[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.

                          ____________________