[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1900 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1900

    To provide for adequate consumer protection in the provision of 
              financial services, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 17, 1997

  Mr. LaFalce (for himself, Mr. Gonzalez, Mr. Vento, Mr. Schumer, Mr. 
   Frank of Massachusetts, Ms. Waters, Mrs. Maloney of New York, Mr. 
Gutierrez, Ms. Roybal-Allard, Ms. Velazquez, Mr. Hinchey, Mr. Ackerman, 
 Mr. Jackson of Illinois, Ms. Kilpatrick, Ms. Carson, Mr. Torres, and 
 Mr. Sanders) introduced the following bill; which was referred to the 
              Committee on Banking and Financial Services

_______________________________________________________________________

                                 A BILL


 
    To provide for adequate consumer protection in the provision of 
              financial services, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Depository Institution Consumer 
Protection Act of 1997''.

SEC. 2. CONSUMER PROTECTION REGULATIONS REQUIRED.

    (a) In General.--The Federal Deposit Insurance Act (12 U.S.C. 1811 
et seq.) is amended by adding at the end the following new section:

``SEC. 45. CONSUMER PROTECTION REGULATIONS.

    ``(a) Regulations Required.--
            ``(1) In general.--Each Federal banking agency shall 
        prescribe and publish in final form not later than six months 
        after the date of enactment of this section of consumer 
        protection regulations which--
                    ``(A) apply to sales, solicitations, advertising or 
                offers of any nondeposit product by any retail 
                depository institution, any affiliate or subsidiary of 
                a retail depository institution, or any person who is 
                engaged in such activities at an office of the 
                institution or on behalf of the institution; and
                    ``(B) meet the requirements of this section and 
                provide such additional protections for consumers to 
                whom such sales, solicitations, advertising or offers 
                are directed as the agency determines to be 
                appropriate.
            ``(2) Consultation and joint regulations.--The Federal 
        banking agencies shall consult with each other and the SEC 
        regarding the regulations required to be prescribed pursuant to 
        paragraph (1) and to the greatest extent practicable shall 
        prescribe such regulations jointly.
            ``(3) Nondeposit product defined.--For purposes of this 
        section, the term `nondeposit product'--
                    ``(A) means any investment and insurance product 
                which is not an insured deposit;
                    ``(B) includes shares issued by a registered 
                investment company; and
                    ``(C) does not include--
                            ``(i) any loan or any other extension of 
                        credit by an insured depository institution;
                            ``(ii) any letter of credit; or
                            ``(iii) any other instrument or insurance 
                        or investment product specifically excluded 
                        from the definition of such term by regulations 
                        prescribed jointly by the Federal banking 
                        agencies, to the extent necessary to carry out 
                        the purpose of this Act.
    ``(b) Sales Practices.--The regulations prescribed pursuant to 
subsection (a) shall include the following provisions relating to sales 
practices in connection with the sale of nondeposit products:
            ``(1) Anticoercion rules.--
                    ``(A) In general.--Anticoercion rules prohibiting 
                depository institutions from making any extension of 
                credit conditional upon:
                            ``(i) the purchase of a nondeposit product 
                        from the same retail depository institutions, 
                        or an affiliate, subsidiary or agent of that 
                        retail depository institution; or
                            ``(ii) an agreement by the consumer not to 
                        obtain, or a prohibition on the consumer from 
                        obtaining, a nondeposit product from an 
                        unaffiliated entity.
                    ``(B) Product marketing.--Specific rules 
                prohibiting depository institutions, or their 
                affiliates, subsidiaries or agents from marketing 
                nondeposit products to consumers while applications for 
                extensions of credit from the depository institution 
                are pending, unless such marketing is done by mail, 
                separate and distinct from any processing, discussion 
                or provision of information regarding the application 
                for an extension of credit.
            ``(2) Suitability of product.--
                    ``(A) In general.--Standards to ensure that 
a nondeposit product sold to a consumer is suitable and appropriate for 
the consumer based on financial information disclosed by the consumer.
                    ``(B) Rules of fair practice.--In prescribing the 
                standards under subparagraph (A) with respect to the 
                sale of investments, the Federal banking agencies shall 
                take into account the Rules of Fair Practice of the 
                National Association of Securities Dealers.
    ``(c) Disclosures and Advertising.--The regulations prescribed 
pursuant to subsection (a) shall include the following provisions 
relating to disclosures and advertising in connection with the sale of 
nondeposit products:
            ``(1)(A) Disclosures.--Requirements that the following 
        disclosures be made orally and in writing before the completion 
        of the sale and, additionally, in the case of subparagraph 
        (iv), at the time of application for an extension of credit:
                    ``(i) Uninsured status.--The product is not insured 
                by the Federal Deposit Insurance Corporation or the 
                United States Government.
                    ``(ii) Insurance product.--In the case of an 
                insurance policy which is sold by the retail depository 
                institution, affiliate, subsidiary or other person as 
                agent, the product is not guaranteed by the retail 
                depository institution.
                    ``(iii) Investment risk.--In the case of an 
                investment product, there is an investment risk 
                associated with the product, including possible loss of 
                principal.
                    ``(iv) Coercion.--The approval, by the retail 
                depository institution, of an extension of credit may 
                not be conditioned on:
                            ``(I) the purchase of a nondeposit product 
                        which is sold by the retail depository 
                        institution, affiliate, or other person as 
                        agent; or
                            ``(II) an agreement by the consumer not to 
                        obtain, or a prohibition on the consumer from 
                        obtaining, a nondeposit product from an 
                        unaffiliated entity.
            ``(B) Adjustments for alternative methods of purchase.--In 
        prescribing the requirements under subparagraph (A), necessary 
        adjustments shall be made for purchase in person, by telephone 
        or by electronic media to provide for the most appropriate and 
        complete form of disclosure.
            ``(C) Consumer acknowledgement.--A requirement that a 
        retail depository institution shall require any person selling 
        a nondeposit product at any office of, or on behalf of, the 
        institution to obtain, at the time of the initial purchase by 
        the consumer of such product, a separate statement, signed and 
        dated by the consumer, which contains the declaration that the 
        purchaser has received the disclosure required under this 
        subsection with respect to such product. Notwithstanding any 
        rule of evidence, written acknowledgement of receipt of any 
        disclosures by a person to whom such information is required to 
        be given does no more than create a rebuttable presumption of 
        delivery thereof.
            ``(2) Prohibition on misrepresentations.--A prohibition on 
        any practice, or any advertising, at any office of, or on 
        behalf of, the retail depository institution which could 
        mislead any person or otherwise cause a reasonable person to 
        reach an erroneous belief with respect to--
                    ``(i) the uninsured nature of any nondeposit 
                product sold, or offered for sale by the institution or 
                any affiliate or agent of the institution; or
                    ``(ii) the investment risk associated with any such 
                product.
    ``(d) Separation of Banking and Nonbanking Activities.--The 
regulations prescribed pursuant to subsection (a) shall include such 
provisions as the Federal banking agencies consider appropriate to 
ensure that the acceptance of deposits or the extension of credit by a 
depository institution, are kept physically segregated from nondeposit 
product activity. These provisions should include at a minimum the 
following provisions:
            ``(1) Separate setting.--A clear delineation of the setting 
        in which, and the circumstances under which, transactions 
        involving nondeposit products may be effected, and referrals 
        made, to ensure that such activity is conducted in a location 
        physically segregated from the area where retail deposits are 
        accepted, extensions of credit are granted or insured products 
        are sold by or on behalf of a depository institution.
            ``(2) Certain persons prohibited from selling nondeposit 
        products.--Standards prohibiting any person who accepts 
        deposits from the public at any office of, or on behalf of, an 
        insured depository institution from selling or offering to 
        sell, or offering an opinion or investment advice on, any 
        nondeposit product.
            ``(3) Referral.--Notwithstanding paragraph (2), the 
        regulations shall include standards requiring that a person who 
        accepts deposits from the public at any office of, or on behalf 
        of, an insured depository institution may refer a customer who 
        seeks to purchase, or seeks an opinion or investment advice on, 
        any nondeposit product to a person who sells or provides 
        opinions or investment advice on such product only if--
                    ``(A) the consumer explicitly requests such 
                referral; and
                    ``(B) the person who accepts deposits--
                            ``(i) does not solicit such request;
                            ``(ii) discloses to the consumer that such 
                        product is not insured by the institution, the 
                        Federal Deposit Insurance Corporation, or the 
                        United States Government, or the institution; 
                        and
                            ``(iii) does not receive any compensation 
                        for the referral.
            ``(4) Qualification requirements and training.--Standards 
        prohibiting any depository institution from permitting any 
        person to sell or offer for sale, or provide an opinion or 
        investment advice about, any nondeposit product in any part of 
        any office of the institution, or on behalf of the institution, 
        unless such person--
                    ``(A) is registered with the Securities and 
                Exchange Commission as a broker or dealer, as a 
                representative of a broker or dealer, or as an 
                investment adviser; or
                    ``(B) meets qualification and training requirements 
                which the Federal banking agencies jointly determine 
                are equivalent to the training and qualification 
                requirements applicable to a person who is registered 
                with the Commission as a broker or dealer, as a 
                representative of a broker or dealer, or as an 
                investment adviser, as the case may be; or
                    ``(C) in the case of insurance sales, is qualified 
                in accordance with regulations promulgated by the 
                Federal banking regulators or in accordance with state 
                law, as appropriate.
            ``(5) Compensation programs.--Standards to ensure that 
        compensation programs are not structured in such a way as to 
        provide incentives for the referral or sales of nondeposit 
        products that are not suitable or appropriate for the consumer.
    ``(e) Consumer Enforcement Mechanism.--The Federal banking 
regulators shall jointly establish a consumer enforcement mechanism for 
receiving and resolving within nine months of receipt of a written 
complaint non-frivolous consumer complaints involving an alleged 
violation of regulations issued under this section which shall:
            ``(1) involve an impartial decisionmaker;
            ``(2) allow consumers to recover from an institution that 
        violates the regulations established under this section;
            ``(3) provide a written statement of the basis for any 
        decision and a public record of the proceedings.
    ``(f) Use of Names of Depository Institutions.--No insured 
depository institution, and no affiliate of any insured depository 
institution, may use or permit any other person to use the name, title, 
or logo of such institution or any word or design which is the same as, 
or substantially similar to, the name, title, or logo of such 
institution in connection with any nondeposit product--
            ``(1) which is offered for sale by the institution or 
        affiliate or by any other person at any office, of, or on 
        behalf of, the institution; or
            ``(2) with respect to which the institution, affiliate, or 
        other person provides an opinion or advice.
    ``(g) Requirements Relating to Confidential Consumer Financial 
Information.--No retail depository institution shall disclose to any 
affiliate or subsidiary of that institution that is not a retail 
depository institution, and no affiliate of that company that is not an 
insured depository institution shall disclose to any other affiliate 
that is an insured depository institution or a subsidiary thereof, any 
information regarding transactions or experiences between a consumer 
and the depository institution affiliate or subsidiary in a position to 
disclose this information unless the consumer--
            ``(1) has received clear and conspicuous disclosure that 
        such information may be communicated among such persons; and
            ``(2) has had an opportunity, before such information is 
        initially communicated, to direct that such information not be 
        communicated among such persons. The provisions of the Fair 
        Credit Reporting Act shall otherwise with regard to the sharing 
        of information among affiliates; except that section 615(b)(2) 
        of such Act shall apply without regard to section 
        615(b)(2)(C)(ii).
    ``(h) No Effect On Other Authority.--
            ``(1) In general.--No provision of this section shall be 
        construed as limiting or otherwise affecting--
                    ``(A) any authority of the Securities and Exchange 
                Commission, any self-regulatory organization, the 
                Municipal Securities Rulemaking Board, or the Secretary 
                of the Treasury under any Federal securities law;
                    ``(B) any authority of any State insurance 
                commissioner or other State authority under any State 
                insurance law; or
                    ``(C) the applicability of any Federal securities 
                law or State insurance law, or any regulation 
                prescribed by the Commission, any self-regulatory 
                organization, the Municipal Securities Rulemaking 
                Board, the Secretary of the Treasury, or any State 
                insurance commissioner or other State authority 
                pursuant to any such law, to any person.
            ``(2) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                    ``(A) Federal securities law.--The term `Federal 
                securities law' has the meaning given to the term 
                `securities laws' in section 3(a)(47) of the Securities 
                Exchange Act of 1934.
                    ``(B) Self-regulatory organization.--The term 
                `self-regulatory organization' has the meaning given to 
                such term in section 3(a)(26) of the Securities 
                Exchange Act of 1934.''.
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