[Congressional Record Volume 151, Number 87 (Monday, June 27, 2005)]
[House]
[Pages H5186-H5192]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MILITARY PERSONNEL FINANCIAL SERVICES PROTECTION ACT
Mr. DAVIS of Kentucky. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 458) to prevent the sale of abusive insurance and
investment products to military personnel, as amended.
The Clerk read as follows:
H.R. 458
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Military
Personnel Financial Services Protection Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I--INSURANCE AND INVESTMENT PRODUCTS
Sec. 101. Congressional findings.
[[Page H5187]]
Sec. 102. Prohibition on future sales of periodic payment plans.
Sec. 103. Method of maintaining broker/dealer registration,
disciplinary, and other data.
Sec. 104. Filing depositories for investment advisers.
Sec. 105. State insurance and securities jurisdiction on military
installations.
Sec. 106. Required development of military personnel protection
standards regarding insurance sales.
Sec. 107. Required disclosures regarding life insurance.
Sec. 108. Improving life insurance product standards.
Sec. 109. Required reporting of disciplined insurance producers.
Sec. 110. Reporting barred persons engaging in financial services
activities.
Sec. 111. Sense of Congress.
Sec. 112. Definitions.
TITLE II--LENDING TO ARMED FORCES PERSONNEL
Sec. 201. Requirements applicable to certain loans to military
servicemembers.
TITLE I--INSURANCE AND INVESTMENT PRODUCTS
SEC. 101. CONGRESSIONAL FINDINGS.
The Congress finds the following:
(1) Our military personnel perform great sacrifices in
protecting our Nation in the War on Terror and promoting
democracy abroad.
(2) Our brave men and women in uniform deserve to be
offered first-rate financial products in order to provide for
their families and to save and invest for retirement.
(3) Our military personnel are being offered high-cost
securities and life insurance products by some financial
services companies engaging in abusive and misleading sales
practices.
(4) One securities product being offered to our service
members, the contractual plan, has largely disappeared from
the civilian market since the 1980s due to its excessive
sales charges and the emergence of low-cost products. A 50-
percent sales commission is typically assessed against the
first year of contributions made under a contractual plan,
even though the average commission on other securities
products such as mutual funds is less than 6 percent on each
sale.
(5) The excessive sales charge of the contractual plan
makes it susceptible to abusive and misleading sales
practices.
(6) Certain life insurance products being offered to our
service members are being improperly marketed as investment
products. These products provide very low death benefits for
very high premiums that are front-loaded in the first few
years, making them completely inappropriate for most military
personnel.
(7) Regulation of these securities and life insurance
products and their sale on military bases has been clearly
inadequate and requires Congressional legislation to address.
SEC. 102. PROHIBITION ON FUTURE SALES OF PERIODIC PAYMENT
PLANS.
(a) Amendment.--Section 27 of the Investment Company Act of
1940 (15 U.S.C. 80a-27) is amended by adding at the end the
following new subsection:
``(j) Termination of Sales.--
``(1) Termination.--Effective 30 days after the date of
enactment of the Military Personnel Financial Services
Protection Act, it shall be unlawful, subject to subsection
(i)--
``(A) for any registered investment company to issue any
periodic payment plan certificate; or
``(B) for such company, or any depositor of or underwriter
for any such company, or any other person, to sell such a
certificate.
``(2) No invalidation of existing certificates.--Paragraph
(1) shall not be construed to alter, invalidate, or otherwise
affect any rights or obligations, including rights of
redemption, under any periodic payment plan certificate
issued and sold before 30 days after such date of
enactment.''.
(b) Technical Amendment.--Section 27(i)(2)(B) of such Act
is amended by striking ``section 26(e)'' each place it
appears and inserting ``section 26(f)''.
(c) Report on Refunds, Sales Practices, and Revenues From
Periodic Payment Plans.--Within 6 months after the date of
enactment of this Act, the Securities and Exchange Commission
shall submit to the Committee on Financial Services of the
House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate, a report
describing--
(1) any measures taken by a broker or dealer registered
with the Securities and Exchange Commission pursuant to
section 15(b) of the Securities Exchange Act of 1934 (15
U.S.C. 78o(b)) to voluntarily refund payments made by
military service members on any periodic payment plan
certificate, and the amounts of such refunds;
(2) after such consultation with the Secretary of Defense
as the Commission considers appropriate, the sales practices
of such brokers or dealers on military installations over the
past 5 years and any legislative or regulatory
recommendations to improve such practices; and
(3) the revenues generated by such brokers or dealers in
the sales of periodic payment plan certificates over the past
5 years and what products such brokers or dealers market to
replace the revenue generated from the sales of periodic
payment plan certificates prohibited under subsection (a) of
this section.
SEC. 103. METHOD OF MAINTAINING BROKER/DEALER REGISTRATION,
DISCIPLINARY, AND OTHER DATA.
Subsection (i) of section 15A of the Securities Exchange
Act of 1934 (15 U.S.C. 78o-3(i)) is amended to read as
follows:
``(i) Obligation to Maintain Registration, Disciplinary,
and Other Data.--
``(1) Maintenance of system to respond to inquiries.--A
registered securities association shall--
``(A) establish and maintain a system for collecting and
retaining registration information;
``(B) establish and maintain a toll-free telephone listing,
and a readily accessible electronic or other process, to
receive and promptly respond to inquiries regarding--
``(i) registration information on its members and their
associated persons; and
``(ii) registration information on the members and their
associated persons of any registered national securities
exchange that uses the system described in subparagraph (A)
for the registration of its members and their associated
persons; and
``(C) adopt rules governing the process for making
inquiries and the type, scope, and presentation of
information to be provided in response to such inquiries in
consultation with any registered national securities exchange
providing information pursuant to subparagraph (B)(ii).
``(2) Recovery of costs.--Such an association may charge
persons making inquiries, other than individual investors,
reasonable fees for responses to such inquiries.
``(3) Process for disputed information.--Such an
association shall adopt rules establishing an administrative
process for disputing the accuracy of information provided in
response to inquiries under this subsection in consultation
with any registered national securities exchange providing
information pursuant to paragraph (1)(B)(ii).
``(4) Limitation of liability.--Such an association, or an
exchange reporting information to such an association, shall
not have any liability to any person for any actions taken or
omitted in good faith under this subsection.
``(5) Definition.--For purposes of this subsection, the
term `registration information' means the information
reported in connection with the registration or licensing of
brokers and dealers and their associated persons, including
disciplinary actions, regulatory, judicial, and arbitration
proceedings, and other information required by law, or
exchange or association rule, and the source and status of
such information.''.
SEC. 104. FILING DEPOSITORIES FOR INVESTMENT ADVISERS.
(a) Amendment.--Section 204 of the Investment Advisers Act
of 1940 (15 U.S.C. 80b-4) is amended--
(1) by striking ``Every investment'' and inserting the
following:
``(a) In General.--Every investment''; and
(2) by adding at the end the following:
``(b) Filing Depositories.--The Commission may, by rule,
require an investment adviser--
``(1) to file with the Commission any fee, application,
report, or notice required to be filed by this title or the
rules issued under this title through any entity designated
by the Commission for that purpose; and
``(2) to pay the reasonable costs associated with such
filing and the establishment and maintenance of the systems
required by subsection (c).
``(c) Access to Disciplinary and Other Information.--
``(1) Maintenance of system to respond to inquiries.--The
Commission shall require the entity designated by the
Commission under subsection (b)(1) to establish and maintain
a toll-free telephone listing, or a readily accessible
electronic or other process, to receive and promptly respond
to inquiries regarding information (including disciplinary
actions, regulatory, judicial, and arbitration proceedings,
and other information required by law or rule to be reported)
involving investment advisers and persons associated with
investment advisers. Such information shall include
information on an investment adviser (and the persons
associated with that adviser) whether the investment adviser
is registered with the Commission under section 203 or
regulated solely by a State as described in section 203A.
``(2) Recovery of costs.--An entity designated by the
Commission under subsection (b)(1) may charge persons making
inquiries, other than individual investors, reasonable fees
for responses to inquiries made under paragraph (1).
``(3) Limitation on liability.--An entity designated by the
Commission under subsection (b)(1) shall not have any
liability to any person for any actions taken or omitted in
good faith under this subsection.''.
(b) Conforming Amendments.--
(1) Section 203A of the Investment Advisers Act of 1940 (15
U.S.C. 80b-3a) is amended--
(A) by striking subsection (d); and
(B) by redesignating subsection (e) as subsection (d).
(2) Section 306 of the National Securities Markets
Improvement Act of 1996 (15 U.S.C. 80b-10, note; Public Law
104-290; 110 Stat. 3439) is repealed.
SEC. 105. STATE INSURANCE AND SECURITIES JURISDICTION ON
MILITARY INSTALLATIONS.
(a) Clarification of Jurisdiction.--Any law, regulation, or
order of a State with respect to regulating the business of
insurance
[[Page H5188]]
or the offer or sale (or both) of securities shall apply to
such activities conducted on Federal land or facilities in
the United States and abroad, including military
installations, except to the extent that such law,
regulation, or order--
(1) directly conflicts with any applicable Federal law,
regulation, or authorized directive; or
(2) would not apply if such activity were conducted on
State land.
(b) Primary State Jurisdiction.--To the extent that
multiple State laws would otherwise apply pursuant to
subsection (a) to an insurance or securities activity of an
individual or entity on Federal land or facilities, the State
having the primary duty to regulate such activity and whose
laws shall apply to such activity in the case of a conflict
shall be--
(1) the State within which the Federal land or facility is
located; or
(2) if the Federal land or facility is located outside of
the United States, the State in which--
(A) in the case of an individual engaged in the business of
insurance, such individual has been issued a resident
license;
(B) in the case of an individual engaged in the offer or
sale (or both) of securities, such individual is registered
or required to be registered to do business or the person
solicited by such individual resides;
(C) in the case of an entity engaged in the business of
insurance, such entity is domiciled; or
(D) in the case of an entity engaged in the offer or sale
(or both) of securities, such entity is registered or is
required to be registered to do business or the person
solicited by such entity resides.
SEC. 106. REQUIRED DEVELOPMENT OF MILITARY PERSONNEL
PROTECTION STANDARDS REGARDING INSURANCE SALES.
(a) State Standards.--The Congress intends that--
(1) the States collectively work with the Secretary of
Defense to ensure implementation of appropriate standards to
protect members of the Armed Forces from dishonest and
predatory insurance sales practices while on a military
installation of the United States (including installations
located outside of the United States); and
(2) each State identify its role in promoting the standards
described in paragraph (1) in a uniform manner within 12
months after the date of the enactment of this Act.
(b) State Report.--It is the sense of the Congress that the
NAIC should, after consultation with the Secretary of Defense
and within 12 months after the date of the enactment of this
Act, conduct a study to determine the extent to which the
States have met the requirement of subsection (a) and report
such study to the Committee on Financial Services of the
House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate.
SEC. 107. REQUIRED DISCLOSURES REGARDING LIFE INSURANCE.
(a) Requirement.--Except as provided in subsection (d), no
insurer or producer may sell or solicit, in person, any life
insurance product to any member of the Armed Forces on a
military installation of the United States unless a
disclosure in accordance with this section is provided to
such member before the sale of such insurance.
(b) Disclosure.--A disclosure in accordance with this
section is a written disclosure that--
(1) states that subsidized life insurance may be available
to the member of the Armed Forces from the Federal
Government;
(2) states that the United States Government has in no way
sanctioned, recommended, or encouraged the sale of the
product being offered;
(3) is made in plain and readily understandable language
and in a type font at least as large as the font used for the
majority of the policy; and
(4) with respect to a sale or solicitation on Federal land
or facilities located outside of the United States by an
individual or entity engaged in the business of insurance,
except to the extent otherwise specifically provided by the
laws of such State in reference to this Act, lists the
address and phone number where consumer complaints are
received by the State insurance commissioner for the State in
which the individual has been issued a resident license or
the entity is domiciled, as applicable.
(c) Enforcement.--If it is determined by a State or Federal
agency, or in a final court proceeding, that any individual
or entity has intentionally failed to provide a disclosure
required by this section, such individual or entity shall be
prohibited from further engaging in the business of insurance
with respect to employees of the Federal Government on
Federal land, except--
(1) with respect to existing policies; and
(2) to the extent required by the Federal Government
pursuant to previous commitments.
(d) Exceptions.--
(1) Federal and state insurance activity.--This section
shall not apply to insurance activities--
(A) specifically contracted by or through the Federal
Government or any State government; or
(B) specifically exempted from the applicability of this
Act by a Federal or State law, regulation, or order that
specifically refers to this paragraph.
(2) Uniform state standards.--If a majority of the States
have adopted, in materially identical form, a standard
setting forth the disclosures required under this section
that apply to insurance solicitations and sales to military
personnel on military installations of the United States,
after the expiration of the 2-year period beginning on such
majority adoption, such standard shall apply in lieu of the
requirements of this section to all insurance solicitations
and sales to military personnel on military installations,
with respect to such States, to the extent that such
standards do not directly conflict with any applicable
authorized Federal regulation or directive.
(3) Materially identical form.--For purposes of this
subsection, standards adopted by more than one State shall be
considered to have materially identical form to the extent
that such standards require or prohibit identical conduct
with respect to the same activity, notwithstanding that the
standards may differ with respect to conduct required or
prohibited with respect to other activities.
SEC. 108. IMPROVING LIFE INSURANCE PRODUCT STANDARDS.
(a) In General.--It is the sense of the Congress that the
NAIC should, after consultation with the Secretary of Defense
and within 12 months after the date of the enactment of this
Act, conduct a study and submit a report to the Committee on
Financial Services of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the
Senate on ways of improving the quality of and sale of life
insurance products sold by insurers and producers on military
installations of the United States, which may include
limiting sales authority to companies and producers that are
certified as meeting appropriate best practices procedures or
creating standards for products specifically designed for
members of the Armed Forces regardless of the sales location.
(b) Conditional GAO Report.--If the NAIC does not submit
the report to the committees as described in subsection (a),
the Comptroller General of the United States shall study any
proposals that have been made to improve the quality and sale
of life insurance products sold by insurers and producers on
military installations of the United States and report to the
Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate on such proposals within 6 months
after the expiration of the period referred to in subsection
(a).
SEC. 109. REQUIRED REPORTING OF DISCIPLINED INSURANCE
PRODUCERS.
(a) Reporting by Insurers.--After the expiration of the 2-
year period beginning on the date of the enactment of this
Act, no insurer may enter into or renew a contractual
relationship with a producer that solicits or sells life
insurance on military installations of the United States
unless the insurer has implemented a system to report, to the
State insurance commissioner of the State of the domicile of
the insurer and the State of residence of the insurance
producer, disciplinary actions taken against the producer
with respect to the producer's sales or solicitation of
insurance on a military installation of the United States, as
follows:
(1) Any disciplinary action taken by any government entity
that the insurer knows has been taken.
(2) Any significant disciplinary action taken by the
insurer.
(b) Reporting by States.--It is the sense of the Congress
that within 2 years after the date of the enactment of this
Act, the States should collectively implement a system to--
(1) receive reports of disciplinary actions taken against
insurance producers by insurers or government entities with
respect to the producers' sale or solicitation of insurance
on a military installation; and
(2) disseminate such information to all other States and to
the Secretary of Defense.
SEC. 110. REPORTING BARRED PERSONS ENGAGING IN FINANCIAL
SERVICES ACTIVITIES.
(a) Establishment.--The Secretary of Defense shall maintain
a list of the name, address, and other appropriate
information of persons engaged in financial services
activities that have been barred, banned, or otherwise
limited in any manner that is not generally applicable to all
such type of persons, from any or all military installations
of the United States or from patronage by military members.
(b) Notice and Access.--The Secretary shall ensure that--
(1) the appropriate Federal and State agencies responsible
for any financial services regulation are promptly notified
upon the inclusion or removal of a person under such
agencies' jurisdiction; and
(2) the list is kept current and easily accessible--
(A) for use by such agencies; and
(B) for purposes of enforcing or considering any such bar,
ban, or limitation by the appropriate Federal personnel,
including commanders of military installations.
(c) Regulations.--
(1) In general.--The Secretary shall issue regulations in
accordance with this subsection to provide for the
establishment and maintenance of the list under this section,
including appropriate due process considerations.
(2) Timing.--
(A) Proposed regulations.--Not later than the expiration of
the 60-day period beginning on the date of the enactment of
this
[[Page H5189]]
Act, the Secretary shall prepare and submit to the
appropriate Committees a copy of the regulations under this
subsection that are proposed to be published for comment. The
Secretary may not publish such regulations for comment in the
Federal Register until the expiration of the 15-day period
beginning upon such submission to the appropriate Committees.
(B) Final regulations.--Not later than 90 days after the
date of the enactment of this Act, the Secretary shall submit
to the appropriate Committees a copy of the regulations under
this section to be published as final.
(C) Effective date.--Such regulations shall become
effective upon the expiration of the 30-day period beginning
upon such submission to the appropriate Committees.
(3) Definition.--For the purposes of this section, the term
``appropriate Committees'' means--
(A) the Committee on Financial Services and the Committee
on Armed Services of the House of Representatives; and
(B) the Committee on Banking, Housing, and Urban Affairs
and the Committee on Armed Services of the Senate.
SEC. 111. SENSE OF CONGRESS.
It is the sense of the Congress that the Federal and State
agencies responsible for insurance and securities regulation
should provide advice to the appropriate Federal entities to
consider--
(1) significantly increasing the life insurance coverage
made available through the Federal Government to members of
the Armed Forces;
(2) implementing appropriate procedures to encourage
members of the Armed Forces to improve their financial
literacy and obtain objective financial counseling before
purchasing additional life insurance coverage or investments
beyond those provided by the Federal Government; and
(3) improving the benefits and matching contributions
provided under the Thrift Savings Plan to members of the
Armed Forces.
SEC. 112. DEFINITIONS.
For purposes of this Act, the following definitions shall
apply:
(1) Entity.--The term ``entity'' includes insurers.
(2) Individual.--The term ``individual'' includes insurance
agents and producers.
(3) NAIC.--The term ``NAIC'' means the National Association
of Insurance Commissioners.
(4) State insurance commissioner.--The term ``State
insurance commissioner'' means, with respect to a State, the
officer, agency, or other entity of the State that has
primary regulatory authority over the business of insurance
and over any person engaged in the business of insurance, to
the extent of such business activities, in such State.
TITLE II--LENDING TO ARMED FORCES PERSONNEL
SEC. 201. REQUIREMENTS APPLICABLE TO CERTAIN LOANS TO
MILITARY SERVICEMEMBERS.
(a) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Military lender.--
(A) In general.--The term ``military lender'' means--
(i) a person engaged in the business of extending consumer
credit that--
(I) targets customers who are active duty members of the
Armed Forces; or
(II) knows or has reason to know that more than 10 percent
of the person's customers for consumer credit products are
active duty members of the Armed Forces; and
(ii) any assignee of such person with respect to any credit
extended to any such customer.
(B) Exception.--The term ``military lender'' does not
include any insured depository institution, except as
provided in paragraph (3)(B).
(C) Treatment of each office as lender.--In the case of any
person engaged in the business of extending consumer credit
from more than 1 office or at more than 1 location, each
office or location at which credit is offered or extended or
a credit transaction is consummated shall be treated as a
separate person for purposes of this section.
(2) Covered loan.--The term ``covered loan''--
(A) means any extension of credit to an active duty member
of the Armed Forces by a military lender that has an annual
percentage rate that exceeds by more than 5 percentage points
the average annual percentage rate for 24-month personal
loans, as published by the Board of Governors of the Federal
Reserve System for the most recent calendar quarter preceding
the quarter in which such extension of credit is made; and
(B) does not include any extension of credit on margin on
securities by a broker or dealer registered with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934 to the extent such extension of credit
complies with the rules and regulations of the Board of
Governors of the Federal Reserve System, the Securities and
Exchange Commission, and any applicable self-regulatory
organization relating to credit on margin on securities.
(3) Insured depository institution.--
(A) In general.--The term ``insured depository
institution''--
(i) has the meaning given such term in section 3 of the
Federal Deposit Insurance Act; and
(ii) includes any insured credit union (as defined in
section 101(7) of the Federal Credit Union Act).
(B) Exclusion.--For purposes of this section, the term
``insured depository institution'' does not include an
insured depository institution in any circumstance in which--
(i) such depository institution is extending credit
pursuant to a contractual relationship with a third-party
agent; and
(ii) such agent would be a military lender, under this
section, if the agent made the same loan as a principal.
(4) Active duty member of the armed forces.--The term
``active duty member of the Armed Forces'' means any member
of the Armed Forces who is on active duty (as defined in
section 101(d)(1) of title 10, United States Code) under a
call or order that does not specify a period of 30 days or
less.
(5) Targets customers.--For purposes of paragraph
(1)(A)(i)(I), the term ``targets customers'' means to,
directly or indirectly, solicit, or engage in other
promotional activities explicitly directed at, members of the
Armed Forces for the purpose of securing business from the
recipients of such solicitations or promotions.
(6) Annual percentage rate.--The term ``annual percentage
rate'' has the same meaning as in section 107 of the Truth in
Lending Act, as implemented by regulations of the Board of
Governors of the Federal Reserve System.
(b) Protection of Military Servicemembers.--Any military
lender who makes a loan to an active duty member of the Armed
Forces (other than a loan described in paragraph (2)(B)) may
not, with respect to such loan--
(1) garnish any military salary or wages, or accept any
assignment of or institute any allotment of any military
salary or wages, to secure payment of the loan, unless any
such allotment or assignment is voluntary and may be
cancelled at any time by the borrower;
(2) contact, or threaten to contact, the borrower's
commanding officer or any other person in the borrower's
military chain of command in an effort to collect on such
loan;
(3) include any provision in the loan agreement, or in any
other instrument or agreement made in connection with such
loan, that purports to--
(A) waive any rights of the borrower under any Federal or
State law, including this section and the Servicemembers
Civil Relief Act (50 U.S.C. App. 501 et seq.); or
(B) provide the consent of the borrower for any action
prohibited under paragraph (1);
(4) at any time, use oral or written representations, or
use any symbols, that suggest, give the appearance, or
provide reasonable cause to believe that any component of the
Armed Forces, the Department of Defense, or any federal
entity sponsors or endorses the military lender, any agent of
the lender, or any good, service, commodity, or credit that
is sold, provided, or extended by the military lender (unless
expressly authorized in writing by such entity); or
(5) if such loan is a covered loan, enter into the loan
without disclosing, prior to consummation of the transaction
and in conspicuous form, the following notice:
``Notice to military servicemembers:
``You are not required to complete this agreement merely
because you have received these disclosures or even if you
have signed an application for an extension of credit. If you
obtain this credit to repay other loans, you may get into
serious financial difficulties if you use this credit to pay
off old debts and then replace them with other new debts.
Before you complete this agreement, you should consider
applying for credit through other organizations or entities.
Interest-free loans or grants may be available from the Army,
Air Force, or Navy-Marine Corps Relief Society, the United
Service Organizations, or another base or military service
organization for military personnel seeking short-term credit
in response to a family or other emergency.
``This extension of credit is not sponsored or endorsed by
any component of the Armed Forces, the Department of Defense,
or any Federal entity.
``Your lender may not garnish your salary or wages, or
accept any assignment of or institute an allotment of your
salary or wages, to secure repayment of the debt, unless any
such allotment or assignment is voluntary and may be
cancelled by you at any time. Your lender may not contact
your commanding officer or anyone in your chain of command in
an effort to collect on the loan.
``You and your dependents may have additional rights and
protections under Federal and State law with respect to this
loan, including the Servicemembers Civil Relief Act, which
you cannot waive and which the lender may not ask or require
you to waive.''.
(c) Rule of Construction.--No provision of this section
shall be construed as--
(1) authorizing any person that is not a military lender to
engage in any activity that is prohibited for military
lenders under this section;
(2) creating any inference that any activity described in
subsection (b) is a lawful activity for any person or would
be a lawful activity for a military lender but for this
section; or
(3) creating any inference that any right or protection
provided for consumers under any Federal or State law can be
waived by any consumer.
(d) Enforcement.--The provisions of this section shall be
enforced under section 917 of the Consumer Credit Protection
Act, in the manner provided in such section. For the
[[Page H5190]]
purposes of any enforcement under such section 917, any
violation of a provision or requirement of this section shall
be treated as a violation of a provision or requirement of
title IX of such Act.
(e) Circumvention Prohibited.--The Federal Trade Commission
shall, with respect to entities and activities under its
jurisdiction, prescribe regulations to become effective not
later than 90 days after the date of the enactment of this
Act to prevent a military lender from taking any action in
connection with any loan made to an active duty member of the
Armed Forces to structure a loan transaction, by structuring
any loan as an open-end credit plan (as defined in section
103 of the Truth in Lending Act), dividing any loan into
separate transactions, using a lower temporary or
introductory rate of interest to lower the overall annual
percentage rate applicable for any loan, or any similar
action, for the purpose of avoiding designation as a covered
loan for purposes of this section or otherwise circumventing
or evading any requirement of this title.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Kentucky (Mr. Davis) and the gentleman from Massachusetts (Mr. Frank)
each will control 20 minutes.
The Chair recognizes the gentleman from Kentucky (Mr. Davis).
General Leave
Mr. DAVIS of Kentucky. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks and include extraneous material on H.R. 458.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Kentucky?
There was no objection.
Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may
consume.
Today I would like to bring to the attention of my colleagues that
there is a long history of certain companies and agents using abusive
sales tactics to sell financial products of dubious value to our
members of the armed services. Problems have included abusive and
coercive sales tactics, outdated and high-cost products, and a lack of
uniform regulatory oversight of these practices on our military bases
and posts.
The Pentagon has issued directives intended to prevent these abuses.
But with the ongoing confusion over regulatory jurisdiction, the lack
of communication between government agencies, and lack of sufficient
protection standards for certain financial products, it is clear that
the abuses will not stop unless Congress enacts the Military Personnel
Financial Services Protection Act.
Unfortunately, there are a few bad agents in the securities and
insurance industry that have been taking advantage of our military
personnel by selling them harmful insurance and investment products.
Mr. Speaker, as a matter of fact, when I myself was a young officer
in the Army, a group of salesmen showed up on post and convinced my
fellow soldiers and me that I could begin saving for my retirement by
buying into an investment plan that included insurance and mutual
funds. I was so impressed with their infomercial-like presentation that
I invested what was a lot of money to me at the time. It was not until
I got out of the Army and into the business world that I discovered how
uncompetitive these products were compared with other opportunities.
While serving as an officer in the 82nd Airborne Division, I knew
many soldiers who fell victim to such ``contractual plans.''
In my case, I fell for the sales pitch because those agents selling
the programs encouraged one of my fellow soldiers to invite me to a
presentation. That program included a respected veteran who could show
up on post without the post commander's permission. I did not make the
decision because I was a financial expert, because I was not, I made
the decision because a retired servicemember, whom I respected, working
as a salesman, presented this, and he was using referrals from other
servicemembers who he convinced it was a good thing.
Because of these types of selling practices, I am pleased to report
that today the House will be voting on this reintroduced, bipartisan
legislation, H.R. 458, which will protect those preserving our freedom
from some unnecessary, high-cost financial products.
This piece of legislation would clarify that State insurance
regulators have jurisdiction over insurance sales on military bases
within their States. Also, it would ban the sale of contractual mutual
funds and require that our military personnel hear about government
life insurance programs before buying private life insurance.
This bill would also allow our military post commanders to ban
unscrupulous agents from their bases and posts and forward a list of
these banned agents to the Department of Defense, and the DOD would
compile lists and send them to State departments of insurance for
further investigation.
We cannot allow these abusive practices to continue. We must not ask
the men and women of our armed services to make sacrifices for our
security without doing all that we can to protect their financial
futures. You may be pleased to know that in the 108th Congress, this
purpose-driven piece of legislation passed overwhelmingly with a vote
of 396-2. During this Congress, the Committee on Financial Services
reported this bill to protect our servicemen and -women by unanimous
vote. This overwhelmingly bipartisan census is the result of strong
leadership by the gentleman from Ohio (Mr. Oxley) and the ranking
member, the gentleman from Massachusetts (Mr. Frank), and subcommittee
chairman on capital markets, the gentleman from Louisiana (Mr. Baker)
and ranking member, the gentleman from Pennsylvania (Mr. Kanjorski),
who led our investigation into abusive practices and bad products.
{time} 1445
The gentleman from Kansas (Mr. Ryun) and the gentleman from New York
(Mr. Israel), who worked closely together on the reporting
requirements, are to be thanked, as well as the gentlewoman from
Florida (Ms. Ginny Brown-Waite) for ensuring appropriate SEC oversight
of broker-dealer practices on military posts. Also, I would like to
thank the gentleman from Illinois (Mr. Gutierrez) for working on new
requirements for high-cost lending. Their hard work and bipartisan
leadership is well reflected in the legislation.
Today, I urge my colleagues in the 109th Congress to support this
bipartisan bill and vote ``yes'' on the Military Personnel Financial
Services Protection Act and protect our military from these predatory
financial products and sales practices.
Mr. Speaker, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself such time as
I may consume.
The gentleman from Kentucky has quite correctly described both the
need for this bill and what it does, and I am very pleased that this is
one in a number of genuinely nonpartisan efforts that the Committee on
Financial Services has brought forward.
I think there is a consensus in our committee. We have some issues
about which we disagree, and we will continue to do so in a good
spirit. But we also have a consensus that it is possible to work to
make sure that the financial sector, the financial intermediaries in
this country, are able to perform their function, which is so important
in our capitalist society, but still protect consumers from abusive
practices, that is, legitimate protection of consumers need not be
seen, should not be seen, as inconsistent with support for the function
that the financial intermediaries should perform in our system.
This legislation is a very good example of that. It was introduced
previously, as the gentleman from Kentucky mentioned, in a previous
Congress. One version of it was also introduced, very similar, by the
gentleman from Illinois (Mr. Emanuel), who is on our committee. Our
committee acted; the House acted. We are hopeful that the Senate will
this time, because we are passing it early enough in this 2-year
session to get its attention to go along with us.
And I would also note, as the gentleman from Kentucky graciously
mentioned, that the gentleman from Illinois (Mr. Gutierrez) addressed
as well at the session when we brought this up, the problem of payday
lending, abusive payday lending for members of the military. As we
know, members of the military, particularly now that we have mobilized
the Guard, we have young, not always young, men and women in the
military who may find themselves in economic distress
[[Page H5191]]
through no fault of their own because of an unforeseen call-up. They
are fully entitled to our protection against those people who would
prey on them.
So what we have done in this bill is to protect them from
inappropriate sales, given the stressful situation in which they find
themselves, the pressures they are under; and we have added, thanks to
the initiative of the gentleman from Illinois, protection against
abusive payday lending. And I appreciate the majority, the gentleman
from Kentucky and the gentleman from Ohio (Mr. Oxley), the chairman of
the committee, in working with the gentleman from Illinois (Mr.
Gutierrez) so that we were able to bring forward a comprehensive bill
that we believe will protect members of our military from any kind of
financial impositions on them of an inappropriate sort.
So I am delighted to join in what I hope will be an overwhelming, if
not unanimous, vote for this bill; and I hope the Senate will act
promptly.
Mr. Speaker, I yield back the balance of my time.
Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may
consume.
I thank the gentleman from Massachusetts for his remarks and also
heartily agree and hope that the Senate will pass this bill and take it
up in an aggressive manner. I thank all the members of the Committee on
Financial Services for their support on both sides of the aisle. It was
truly a bipartisan effort.
Mrs. TAUSCHER. Mr. Speaker, I rise today to speak in support of H.R.
458, the Military Personnel Financial Services Protection Act of 2005.
I congratulate Chairman Oxley and all the members of the Financial
Services Committee for putting forth a bill that seeks to protect our
men and women in uniform from certain deceptive practices.
During the Financial Services Committee's consideration of this bill,
my colleague Representative Gutierrez raised concerns about the issue
of pay day loans and offered an amendment to extend the bill's coverage
to them.
These are deferred-deposit loans that offer borrowers short-term
credit that will be repaid on the person's next pay day.
If the borrower does not repay the loan at the end of the period, it
can be rolled over with additional fees and interest assessed. Because
of the way these loans work, the annual percentage rates are often 390
percent or more.
Representative Gutierrez was rightfully concerned that the high
interest rates of such loans cause too much debt for military personnel
and this could impede their military readiness.
Mr. Speaker, I am pleased to see that the bill before us today
contains language that places new requirements on military lenders and
requires certain disclosures of lenders offering service members loans
with higher-than-average rates, including payday loans.
It is time to crack down on unscrupulous lenders who seek to make a
quick buck by selling improper loans to our uniformed service members.
I am pleased that the bill requires the Secretary of Defense to
create and maintain a registry of banned payday lenders.
The Secretary will be responsible for updating and maintaining the
registry, which will provide the name, address, and other identifying
information of the banned or barred agent or advisor.
The registry must be accessible and searchable by the public and
local installation commanders and appropriate Federal and State
financial regulators.
Furthermore, I wish to bring to the House's attention that the
Commander's webpage section of the Defense Department's website
currently has a section entitled, ``Quick Links.''
Under this are several tabs the user can click on dealing with such
issues as Compensation, Deployment, Benefits, and the like.
I would like to urge the House to stipulate that the Defense
Department place another separate tab under this ``Quick Links''
section and have it be a specific listing of abusive lenders so our
service members can know whom to avoid.
Mr. Speaker, I think we all can agree that our soldiers do not
deserve to be taken advantage of and the actions taken today are a step
in the right direction.
Mr. OXLEY. Mr. Speaker, I rise in support of H.R. 458, the Military
Personnel Financial Services Protection Act. This bill, introduced by
my good friend Mr. Geoff Davis from the Commonwealth of Kentucky, will
go a long way towards protecting the men and women serving in our
Nation's military from deceptive financial practices and unsuitable
financial products.
Mr. Speaker, since the tragic day of September 11, 2001, our country
has been at war. In the prosecution of that war, our armed services
have performed heroically. Many have made the ultimate sacrifice for
the cause of freedom. Unfortunately, there are a few bad actors in the
financial services industry who have been taking financial advantage of
our armed forces. These unscrupulous companies and salesmen gain access
to military installations and use aggressive, misleading, and often
illegal sales tactics, to sell high-cost products of dubious value that
are unsuitable for any investor, and are particularly unsuitable for
our military personnel.
The Pentagon has issued directives intended to prevent these abuses.
But with the ongoing confusion over regulatory jurisdiction, the lack
of communication among government agencies, and the lack of sufficient
protection standards for certain financial products, it is clear that
the abuses will not stop unless Congress enacts this legislation.
H.R. 458 bans bad financial products and sales practices, clarifies
regulatory jurisdiction on military installations within the United
States and abroad, adds appropriate consumer protections and
disclosures for financial products, and ensures proper reporting
systems between our military and the financial regulators to ensure bad
actors cannot escape. It also makes the process of selecting a
financial advisor more transparent for all investors, by providing
online access to background information on broker-dealers, including
disciplinary actions. Finally, the legislation imposes new requirements
on lenders that target a military clientele for high-cost loan
products, to ensure that our men and women in uniform are treated
fairly when obtaining credit, and are fully informed about the costs
and potential consequences of entering into credit arrangements that
feature high annual percentage rates.
The House passed similar legislation in the 108th Congress by a vote
of 396 to 2. This term, our Committee reported Mr. Davis' bill to
protect our servicemen and women by a unanimous vote. This overwhelming
bipartisan consensus is the result of strong leadership by Mr. Davis,
the author of this legislation; the chairman of the Subcommittee on
Capital Markets, Mr. Baker, who led our investigation into abusive
practices and bad products; Mr. Jim Ryun and Mr. Israel who worked
closely together on the reporting requirements of this bill; Ms. Brown-
Waite for ensuring appropriate SEC oversight of broker-dealer sales
practices on military installations; and Mr. Gutierrez for working on
new requirements for high cost lending. Their hard work and bipartisan
leadership is well-reflected in this legislation.
I urge my colleagues in the full House to support this bipartisan
bill and vote ``yes'' on H.R. 458.
Mr. EMANUEL. Mr. Speaker, I rise in strong support of H.R. 458, the
Military Personnel Financial Services Protection Act. H.R. 458 is
identical to legislation passed by the House of Representatives by a
vote of 396 to 2 in the 108th Congress. Unfortunately, the Senate did
not act on that legislation.
Last year, I worked closely with Financial Services Committee
Chairman Michael Oxley, Ranking Member Barney Frank and Capital Markets
Subcommittee Chairman Richard Baker in holding hearings and developing
legislation to add new protections for enlisted personnel.
The legislation we produced last session is before us once again
today. The Military Personnel Financial Services Protection Act will go
a long way toward eliminating these abuses and protecting our troops.
First, and most importantly, H.R. 458 bans the sale of contractual
mutual funds on military bases. These expensive funds disappeared from
the civilian market in the 1980s because their first-year commissions
are equal to half of all contributions.
If they are not good enough for civilians, why should we allow them
to be sold to our men and women in uniform?
Many of our enlistees are of modest financial means and need to cash
in food stamps to feed their families. None of them can afford a 50
percent commission, and often, they do not realize they are paying so
much.
If we want to give financial services firms access to military bases,
that is one thing. But we cannot allow our young men and women to be
used as laboratories for expensive financial products or to be seen as
ATM machines, and that is what contractual mutual funds have made them.
This legislation also includes new disclosure requirements for life
insurance products, so it is crystal clear what is being sold. H.R. 458
requires companies to provide recruits with a ``Plain English''
document telling them
[[Page H5192]]
subsidized life insurance is available from the Federal Government and
that the Government does not endorse, recommend or encourage them to
buy the product.
Finally, H.R. 458 clarifies the authority of state insurance
regulators to act against bad actors on-base. The States are also
directed to create uniform military personnel protection standards and
to work with the Department of Defense to carry out those standards.
Mr. Speaker, it is time to end a culture on military bases that too
often favors financial interests over the interests of our troops,
their families, and their futures.
I encourage my colleagues to support this important legislation.
Mr. DAVIS of Kentucky. Mr. Speaker, I have no further requests for
time, and I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Radanovich). The question is on the
motion offered by the gentleman from Kentucky (Mr. Davis) that the
House suspend the rules and pass the bill, H.R. 458, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. DAVIS of Kentucky. Mr. Speaker, on that I demand the yeas and
nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
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