Court Opinion

ID: 8922546
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:22:37.409457+00
Date Added: 2024-06-11T17:09:19.198703
License: Public Domain

ROSS, Circuit Judge,
dissenting.
I respectfully dissent. The majority concludes, initially, that Mercantile’s application was sufficiently precise to comply with this court’s order in Independent Insurance Agents of America, Inc. v. Board of Governors of the Federal Reserve, 658 F.2d 571 (8th Cir.1981) (hereinafter Mercantile I). I am unable to join in that conclusion because in my opinion the proposal remains vague in areas of critical importance to the public. These areas of concern are “tying” and the cost of the insurance to be offered for sale.
*478The AU found that no clear commitment on the price of the insurance was made in Mercantile’s proposal. In fact the evidence indicated that Mercantile itself did not know whether its product would fall in the high, middle or low cost area. This failure to specifically commit to at least a general price level led the AU to recommend, albeit hesitatingly, that the application be denied. This court has already stated its opinion on the importance the cost of insurance plays in these applications.
7 The Board recognized that Mercantile is under a fiduciary obligation to make insurance available at the lowest practicable cost to the consumer. Board’s Brief at 30 (citing 36 Fed.Reg. 15,525 (1971)). In considering this fiduciary obligation on remand, we find it unnecessary for the Board to elicit specific insurance rate quotations from Mercantile. The Board must, however, consider general proposed insurance rates before it can determine the validity of the IIAA’s claims that MBI’s rates will be much higher than those offered by independent agents in the relevant markets. Quite simply, we consider potential cost to consumers an essential factor in the Board’s net public benefits determination under 12 U.S.C. § 1843(c)(8).
Mercantile I, supra, at 576 n. 7 (emphasis added).
The murky nature of Mercantile’s proposal in the area of cost is especially worrisome when considered in conjunction with the record on the question of tying. The majority recognizes that both Mercantile and Commerce are linked to tying in the past and that both have enjoyed an unusually high success rate (penetration) in the sale of credit life insurance to borrowers. We are confronted then with the specter of an extremely successful “sales program” peddling overpriced coverage to a captive market. The “stringent commitments” entered into by the applicants and subject to enforcement by the Board are not enough. Enforcement of the law against coercive tying will be very difficult. Furthermore, the evils flowing from voluntary tying alone are sufficiently great, so that the application must be quite precise on the question of cost if the public is to be protected.
It follows from the above that I am also unable to accept the majority’s conclusion on the question of public benefits. In addition to my reservations on the issues of tying and price, I am persuaded that any potential benefit accruing to the public because of convenience is outweighed by the evils which will flow from conflicts of interest: (1) Both of the applicants’ proposals state that the insurance agent will also at times act as a loan officer. The majority, in addressing this conflict, points out that the applicants have promised that no insurance will be offered until after the loan is approved. This promise appears to be inconsistent with another of the applicants’ proposals which would permit premiums to be financed, and ignores the consumer’s potential desire for a subsequent loan. (2) The agent/loan officer will be unable to offer low cost multi-car insurance to the borrower who has only one of the family autos pledged to the bank. The sale of insurance covering unencumbered property or property not collateral for loans made by the applicant bank cannot logically be said to be “related” to banking. Alabama Ass’n of Ins. Agents v. Board of Governors of the Federal Reserve System, 533 F.2d 224, 241-44 (5th Cir.1976). And as the Board has previously argued to this court, the Alabama Ass’n case has foreclosed any reinterpretation of the regulation. Mercantile I, supra, at 575 n. 4. This potential conflict is also applicable to comprehensive home and auto insurance. (3) The bank’s interest will be best served if each borrower purchases low deduction but high premium insurance which completely covers the bank’s security. The borrower’s interest may of course require a choice of the lower cost insurance.
In light of these conflicts, I believe it is unrealistic to expect the agent/loan officer to ignore the interests of the institution which pays his salary and still fulfill his fiduciary obligations. In short, I am of the opinion that the only public which will be benefited under the majority’s decision is that part of the public which owns stock in either Commerce or Mercantile.
*479I must also dissent from the majority’s determination that Saxon v. Georgia Ass’n of Independent Ins. Agents, 399 F.2d 1010 (5th Cir.1968) is inapplicable to the facts of this case. The court in Saxon clearly held that 12 U.S.C. § 92 (1976) prohibits a national bank located in a town with a population of over 5,000 from selling insurance. The majority distinguishes this case by accepting as meaningful the separate corporate identity of the insurance sellers. This is unrealistic. The same employees, working in the same building, will sell insurance to the same customers that apply to the banks for credit. In addition, the profits from these sales will flow into the same pockets. The applicant banks will be selling insurance and to conclude otherwise would ignore the realities of the situation. If Saxon was correctly decided then it should not be so easily circumvented. If, on the other hand, this panel concludes that the decision is incorrect we should decline to follow the precedent of a sister circuit. In no event should we permit artifice to evade the effect of precedent. I accordingly dissent.