-B Act expressly prescribes the content of 
its implementing regulations. The FDIC's final rule does not depart 
materially from the requirements of the statute. The statute does not 
authorize the FDIC to provide exemptions or exceptions to its 
requirements for small banks.
    In preparing the final rule, the FDIC has considered the burden on 
small banks to the extent that it has the discretion to do so. As set 
forth above in the discussion of significant issues raised in response 
to the Initial Regulatory Flexibility Analysis, the Agencies have 
modified the final rules to minimize burden.
Duplicative, Overlapping, or Conflicting Federal Rules
    As used in the Interagency Statement, the term ``nondeposit 
investment products,'' includes some products, such as annuities, that 
are covered by section 47 of FDIA and these proposed rules. The 
Interagency Statement provides, among other things, that institutions 
should disclose to customers that such products are not insured by the 
FDIC or the depository institution and are subject to investment risk 
including possible loss of principal. It also provides that 
institutions should obtain acknowledgments from customers verifying 
that they have received and understand the disclosures. The Interagency 
Statement further provides that retail sales or recommendations of 
nondeposit investment products should be conducted in a location 
physically distinct from where retail deposits are taken, that 
nondeposit investment product sales personnel should receive adequate 
training, and that referral fees should be limited. The final rules do 
not appear to conflict materially with the Interagency Statement.
    OTS: The Regulatory Flexibility Act (5 U.S.C. 601-612) requires 
federal agencies to prepare a final regulatory flexibility analysis 
(RFA) with a final rule, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities. OTS believes that this rule will not have a significant 
economic impact on a substantial number of small thrifts or other small 
entities because the burden imposed on small entities stems in large 
part from the G-L-B Act rather than from the final rule. This final 
rule restates and clarifies the statutory requirements. These 
clarifications should reduce the burden of complying with the G-L-B Act 
provisions. OTS has revised the proposed rule to reduce the regulatory 
burden on financial institutions of all sizes, as discussed below. 
However, OTS has prepared the following final RFA, because the G-L-B 
Act creates requirements that, in part, are new to the OTS, the thrift 
industry, and others, and because OTS is uncertain of the economic 
impact of compliance with the new requirements.
1. Statement of Need and Objectives
    A description of the reasons why OTS is adopting this final rule 
and a statement of the objectives of, and legal basis for, the final 
rule, are contained in the supplementary materials provided above.
2. Small Entities to Which the Final Rule Would Apply
    The final rule would apply to a savings association or any ``other 
person'' who, at an office of a savings association or on behalf of a 
savings association, sells, solicits, advertises, or offers insurance 
products or annuities to consumers. The final rule would apply 
regardless of the size of the savings association or other organization 
for which a person worked.
    Small savings associations are generally defined, for Regulatory

[[Page 75836]]

Flexibility Act purposes, as those with assets of $100 million or less. 
13 CFR 121.201, Division H (2000). As of the publication of the 
proposed rule, OTS calculated that of the approximately 1,097 savings 
associations, a maximum of 482 were small savings associations. 
Currently, OTS calculates that of the approximately 1,091 savings 
associations, a maximum of 476 are small savings associations. OTS 
estimates that all of the small savings associations sell, solicit, 
advertise, or offer insurance products or annuities to consumers.
    OTS does not collect data on how many ``covered persons'' that are 
not savings associations sell, solicit, advertise, or offer insurance 
products or annuities to consumers at an office of a savings 
association or on behalf of a savings association, or on how many of 
them are small entities. The initial RFA published in the proposed rule 
sought information about impact on entities other than savings 
associations affected by the rule to permit OTS to better analyze the 
effect. Although OTS received comments on the proposed rule from 
insurance industry representatives, who might have data with respect to 
their members, none of them provided information on the number or size 
of entities other than savings associations affected by the rule. As a 
result, OTS is unable to determine the number or size of entities other 
than savings associations affected by this final rule.
3. Significant Issues Raised in Response to Initial Regulatory 
Flexibility Analysis and Changes Made To Minimize Burden
    The issues raised by the commenters generally are described more 
fully in the supplementary material provided above. The issues that 
were raised by commenters in connection with impact on small 
businesses, specifically, were the following:
     The requirement that a covered person obtain a written 
acknowledgment of receipt of disclosures for a telephone transaction 
could require significant effort and additional correspondence if the 
customer does not return the acknowledgment with other paperwork for 
the policy. This effort would be a significant burden for small 
financial institutions.
     The requirement that such insurance as credit and mortgage 
insurance be sold in an area of the office separate from where deposits 
are routinely taken poses a particular hardship for small financial 
institutions where deposits and loan applications are taken at the same 
place.
    OTS seriously considered how to tailor the form of disclosures and 
acknowledgments to the form of the sales transaction and how to make 
the record of acknowledgment functional, within the statutory 
constraints. In the case of telephone applications for credit, the 
proposed rule permitted the disclosure on anti-tying due at the time of 
applications to be given orally and followed with written disclosures 
by mail, provided that the written disclosures were mailed within three 
days. To extend the principle more broadly, the final rule applies this 
form of providing written disclosures for telephone sales to all the 
required disclosures. The timing has been clarified to be three 
business days, starting with the first business day after the telephone 
transaction. With respect to telephone sales, the final rule permits an 
oral acknowledgment of the disclosures if the covered person documents 
the acknowledgment. In that case, the final rule requires the covered 
person to make reasonable efforts to obtain a written acknowledgment, 
as well.
    We have made an additional change affecting disclosures relevant to 
sales initiated by telephone. In response to concerns expressed about 
the proposed rule's limitation of using electronic disclosures to those 
transactions taking place entirely electronically, and not permitting 
them to be used in transactions that may have started with a telephone 
contact, we have removed that limitation. Thus, if a transaction 
involves telephone contact, but the consumer affirmatively consents to 
transmission of disclosures through electronic media instead of on 
paper, the covered person may provide the ``written'' disclosures 
electronically. Of course, these electronic disclosures must satisfy 
the rule's requirement that the format of disclosure be one that 
permits the consumer to retain or to obtain later, such as by printing 
or storing electronically. Where disclosures are made electronically, 
the rule already provided that the consumer could acknowledge them 
electronically. Electronic acknowledgment of electronic disclosures 
applies under the final rule to these mixed media transactions, as 
well. The final rule also provides that oral disclosures are not 
required where disclosures are provided electronically. This exception 
applies not only to disclosures provided in the sale of insurance and 
annuities as in the proposed rule, but also to the anti-coercion 
disclosure provided with credit applications.
    In response to the concern expressed about the difficulty of 
separating functions in a small office, we have clarified in the 
preamble to this final rule that generally the location where deposits 
are routinely taken is the teller window and teller line. This 
distinction permits a savings association to sell insurance products 
and annuities from the ``platform area'' where loan transactions may 
routinely be conducted, if the savings association distinguishes that 
area from the teller window area. The regulation also requires this 
segregation of functions into separate areas ``to the extent 
practicable.'' If it is not practicable for a small institution to have 
separate areas, it could make other efforts to satisfy the separation 
of functions between deposit taking and selling of insurance.
    We note that in addition to these specific responses to concerns 
expressed with reference to impact on small entities, we have limited 
the scope of the rule in other ways to minimize compliance burdens. The 
final rule:
     Only applies to retail sales, solicitations, 
advertisements, or offers of insurance products or annuities to 
individuals purchasing for personal, family, or household use. The 
Agencies have determined, after requesting comment on whether to also 
include small business purchase, not to broaden the coverage.
     Does not apply to subsidiaries of depository institutions, 
except where the subsidiaries are selling, soliciting, advertising, or 
offering insurance products or annuities to consumers at an office of a 
savings association or on behalf of a savings association. OTS is 
adopting this approach even though, under section 47(a)(2) of FDIA, OTS 
could apply the requirements to subsidiaries if it determined that 
doing so was necessary to ensure the consumer protections provided by 
the statute.
     Clarifies the scope of the rule and the definition of 
``you'' to apply only to transactions conducted by the person that are 
by, at an office of, or on behalf of, the savings association.
     Defines ``office'' narrowly to include only premises where 
retail deposits are accepted from the public.
     Clarifies when certain disclosures must be provided, 
including that a disclosure such as ``not insured by any federal 
agency'' is not to be given where it would be inaccurate (as in the 
case of federally-insured crop insurance or flood insurance).
     Only requires the anti-coercion disclosure to be made 
once, instead of twice per transaction.

[[Page 75837]]

     Provides flexibility for covered persons to use a variety 
of means to provide disclosures that are readily understandable and 
call attention to the information.
     Provides that, in the case of telephone sales, the duty to 
obtain a consumer's acknowledgment of receiving the disclosures may be 
satisfied by an oral acknowledgment of disclosures combined with 
reasonable efforts to obtain a written acknowledgment.
     Does not require disclosures in advertisements of a 
general nature describing or listing the services or products offered 
by the savings association.
     Provides for a delayed effective date, requiring 
compliance by April 1, 2001, to permit adequate time to prepare 
disclosures and acknowledgment materials and train staff.
4. Projected Reporting, Recordkeeping and Other Compliance Requirements
    While the scope of the final rule implementing section 47 of FDIA 
is unique, there is some overlap with certain prior guidance and 
Federal statutes and rules. As used in the Interagency Statement on 
Retail Sales of Nondeposit Investment Products (February 15, 1994) 
(``Interagency Statement''), the term ``nondeposit investment 
products'' includes some products, such as annuities, that are covered 
by section 47 of FDIA and this final rule. The Interagency Statement 
provides, among other things, that institutions should disclose to 
customers that such products are not insured by the FDIC or the 
depository institution and are subject to investment risk including 
possible loss of principal. It also provides that institutions should 
obtain acknowledgments from customers verifying that they have received 
and understand the disclosures. The Interagency Statement further 
provides that retail sales or recommendations of nondeposit investment 
products should be conducted in a location physically distinct from 
where retail deposits are taken, that nondeposit investment product 
sales personnel should receive adequate training, and that referral 
fees should be limited.
    Other federal authorities that overlap with the final rule include 
the statutory prohibition on tying arrangements in section 5(q) of the 
Home Owners' Loan Act (12 U.S.C. 1464(q)), and OTS's regulation 
prohibiting advertising that is inaccurate or makes misrepresentations 
(12 CFR 563.27). State consumer protection rules also may apply to 
sales, solicitations, advertisements, and offers of insurance products 
or annuities. The final rule does not appear to conflict materially 
with the Interagency Statement or these other authorities.
    As a result of the overlap of the rule's requirements with the 
provisions of the Interagency Statement and other federal authorities 
discussed above, many savings associations and other persons may 
already be partly or fully prepared to meet the requirements of the 
final rule. Persons selling, soliciting, advertising, or offering 
insurance products or annuities may have to revise printed materials 
and modify Internet web sites. Compliance with other requirements, such 
as the prohibition on domestic violence discrimination, will call for 
similar types of resources as are used to comply with other existing 
nondiscrimination statutes such as the Equal Credit Opportunity Act, 15 
U.S.C. 1691-1691f, and the Fair Housing Act, 42 U.S.C. 3601 et seq. 
Covered persons may need to provide further training or additional 
personnel, including personnel skilled in clerical, computer, 
compliance, and legal matters. The delayed effective date of the final 
rule should provide adequate time for the affected parties to develop 
revised materials and to modify web sites, as necessary.
5. Significant Alternatives
    The requirements in the final rule parallel those in section 47 of 
FDIA. The final rule clarifies the statutory requirements in some areas 
and restates the requirements in a more understandable manner in other 
areas. The final rule does not impose any requirements that differ 
substantially from the statute. Since the requirements are set by 
statute, OTS has only limited discretion to consider alternatives. To 
the extent that OTS does have discretion, it has exercised that 
discretion to minimize the burden as discussed in section 3 above.
    Congress has decided that ``any depository institution'' and ``any 
person'' that is engaged in retail sales, solicitations, advertising, 
or offers of insurance products (or annuities), at the office or on 
behalf of a depository institution, must comply with these disclosure 
requirements. The G-L-B Act does not expressly authorize OTS to exempt 
small savings associations, affiliates, or persons from these 
requirements. OTS does not interpret the statute to permit such an 
exemption.

C. Executive Order 12866

    OCC: The OCC has determined that this final rule does not 
constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866. While the OCC's cost estimates are necessarily 
imprecise because the requirements included in the final rule result 
from new legislation, under the most conservative cost scenarios that 
the OCC can develop on the basis of available information, the impact 
of the final rule falls well short of the thresholds established by the 
Executive Order.
    OTS: OTS has determined that this final rule does not constitute a 
``significant regulatory action'' for the purposes of Executive Order 
12866. The rule follows closely the requirements of section 305 of the 
G-L-B Act. Since the G-L-B Act establishes the minimum requirements for 
this activity, OTS has little discretion to propose regulatory options 
that might significantly reduce costs or other burdens. OTS believes 
that the impact of the rule would not meet the thresholds of the 
Executive Order, and consequently OMB review is not necessary.

D. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
also requires the agency to identify and consider a reasonable number 
of regulatory alternatives before promulgating the rule. However, an 
agency is not required to assess the effects of its regulatory actions 
on the private sector to the extent that such regulations incorporate 
requirements specifically set forth in law. 2 U.S.C. 1531. Section 
305(e) of the G-L-B Act imposes the requirements contained in the final 
rules concerning domestic violence even without the issuance of 
regulations. Sections 305(a)-(d) of the G-L-B Act direct the Agencies 
to issue regulations implementing disclosure requirements and 
requirements to segregate the areas in which insurance activities are 
conducted from the areas where deposits are routinely accepted. The 
burden the rules place on the private sector is almost entirely 
attributable to the G-L-B Act. Therefore, the OCC and OTS have 
determined that the final rules will not result in expenditures by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. Accordingly, 
the OCC and OTS have not

[[Page 75838]]

prepared a budgetary impact statement or specifically addressed the 
regulatory alternatives considered.

E. Executive Order 13132--Federalism

    OCC: Executive Order 13132 imposes certain requirements when an 
agency issues a regulation that has federalism implications or that 
preempts State law. Under the Executive Order, a regulation has 
federalism implications if it has substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. In general, the Executive Order requires 
the agency to adhere strictly to federal constitutional principles in 
developing rules that have federalism implications; provides guidance 
about an agency's interpretation of statutes that authorize regulations 
that preempt State law; and requires consultation with State officials 
before the agency issues a final rule that has federalism implications 
or that preempts State law.
    This final rule satisfies the requirements of the Executive Order. 
If an agency promulgates a regulation that has federalism implications 
and preempts State law, the Executive Order imposes upon the agency 
requirements to consult with State and local officials; to publish a 
``federalism summary impact statement,'' and to make written comments 
from State and local officials available to the Director of the Office 
of Management and Budget (OMB).
    In the OCC's opinion, it is not clear that Executive Order 13132 
applies to the OCC's rules implementing section 305 of the G-L-B Act 
because the statute itself directs most of the significant policy 
choices that the Agencies have made--that is, the statute expressly 
prescribes both the substantive content and the preemptive effect of 
the rules. Moreover, the impact of the language of the express 
preemption provision in section 305 is to preserve State laws, subject 
to certain exceptions, rather than to preempt them. Under that 
provision, the insurance customer protections in the Agencies' rules 
generally will not have preemptive effect in a State where the State 
has in effect statutes, rules, regulations, orders, or interpretations 
that are inconsistent with or contrary to the regulations prescribed by 
the Agencies unless a provision in the Agencies' rules affords greater 
protection to customers than is afforded by a comparable State law. 
Section 305 prescribes a process for the Agencies to use in order to 
determine jointly whether a provision in the Agencies' regulations 
satisfies this ``greater protection'' standard. If the Agencies make 
that joint determination, and provide written notice to the affected 
State that its law is preempted, then that provision of State law will 
be preempted unless, within 3 years after the date that the Agencies 
issue the written notice, the State adopts legislation that overrides 
the preemption.
    As we indicated in the Supplementary Information that accompanied 
the proposal, the federalism implications and the preemptive effect of 
the OCC's rules implementing section 305 depend, in the first instance, 
on how the Agencies' final rules compare with a particular State's laws 
and, ultimately, on whether a State adopts the ``opt-out'' legislation 
that section 305 permits.
    Separately, section 305 of the G-L-B Act requires the Agencies to 
consult with State insurance regulators before issuing final 
implementing regulations. As described elsewhere in the Supplementary 
Information, the OCC and the other Agencies have consulted with the 
NAIC in preparing this final rule. The Agencies have provided the OMB a 
copy of the NAIC's written comments on the proposed rule.
    OTS: Executive Order 13132 imposes certain requirements on an 
agency when formulating and implementing policies that will have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, or taking 
actions that preempt state law. Section 47(g) of FDIA, 12 U.S.C. 1831x, 
as added by section 305 of the G-L-B Act, provides that the insurance 
consumer protections in the Agencies' rules generally will not apply to 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by any savings association 
or any person that is engaged in such activities at an office of the 
savings association or on behalf of the savings association in a State 
where the State has in effect statutes, regulations, orders, or 
interpretations that are inconsistent with or contrary to the 
provisions of the federal regulations. However, if the federal 
regulations afford greater protection for insurance consumers than a 
comparable State law, rule, regulation, order, or interpretation, the 
State provision may be preempted by the Board, the OCC, and the FDIC in 
accordance with certain specified procedures described in greater 
detail in the OCC's statement on Executive Order 13132 above.
    OTS has determined that application of these statutorily-mandated 
provisions will have federalism implications and may result in the 
preemption of state law. Section 47(a) of FDIA obligates OTS to issue 
this regulation to implement section 305 of the G-L-B Act, which 
includes section 47(g) of FDIA. Consistent with section 47(a)(3) of 
FDIA and section 6(c) of Executive Order 13132, OTS and the other 
Agencies have consulted with the National Association of Insurance 
Commissioners (NAIC), as indicated in the Supplementary Information 
above. As noted above, the Agencies considered and responded to the 
NAIC's comments. The Agencies also provided an advance copy of the 
final rule to the NAIC and OTS has provided an advance copy of the 
final rule to the Conference of State Bank Supervisors. The Agencies 
expect to consult with the NAIC and State insurance regulators as 
decisions are made concerning preemption in particular states.

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

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

List of Subjects

12 CFR Part 14

    Banks, banking, Insurance consumer protection, National banks.

12 CFR Part 208

    Accounting, Agriculture, Banks, banking, Confidential business 
information, Crime, Currency, Federal Reserve System, Insurance 
consumer protection, Mortgages, Reporting and recordkeeping 
requirements, Securities.

12 CFR Part 343

    Banks, banking, consumer protection, Insurance, Reporting and 
recordkeeping requirements.

12 CFR Part 536

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

[[Page 75839]]

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set out in the joint preamble, the OCC amends 
chapter I of title 12 of the Code of Federal Regulations by adding a 
new part 14 to read as follows:

PART 14--CONSUMER PROTECTION IN SALES OF INSURANCE

Sec.
14.10   Purpose and scope.
14.20   Definitions.
14.30   Prohibited practices.
14.40   What a covered person must disclose.
14.50   Where insurance activities may take place.
14.60   Qualification and licensing requirements for insurance sales 
personnel.
Appendix A to Part 14--Consumer Grievance Process

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


Sec. 14.10  Purpose and scope.

    (a) General rule. This part establishes consumer protections in 
connection with retail sales practices, solicitations, advertising, or 
offers of any insurance product or annuity to a consumer by:
    (1) Any national bank; or
    (2) Any other person that is engaged in such activities at an 
office of the bank or on behalf of the bank.
    (b) Application to operating subsidiaries. For purposes of 
Sec. 5.34(e)(3) of this chapter, an operating subsidiary is subject to 
this part only to the extent that it sells, solicits, advertises, or 
offers insurance products or annuities at an office of a bank or on 
behalf of a bank.


Sec. 14.20  Definitions.

    As used in this part:
    (a) Affiliate means a company that controls, is controlled by, or 
is under common control with another company.
    (b) Bank means a national bank or a Federal branch, or agency of a 
foreign bank as defined in section 1 of the International Banking Act 
of 1978 (12 U.S.C. 3101, et seq.)
    (c) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    (d) Consumer means an individual who purchases, applies to 
purchase, or is solicited to purchase from a covered person insurance 
products or annuities primarily for personal, family, or household 
purposes.
    (e) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (f)(1) Covered person means:
    (i) A bank; or
    (ii) Any other person only when the person sells, solicits, 
advertises, or offers an insurance product or annuity to a consumer at 
an office of the bank or on behalf of a bank.
    (2) For purposes of this definition, activities on behalf of a bank 
include activities where a person, whether at an office of the bank or 
at another location sells, solicits, advertises, or offers an insurance 
product or annuity and at least one of the following applies:
    (i) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the bank;
    (ii) The bank refers a consumer to a seller of insurance products 
or annuities and the bank has a contractual arrangement to receive 
commissions or fees derived from a sale of an insurance product or 
annuity resulting from that referral; or
    (iii) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the bank.
    (g) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (h) Electronic media includes any means for transmitting messages 
electronically between a covered person and a consumer in a format that 
allows visual text to be displayed on equipment, for example, a 
personal computer monitor.
    (i) Office means the premises of a bank where retail deposits are 
accepted from the public.
    (j) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).


Sec. 14.30  Prohibited practices.

    (a) Anticoercion and antitying rules. A covered person may not 
engage in any practice that would lead a consumer to believe that an 
extension of credit, in violation of section 106(b) of the Bank Holding 
Company Act Amendments of 1970 (12 U.S.C. 1972), is conditional upon 
either:
    (1) The purchase of an insurance product or annuity from the bank 
or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. A covered person 
may not engage in any practice or use any advertisement at any office 
of, or on behalf of, the bank or a subsidiary of the bank that could 
mislead any person or otherwise cause a reasonable person to reach an 
erroneous belief with respect to:
    (1) The fact that an insurance product or annuity sold or offered 
for sale by a covered person or any subsidiary of the bank is not 
backed by the Federal government or the bank, or the fact that the 
insurance product or annuity is not insured by the Federal Deposit 
Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank or subsidiary of the bank at which 
insurance products or annuities are sold or offered for sale, the fact 
that:
    (i) The approval of an extension of credit to a consumer by the 
bank or subsidiary may not be conditioned on the purchase of an 
insurance product or annuity by the consumer from the bank or a 
subsidiary of the bank; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. A covered 
person may not sell or offer for sale, as principal, agent, or broker, 
any life or health insurance product if the status of the

[[Page 75840]]

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


Sec. 14.40  What a covered person must disclose.

    (a) Insurance disclosures. In connection with the initial purchase 
of an insurance product or annuity by a consumer from a covered person, 
a covered person must disclose to the consumer, except to the extent 
the disclosure would not be accurate, that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the bank or an affiliate of the bank;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, the bank, or (if applicable) an affiliate of the bank; and
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value.
    (b) Credit disclosure. In the case of an application for credit in 
connection with which an insurance product or annuity is solicited, 
offered, or sold, a covered person must disclose that the bank may not 
condition an extension of credit on either:
    (1) The consumer's purchase of an insurance product or annuity from 
the bank or any of its affiliates; or
    (2) The consumer's agreement not to obtain, or a prohibition on the 
consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (c) Timing and method of disclosures. (1) In general. The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer. The disclosure required by 
paragraph (b) of this section must be made orally and in writing at the 
time the consumer applies for an extension of credit in connection with 
which an insurance product or annuity is solicited, offered, or sold.
    (2) Exception for transactions by mail. If a sale of an insurance 
product or annuity is conducted by mail, a covered person is not 
required to make the oral disclosures required by paragraph (a) of this 
section. If a covered person takes an application for credit by mail, 
the covered person is not required to make the oral disclosure required 
by paragraph (b).
    (3) Exception for transactions by telephone. If a sale of an 
insurance product or annuity is conducted by telephone, a covered 
person may provide the written disclosures required by paragraph (a) of 
this section by mail within 3 business days beginning on the first 
business day after the sale, excluding Sundays and the legal public 
holidays specified in 5 U.S.C. 6103(a). If a covered person takes an 
application for credit by telephone, the covered person may provide the 
written disclosure required by paragraph (b) of this section by mail, 
provided the covered person mails it to the consumer within three days 
beginning the first business day after the application is taken, 
excluding Sundays and the legal public holidays specified in 5 U.S.C. 
6103(a).
    (4) Electronic form of disclosures. (i) Subject to the requirements 
of section 101(c) of the Electronic Signatures in Global and National 
Commerce Act (12 U.S.C. 7001(c)), a covered person may provide the 
written disclosures required by paragraph (a) and (b) of this section 
through electronic media instead of on paper, if the consumer 
affirmatively consents to receiving the disclosures electronically and 
if the disclosures are provided in a format that the consumer may 
retain or obtain later, for example, by printing or storing 
electronically (such as by downloading).
    (ii) Any disclosures required by paragraphs (a) or (b) of this 
section that are provided by electronic media are not required to be 
provided orally.
    (5) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, a covered person may use the 
following disclosures in visual media, such as television broadcasting, 
ATM screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs 
(a) and (b) of this section:

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

    (6) Disclosures must be meaningful. (i) A covered person must 
provide the disclosures required by paragraphs (a) and (b) of this 
section in a meaningful form. Examples of the types of methods that 
could call attention to the nature and significance of the information 
provided include:
    (A) A plain-language heading to call attention to the disclosures;
    (B) A typeface and type size that are easy to read;
    (C) Wide margins and ample line spacing;
    (D) Boldface or italics for key words; and
    (E) Distinctive type style, and graphic devices, such as shading or 
sidebars, when the disclosures are combined with other information.
    (ii) A covered person has not provided the disclosures in a 
meaningful form if the covered person merely states to the consumer 
that the required disclosures are available in printed material, but 
does not provide the printed material when required and does not orally 
disclose the information to the consumer when required.
    (iii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass 
the visual text of the disclosures before purchasing an insurance 
product or annuity.
    (7) Consumer acknowledgment. A covered person must obtain from the 
consumer, at the time a consumer receives the disclosures required 
under paragraphs (a) or (b) of this section, or at the time of the 
initial purchase by the consumer of an insurance product or annuity, a 
written acknowledgment by the consumer that the consumer received the 
disclosures. A covered person may permit a consumer to acknowledge 
receipt of the disclosures electronically or in paper form. If the 
disclosures required under paragraphs (a) or (b) of this section are 
provided in connection with a transaction that is conducted by 
telephone, a covered person must:
    (i) Obtain an oral acknowledgment of receipt of the disclosures and 
maintain sufficient documentation to show that the acknowledgment was 
given; and
    (ii) Make reasonable efforts to obtain a written acknowledgment 
from the consumer.
    (d) Advertisements and other promotional material for insurance 
products or annuities. The disclosures described in paragraph (a) of 
this section are required in advertisements and promotional material 
for insurance products or annuities unless the advertisements and 
promotional materials are of a general nature

[[Page 75841]]

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


Sec. 14.50  Where insurance activities may take place.

    (a) General rule. A bank must, to the extent practicable, keep the 
area where the bank conducts transactions involving insurance products 
or annuities physically segregated from areas where retail deposits are 
routinely accepted from the general public, identify the areas where 
insurance product or annuity sales activities occur, and clearly 
delineate and distinguish those areas from the areas where the bank's 
retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in the bank may 
refer a consumer who seeks to purchase an insurance product or annuity 
to a qualified person who sells that product only if the person making 
the referral receives no more than a one-time, nominal fee of a fixed 
dollar amount for each referral that does not depend on whether the 
referral results in a transaction.


Sec. 14.60  Qualification and licensing requirements for insurance 
sales personnel.

    A bank may not permit any person to sell or offer for sale any 
insurance product or annuity in any part of its office or on its 
behalf, unless the person is at all times appropriately qualified and 
licensed under applicable State insurance licensing standards with 
regard to the specific products being sold or recommended.

Appendix A to Part 14--Consumer Grievance Process

    Any consumer who believes that any bank or any other person 
selling, soliciting, advertising, or offering insurance products or 
annuities to the consumer at an office of the bank or on behalf of 
the bank has violated the requirements of this part should contact 
the Customer Assistance Group, Office of the Comptroller of the 
Currency, (800) 613-6743, 1301 McKinney Street, Suite 3710, Houston, 
Texas 77010-3031.

    Dated: November 17, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.

Board of Governors of the Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons set out in the joint preamble, the Board amends 
part 208, chapter II, title 12 of the Code of Federal Regulations as 
follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

    1. The authority citation for part 208 is revised to read as 
follows:


    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 
2901-2907, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 
78l(b), 78l(g), 78l(i), 78o-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C. 
5318, 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.

Subpart H [Redesignated as Subpart I]

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

    3. A new subpart H is added to read as follows:

Subpart H--Consumer Protection in Sales of Insurance

Sec.
208.81   Purpose and scope.
208.82   Definitions for purposes of this subpart.
208.83   Prohibited practices.
208.84   What you must disclose.
208.85   Where insurance activities may take place.
208.86   Qualification and licensing requirements for insurance 
sales personnel.
Appendix A to Subpart H--Consumer Grievance Process


Sec. 208.81  Purpose and scope.

    This subpart establishes consumer protections in connection with 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by:
    (a) Any state member bank; or
    (b) Any other person that is engaged in such activities at an 
office of the bank or on behalf of the bank.


Sec. 208.82  Definitions for purposes of this subpart.

    As used in this subpart:
    (a) Affiliate means a company that controls, is controlled by, or 
is under common control with another company.
    (b) Bank means a state member bank.
    (c) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    (d) Consumer means an individual who purchases, applies to 
purchase, or is solicited to purchase from you insurance products or 
annuities primarily for personal, family, or household purposes.
    (e) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (f) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (g) Electronic media includes any means for transmitting messages 
electronically between you and a consumer in a format that allows 
visual text to be displayed on equipment, for example, a personal 
computer monitor.
    (h) Office means the premises of a bank where retail deposits are 
accepted from the public.
    (i) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
    (j)(1) You means:
    (i) A bank; or
    (ii) Any other person only when the person sells, solicits, 
advertises, or offers an insurance product or annuity to a consumer at 
an office of the bank or on behalf of a bank.
    (2) For purposes of this definition, activities on behalf of a bank 
include activities where a person, whether at an office of the bank or 
at another location sells, solicits, advertises, or offers an insurance 
product or annuity and at least one of the following applies:
    (i) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the bank;

[[Page 75842]]

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


Sec. 208.83  Prohibited practices.

    (a) Anticoercion and antitying rules. You may not engage in any 
practice that would lead a consumer to believe that an extension of 
credit, in violation of section 106(b) of the Bank Holding Company Act 
Amendments of 1970 (12 U.S.C. 1972), is conditional upon either:
    (1) The purchase of an insurance product or annuity from the bank 
or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. You may not engage 
in any practice or use any advertisement at any office of, or on behalf 
of, the bank or a subsidiary of the bank that could mislead any person 
or otherwise cause a reasonable person to reach an erroneous belief 
with respect to:
    (1) The fact that an insurance product or annuity sold or offered 
for sale by you or any subsidiary of the bank is not backed by the 
Federal government or the bank or the fact that the insurance product 
or annuity is not insured by the Federal Deposit Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank or subsidiary of the bank at which 
insurance products or annuities are sold or offered for sale, the fact 
that:
    (i) The approval of an extension of credit to a consumer by the 
bank or subsidiary may not be conditioned on the purchase of an 
insurance product or annuity by the consumer from the bank or a 
subsidiary of the bank; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. You may not 
sell or offer for sale, as principal, agent, or broker, any life or 
health insurance product if the status of the applicant or insured as a 
victim of domestic violence or as a provider of services to victims of 
domestic violence is considered as a criterion in any decision with 
regard to insurance underwriting, pricing, renewal, or scope of 
coverage of such product, or with regard to the payment of insurance 
claims on such product, except as required or expressly permitted under 
State law.


Sec. 208.84  What you must disclose.

    (a) Insurance disclosures. In connection with the initial purchase 
of an insurance product or annuity by a consumer from you, you must 
disclose to the consumer, except to the extent the disclosure would not 
be accurate, that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the bank or an affiliate of the bank;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, the bank, or (if applicable) an affiliate of the bank; and
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value.
    (b) Credit disclosure. In the case of an application for credit in 
connection with which an insurance product or annuity is solicited, 
offered, or sold, you must disclose that the bank may not condition an 
extension of credit on either:
    (1) The consumer's purchase of an insurance product or annuity from 
the bank or any of its affiliates; or
    (2) The consumer's agreement not to obtain, or a prohibition on the 
consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (c) Timing and method of disclosures. (1) In general. The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer. The disclosure required by 
paragraph (b) of this section must be made orally and in writing at the 
time the consumer applies for an extension of credit in connection with 
which insurance is solicited, offered, or sold.
    (2) Exceptions for transactions by mail. If a sale of an insurance 
product or annuity is conducted by mail, you are not required to make 
the oral disclosures required by paragraph (a) of this section. If you 
take an application for credit by mail, you are not required to make 
the oral disclosure required by paragraph (b) of this section.
    (3) Exception for transactions by telephone. If a sale of an 
insurance product or annuity is conducted by telephone, you may provide 
the written disclosures required by paragraph (a) of this section by 
mail within 3 business days beginning on the first business day after 
the sale, excluding Sundays and the legal public holidays specified in 
5 U.S.C 6103(a). If you take an application for such credit by 
telephone, you may provide the written disclosure required by paragraph 
(b) of this section by mail, provided you mail it to the consumer 
within three days beginning the first business day after the 
application is taken, excluding Sundays and the legal public holidays 
specified in 5 U.S.C. 6103(a).
    (4) Electronic form of disclosures. (i) Subject to the requirements 
of section 101(c) of the Electronic Signatures in Global and National 
Commerce Act (12 U.S.C. 7001(c)), you may provide the written 
disclosures required by paragraphs (a) and (b) of this section through 
electronic media instead of on paper, if the consumer affirmatively 
consents to receiving the disclosures electronically and if the 
disclosures are provided in a format that the consumer may retain or 
obtain later, for example, by printing or storing electronically (such 
as by downloading).
    (ii) Any disclosures required by paragraphs (a) or (b) of this 
section that are provided by electronic media are not required to be 
provided orally.
    (5) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, you may use the following 
disclosures, in visual media, such as television broadcasting, ATM 
screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs 
(a) and (b) of this section:

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

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

[[Page 75843]]

    (D) Boldface or italics for key words; and
    (E) Distinctive type size, style, and graphic devices, such as 
shading or sidebars, when the disclosures are combined with other 
information.
    (ii) You have not provided the disclosures in a meaningful form if 
you merely state to the consumer that the required disclosures are 
available in printed material, but you do not provide the printed 
material when required and do not orally disclose the information to 
the consumer when required.
    (iii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass 
the visual text of the disclosures before purchasing an insurance 
product or annuity.
    (7) Consumer acknowledgment. You must obtain from the consumer, at 
the time a consumer receives the disclosures required under paragraphs 
(a) or (b) of this section, or at the time of the initial purchase by 
the consumer of an insurance product or annuity, a written 
acknowledgment by the consumer that the consumer received the 
disclosures. You may permit a consumer to acknowledge receipt of the 
disclosures electronically or in paper form. If the disclosures 
required under paragraphs (a) or (b) of this section are provided in 
connection with a transaction that is conducted by telephone, you must:
    (i) Obtain an oral acknowledgment of receipt of the disclosures and 
maintain sufficient documentation to show that the acknowledgment was 
given; and
    (ii) Make reasonable efforts to obtain a written acknowledgment 
from the consumer.
    (d) Advertisements and other promotional material for insurance 
products or annuities. The disclosures described in paragraph (a) of 
this section are required in advertisements and promotional material 
for insurance products or annuities unless the advertisements and 
promotional materials are of a general nature describing or listing the 
services or products offered by the bank.


Sec. 208.85  Where insurance activities may take place.

    (a) General rule. A bank must, to the extent practicable, keep the 
area where the bank conducts transactions involving insurance products 
or annuities physically segregated from areas where retail deposits are 
routinely accepted from the general public, identify the areas where 
insurance product or annuity sales activities occur, and clearly 
delineate and distinguish those areas from the areas where the bank's 
retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in the bank may 
refer a consumer who seeks to purchase an insurance product or annuity 
to a qualified person who sells that product only if the person making 
the referral receives no more than a one-time, nominal fee of a fixed 
dollar amount for each referral that does not depend on whether the 
referral results in a transaction.


Sec. 208.86  Qualification and licensing requirements for insurance 
sales personnel.

    A bank may not permit any person to sell or offer for sale any 
insurance product or annuity in any part of its office or on its 
behalf, unless the person is at all times appropriately qualified and 
licensed under applicable State insurance licensing standards with 
regard to the specific products being sold or recommended.

Appendix A to Subpart H--Consumer Grievance Process

    Any consumer who believes that any bank or any other person 
selling, soliciting, advertising, or offering insurance products or 
annuities to the consumer at an office of the bank or on behalf of 
the bank has violated the requirements of this subpart should 
contact the Consumer Complaints Section, Division of Consumer and 
Community Affairs, Board of Governors of the Federal Reserve System 
at the following address: 20th & C Streets, NW, Washington, D.C. 
20551.

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

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

    For the reasons set out in the joint preamble, the Federal Deposit 
Insurance Corporation amends chapter III of title 12 of the Code of 
Federal Regulations by adding a new part 343 to read as follows:

PART 343--CONSUMER PROTECTION IN SALES OF INSURANCE

Sec.
343.10   Purpose and scope.
343.20   Definitions.
343.30   Prohibited practices.
343.40   What you must disclose.
343.50   Where insurance activities may take place.
343.60   Qualification and licensing requirements for insurance 
sales personnel.
Appendix A to Part 343--Consumer Grievance Process

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


Sec. 343.10  Purpose and scope.

    This part establishes consumer protections in connection with 
retail sales practices, solicitations, advertising, or offers of any 
insurance product or annuity to a consumer by:
    (a) Any bank; or
    (b) Any other person that is engaged in such activities at an 
office of the bank or on behalf of the bank.


Sec. 343.20  Definitions.

    As used in this part:
    (a) Affiliate means a company that controls, is controlled by, or 
is under common control with another company.
    (b) Bank means an FDIC-insured, state-chartered commercial or 
savings bank that is not a member of the Federal Reserve System and for 
which the FDIC is the appropriate federal banking agency pursuant to 
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).
    (c) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    (d) Consumer means an individual who purchases, applies to 
purchase, or is solicited to purchase from you insurance products or 
annuities primarily for personal, family, or household purposes.
    (e) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (f) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward

[[Page 75844]]

another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (g) Electronic media includes any means for transmitting messages 
electronically between you and a consumer in a format that allows 
visual text to be displayed on equipment, for example, a personal 
computer monitor.
    (h) Office means the premises of a bank where retail deposits are 
accepted from the public.
    (i) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
    (j) (1) You means:
    (i) A bank; or
    (ii) Any other person only when the person sells, solicits, 
advertises, or offers an insurance product or annuity to a consumer at 
an office of the bank or on behalf of a bank.
    (2) For purposes of this definition, activities on behalf of a bank 
include activities where a person, whether at an office of the bank or 
at another location sells, solicits, advertises, or offers an insurance 
product or annuity and at least one of the following applies:
    (i) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the bank;
    (ii) The bank refers a consumer to a seller of insurance products 
or annuities and the bank has a contractual arrangement to receive 
commissions or fees derived from a sale of an insurance product or 
annuity resulting from that referral; or
    (iii) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the bank.


Sec. 343.30  Prohibited practices.

    (a) Anticoercion and antitying rules. You may not engage in any 
practice that would lead a consumer to believe that an extension of 
credit, in violation of section 106(b) of the Bank Holding Company Act 
Amendments of 1970 (12 U.S.C. 1972), is conditional upon either:
    (1) The purchase of an insurance product or annuity from the bank 
or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. You may not engage 
in any practice or use any advertisement at any office of, or on behalf 
of, the bank or a subsidiary of the bank that could mislead any person 
or otherwise cause a reasonable person to reach an erroneous belief 
with respect to:
    (1) The fact that an insurance product or annuity sold or offered 
for sale by you or any subsidiary of the bank is not backed by the 
Federal government or the bank, or the fact that the insurance product 
or annuity is not insured by the Federal Deposit Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank or subsidiary of the bank at which 
insurance products or annuities are sold or offered for sale, the fact 
that:
    (i) The approval of an extension of credit to a consumer by the 
bank or subsidiary may not be conditioned on the purchase of an 
insurance product or annuity by the consumer from the bank or a 
subsidiary of the bank; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. You may not 
sell or offer for sale, as principal, agent, or broker, any life or 
health insurance product if the status of the applicant or insured as a 
victim of domestic violence or as a provider of services to victims of 
domestic violence is considered as a criterion in any decision with 
regard to insurance underwriting, pricing, renewal, or scope of 
coverage of such product, or with regard to the payment of insurance 
claims on such product, except as required or expressly permitted under 
State law.


Sec. 343.40  What you must disclose.

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

[[Page 75845]]

consents to receiving the disclosures electronically and if the 
disclosures are provided in a format that the consumer may retain or 
obtain later, for example, by printing or storing electronically (such 
as by downloading).
    (ii) Any disclosure required by paragraphs (a) or (b) of this 
section that is provided by electronic media is not required to be 
provided orally.
    (5) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, you may use the following 
disclosures in visual media, such as television broadcasting, ATM 
screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs 
(a) and (b) of this section:

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

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


Sec. 343.50  Where insurance activities may take place.

    (a) General rule. A bank must, to the extent practicable, keep the 
area where the bank conducts transactions involving insurance products 
or annuities physically segregated from areas where retail deposits are 
routinely accepted from the general public, identify the areas where 
insurance product or annuity sales activities occur, and clearly 
delineate and distinguish those areas from the areas where the bank's 
retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in the bank may 
refer a consumer who seeks to purchase an insurance product or annuity 
to a qualified person who sells that product only if the person making 
the referral receives no more than a one-time, nominal fee of a fixed 
dollar amount for each referral that does not depend on whether the 
referral results in a transaction.


Sec. 343.60  Qualification and licensing requirements for insurance 
sales personnel.

    A bank may not permit any person to sell or offer for sale any 
insurance product or annuity in any part of its office or on its 
behalf, unless the person is at all times appropriately qualified and 
licensed under applicable State insurance licensing standards with 
regard to the specific products being sold or recommended.

Appendix A to Part 343--Consumer Grievance Process

    Any consumer who believes that any bank or any other person 
selling, soliciting, advertising, or offering insurance products or 
annuities to the consumer at an office of the bank or on behalf of 
the bank has violated the requirements of this part should contact 
the Division of Compliance and Consumer Affairs, Federal Deposit 
Insurance Corporation, at the following address: 550 17th Street, 
NW., Washington, DC 20429, or telephone 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 of November, 2000.
Robert E. Feldman,
Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

    For the reasons set out in the joint preamble, OTS amends chapter V 
of title 12 of the Code of Federal Regulations by adding a new part 536 
to read as follows:

PART 536--CONSUMER PROTECTION IN SALES OF INSURANCE

Sec.
536.10   Purpose and scope.
536.20   Definitions.
536.30   Prohibited practices.
536.40   What you must disclose.
536.50   Where insurance activities may take place.
536.60   Qualification and licensing requirements for insurance 
sales personnel.
Appendix A to Part 536--Consumer Grievance Process.

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


Sec. 536.10  Purpose and scope.

    (a) General rule. This part establishes consumer protections in 
connection with retail sales practices, solicitations, advertising, or 
offers of any insurance product or annuity to a consumer by:
    (1) Any savings association; or
    (2) Any other person that is engaged in such activities at an 
office of a savings association or on behalf of a savings association.
    (b) Application to operating subsidiaries. For purposes of 
Sec. 559.3(h) of this chapter, an operating subsidiary is subject to 
this part only to the extent

[[Page 75846]]

that it sells, solicits, advertises, or offers insurance products or 
annuities at an office of a savings association or on behalf of a 
savings association.


Sec. 536.20  Definitions.

    As used in this part:
    Affiliate means a company that controls, is controlled by, or is 
under common control with another company.
    Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined 
in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended 
(12 U.S.C. 1841(o)(10)).
    Consumer means an individual who purchases, applies to purchase, or 
is solicited to purchase from a covered person insurance products or 
annuities primarily for personal, family, or household purposes.
    Control of a company has the same meaning as in section 3(w)(5) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, 
or sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    Electronic media includes any means for transmitting messages 
electronically between a covered person and a consumer in a format that 
allows visual text to be displayed on equipment, for example, a 
personal computer monitor.
    Office means the premises of a savings association where retail 
deposits are accepted from the public.
    Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
    You means:
    (1) A savings association, as defined in Sec. 561.43 of this 
chapter; or
    (2) Any other person only when the person sells, solicits, 
advertises, or offers an insurance product or annuity to a consumer at 
an office of a savings association, or on behalf of a savings 
association. For purposes of this definition, activities on behalf of a 
savings association include activities where a person, whether at an 
office of the savings association or at another location, sells, 
solicits, advertises, or offers an insurance product or annuity and at 
least one of the following applies:
    (i) The person represents to a consumer that the sale, 
solicitation, advertisement, or offer of any insurance product or 
annuity is by or on behalf of the savings association;
    (ii) The savings association refers a consumer to a seller of 
insurance products and annuities and the savings association has a 
contractual arrangement to receive commissions or fees derived from a 
sale of an insurance product or annuity resulting from that referral; 
or
    (iii) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the 
savings association.


Sec. 536.30  Prohibited practices.

    (a) Anticoercion and antitying rules. You may not engage in any 
practice that would lead a consumer to believe that an extension of 
credit, in violation of section 5(q) of the Home Owners' Loan Act (12 
U.S.C. 1464(q)), is conditional upon either:
    (1) The purchase of an insurance product or annuity from a savings 
association or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. You may not engage 
in any practice or use any advertisement at any office of, or on behalf 
of, a savings association or a subsidiary of a savings association that 
could mislead any person or otherwise cause a reasonable person to 
reach an erroneous belief with respect to:
    (1) The fact that an insurance product or annuity you or any 
subsidiary of a savings association sell or offer for sale is not 
backed by the Federal government or a savings association, or the fact 
that the insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a savings association or subsidiary of a savings 
association at which insurance products or annuities are sold or 
offered for sale, the fact that:
    (i) The approval of an extension of credit to a consumer by the 
savings association or subsidiary may not be conditioned on the 
purchase of an insurance product or annuity by the consumer from the 
savings association or a subsidiary of a savings association; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. You may not 
sell or offer for sale, as principal, agent, or broker, any life or 
health insurance product if the status of the applicant or insured as a 
victim of domestic violence or as a provider of services to victims of 
domestic violence is considered as a criterion in any decision with 
regard to insurance underwriting, pricing, renewal, or scope of 
coverage of such product, or with regard to the payment of insurance 
claims on such product, except as required or expressly permitted under 
State law.


Sec. 536.40  What you must disclose.

    (a) Insurance disclosures. In connection with the initial purchase 
of an insurance product or annuity by a consumer from you, you must 
disclose to the consumer, except to the extent the disclosure would not 
be accurate, that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, a savings association or an affiliate 
of a savings association;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, a savings association, or (if applicable) an affiliate of a 
savings association; and
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value.
    (b) Credit disclosures. In the case of an application for credit in 
connection with which an insurance product or annuity is solicited, 
offered, or sold, you must disclose that a savings association may not 
condition an extension of credit on either:
    (1) The consumer's purchase of an insurance product or annuity from 
the savings association or any of its affiliates; or

[[Page 75847]]

    (2) The consumer's agreement not to obtain, or a prohibition on the 
consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (c) Timing and method of disclosures. (1) In general. The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer. The disclosure required by 
paragraph (b) of this section must be made orally and in writing at the 
time the consumer applies for an extension of credit in connection with 
which an insurance product or annuity is solicited, offered, or sold.
    (2) Exception for transactions by mail. If you conduct an insurance 
product or annuity sale by mail, you are not required to make the oral 
disclosures required by paragraph (a) of this section. If you take an 
application for credit by mail, you are not required to make the oral 
disclosure required by paragraph (b) of this section.
    (3) Exception for transactions by telephone. If a sale of an 
insurance product or annuity is conducted by telephone, you may provide 
the written disclosures required by paragraph (a) of this section by 
mail within 3 business days beginning on the first business day after 
the sale, solicitation, or offer, excluding Sundays and the legal 
public holidays specified in 5 U.S.C. 6103(a). If you take an 
application for credit by telephone, you may provide the written 
disclosure required by paragraph (b) of this section by mail, provided 
you mail it to the consumer within three days beginning the first 
business day after the application is taken, excluding Sundays and the 
legal public holidays specified in 5 U.S.C. 6103(a).
    (4) Electronic form of disclosures. (i) Subject to the requirements 
of section 101(c) of the Electronic Signatures in Global and National 
Commerce Act (12 U.S.C. 7001(c)), you may provide the written 
disclosures required by paragraph (a) and (b) of this section through 
electronic media instead of on paper, if the consumer affirmatively 
consents to receiving the disclosures electronically and if the 
disclosures are provided in a format that the consumer may retain or 
obtain later, for example, by printing or storing electronically (such 
as by downloading).
    (ii) You are not required to provide orally any disclosures 
required by paragraphs (a) or (b) of this section that you provide by 
electronic media.
    (5) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, you may use the following 
disclosures in visual media, such as television broadcasting, ATM 
screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs 
(a) and (b) of this section:

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

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


Sec. 536.50  Where insurance activities may take place.

    (a) General rule. A savings association must, to the extent 
practicable:
    (1) Keep the area where the savings association conducts 
transactions involving insurance products or annuities physically 
segregated from areas where retail deposits are routinely accepted from 
the general public;
    (2) Identify the areas where insurance product or annuity sales 
activities occur; and
    (3) Clearly delineate and distinguish those areas from the areas 
where the savings association's retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in 
an area where such transactions are routinely conducted in a savings 
association may refer a consumer who seeks to purchase an insurance 
product or annuity to a qualified person who sells that product only if 
the person making the referral receives no more than a one-time, 
nominal fee of a fixed dollar amount for each referral that does not 
depend on whether the referral results in a transaction.


Sec. 536.60  Qualification and licensing requirements for insurance 
sales personnel.

    A savings association may not permit any person to sell or offer 
for sale any insurance product or annuity in any part of the savings 
association's office or on its behalf, unless the person is at all 
times appropriately qualified and licensed under applicable State 
insurance licensing standards with regard to the specific products 
being sold or recommended.

[[Page 75848]]

Appendix A to Part 536--Consumer Grievance Process

    Any consumer who believes that any savings association or any 
other person selling, soliciting, advertising, or offering insurance 
products or annuities to the consumer at an office of the savings 
association or on behalf of the savings association has violated the 
requirements of this part should contact the Director, Consumer 
Programs, Office of Thrift Supervision, at the following address: 
1700 G Street, NW, Washington, DC 20552, or telephone 202-906-6237 
or 800-842-6929, or e-mail [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`