[Federal Register Volume 62, Number 9 (Tuesday, January 14, 1997)]
[Notices]
[Pages 1950-1952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-674]


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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket No. 97-01]


Preemption Determination

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice and request for comment.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
publishing for comment a written request for the OCC's determination of 
whether certain provisions of legislation entitled ``Financial 
Institution Insurance Sales Act,'' recently enacted by the State of 
Rhode Island, are preempted by Federal law. The purpose of this notice 
and request for comment is to provide interested persons with an 
opportunity to submit comments prior to the OCC's issuance of a final 
determination responding to the request.

DATES: Comments should be submitted on or before February 13, 1997.

ADDRESSES: Comments should be sent to the Communications Division, 250 
E Street, SW, Third Floor, Washington, DC 20219. Attention Docket No. 
97-01. Comments will be available for inspection and photocopying at 
the same location. Appointments for inspection of comments can be made 
by calling (202) 874-4700.

FOR FURTHER INFORMATION CONTACT: Suzette H. Greco, Senior Attorney, 
Securities and Corporate Practices Division, (202) 874-5210.

SUPPLEMENTARY INFORMATION:

Background

    The OCC has received a request from a trade association that 
represents financial institutions and insurance companies (Requester) 
for a determination that certain provisions of legislation entitled 
``Financial Institution Insurance Sales Act,'' R.I. Gen. Laws Sec. 27-
58-1 et seq., (the Rhode Island law), recently enacted by the State of 
Rhode Island, are preempted by provisions of the National Bank Act.
    Section 114 of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (section 114), Pub. L. 103-328 (12 U.S.C. 43), 
generally requires the OCC to publish in the Federal Register a 
descriptive notice of certain requests that the OCC receives for 
preemption determinations. Under section 114, the OCC must publish 
notice before it issues any opinion letter or interpretive rule 
concluding that Federal law preempts the application to a national bank 
of any State law in four designated areas: community reinvestment, 
consumer protection, fair lending, or the establishment of intrastate 
branches. Pursuant to section 114, interested persons have at least 30 
days to submit written comments.
    The Requester has offered reasons why the request should not be 
subject to section 114. Whether or not section 114 applies to the 
request, the OCC has determined that it is appropriate to use notice 
and comment procedures in this case, given the broad interest in the 
issues presented in the request and the benefit the OCC will derive by 
receiving comments from all parties with an interest in these issues. 
The OCC will publish in the Federal Register any final opinion letter 
or interpretive rule that concludes that Federal law preempts State 
law.

Specific Request for OCC Preemption Determination

    The OCC has been asked to determine whether certain provisions of 
the Rhode Island law are preempted by section 92 of the National Bank 
Act (12 U.S.C. 92) and other specific Federal laws noted later in this 
notice and request for comment.
    Section 92 authorizes a national bank ``located and doing business 
in a place where the population is less than five thousand to act as an 
agent for any fire, life, or other insurance company,'' to ``solicit 
and sell insurance,'' to ``collec[t] premiums,'' and to ``receive for 
services so rendered . . . fees or commissions,'' subject to 
regulations issued by the Comptroller of the Currency. 12 U.S.C. 92. 
State laws that apply generally to regulated insurance agents and 
agencies will apply to national banks provided the law does not 
effectively prevent national banks from conducting activities 
authorized under Federal law, and provided that, if the law interferes 
with those authorized activities, the interference is not significant. 
See Barnett Bank of Marion County, N.A. v. Nelson, 116 S.Ct. 1103 
(1996).
    The Rhode Island law imposes a number of requirements upon 
financial institutions engaged in the solicitation and sale of 
insurance that differ from the requirements that apply to other 
insurance agents and agencies. The Requester contends these special 
requirements prevent or significantly interfere with the ability of a 
national

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bank to exercise its authority under section 92. The special 
requirements include a provision prohibiting banks from requiring or 
implying that the purchase of insurance products from a bank is related 
to receiving another banking product or service, a provision 
restricting where a bank's licensed agent can solicit the sale of 
insurance, a provision prohibiting certain bank employees from 
soliciting and selling insurance, a provision requiring separate 
applications for loans and insurance, and a provision limiting the 
ability of a bank to use its customer information to solicit and sell 
insurance.
    Specifically, section 6 of the Rhode Island law provides that:
    (a) No financial institution may offer a banking product or 
service, or fix or vary the conditions of such offer, on a condition or 
requirement that the customer obtain insurance from the financial 
institution, or any particular insurance producer.
    (b) No person shall require or imply that the purchase of an 
insurance product from a financial institution by a customer or 
prospective customer of the institution is required as a condition of, 
or is any way related to, the lending of money or extension of credit, 
the establishment or maintenance of a trust account, the establishment 
or maintenance of a checking or savings account or other deposit 
account, or the provision of services related to any such activities.
    R.I. Gen. Laws Sec. 27-58-6. The Requester contends that this 
provision would prohibit a bank employee from even mentioning to a 
customer that insurance products are available from the bank. As a 
result, the Requester believes that the provision discriminates against 
national banks and significantly interferes with the ability of a 
national bank to solicit or sell insurance under section 92.
    Moreover, the Requester contends that the provision conflicts with 
the anti-tying provisions of the Bank Holding Company Act, 12 U.S.C. 
1972, and Federal regulations enacted pursuant to that section. Under 
the Federal anti-tying laws and regulations, banks are permitted to 
inform a customer that insurance is required in order to obtain a loan 
or that loan approval is contingent on the customer obtaining 
acceptable insurance. In such circumstances, the bank may indicate that 
insurance is available from the bank. Thus, the Requester contends that 
under traditional preemption standards the Rhode Island law is 
preempted by Federal law. The Requester further contends that the Rhode 
Island law was enacted for the purpose of regulating lenders rather 
than regulating the business of insurance and thus, is not protected 
from preemption by the McCarran-Ferguson Act, 15 U.S.C. 1011 et seq.
    In addition, section 12 of the Rhode Island law permits financial 
institutions to solicit and sell insurance only from an office 
physically separated from the banking activities of the institution. 
Specifically, section 12 provides that:
    The place of solicitation or sale of insurance by any financial 
institution shall be from an office physically separated from the 
banking activities of the institution. Physical separation shall not be 
defined as a separate building. The commissioner shall have the 
authority to promulgate rules to implement this section pursuant to 
Sec. 27-58-4.
    R.I. Gen. Laws Sec. 27-58-12. The Requester contends this provision 
will effectively prohibit insurance activities at small bank or branch 
offices. As a result, the Requester believes that the provision 
significantly interferes with a national bank's ability to solicit and 
sell insurance under section 92.
    In addition, section 8 of the Rhode Island law prohibits bank 
employees with lending or deposit taking responsibilities from 
soliciting and selling insurance. Specifically, section 8 provides 
that:
    Solicitation for the purchase and sale of insurance by a financial 
institution shall be conducted only by persons whose responsibilities 
do not include loan transactions or other transactions involving the 
extension of credit, or the taking of deposits.
    R.I. Gen. Laws Sec. 27-58-8. The Requester contends that this 
provision would prohibit the use of qualified ``platform'' employees to 
solicit and sell insurance, as is permitted for national banks. 
Moreover, the Requester believes that the provision could effectively 
bar insurance activities in small banks or branches where different 
employees may not be available to offer insurance and banking products 
and services. For these reasons, the Requester believes the provision 
discriminates against national banks and prevents or significantly 
interferes with their authority to solicit and sell insurance under 
section 92.
    Section 11 of the Rhode Island law requires that loan and insurance 
applications be completed independently and through separate documents. 
Section 11 provides that:
    (a) If insurance is required as a condition of obtaining a loan, 
the credit and insurance transactions shall be completed independently 
and through separate documents.
    (b) A loan for premiums on required insurance shall not be included 
in the primary credit without the written consent of the customer.
    R.I. Gen. Laws Sec. 27-58-11. The Requester contends that this 
provision, particularly when coupled with other requirements of the 
Rhode Island law, including the provision requiring the physical 
separation of insurance and banking activities and the provision 
prohibiting certain bank employees from soliciting and selling 
insurance, will impose an undue burden upon the bank and its customers 
by necessitating that the customer make multiple visits with different 
bank employees to multiple locations in order to purchase bank and 
insurance products.
    Section 10 of the Rhode Island law prohibits financial institutions 
from using or disclosing certain customer information for the purpose 
of selling or soliciting insurance. Specifically, section 10 provides 
that:
    (1)(b) ``Nonpublic customer information'' means information 
regarding a person that has been derived from a record of a financial 
institution, including information concerning the terms and conditions 
of insurance coverage, insurance expirations, insurance claims, or 
insurance history of an individual. ``Nonpublic customer information'' 
does not include customer names, addresses or telephone numbers.
    (2) No financial institution shall use any nonpublic customer 
information for the purpose of selling or soliciting the purchase of 
insurance or provide the nonpublic customer information to a third 
party for the purpose of another's sale or solicitation of the purchase 
of insurance.
    R.I. Gen. Laws Sec. 27-58-10. The Requester contends that this 
provision will cripple a bank's ability to use customer information to 
meet customer needs. The Requester believes that the limitation on use 
and disclosure of customer information would even prohibit the 
marketing of insurance products to bank customers who had requested 
such information. Moreover, like the other provisions cited by the 
Requester, the Requester contends that this provision discriminates 
against financial institutions because a collateral limitation has not 
been placed on other insurance agents and agencies in Rhode Island.

Request for Comments

    The OCC requests comments on whether Federal law preempts the 
provisions of the Rhode Island law cited above.


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    Dated: December 16, 1996.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 97-674 Filed 1-13-97; 8:45 am]
BILLING CODE 4810-33-P