[Congressional Record Volume 152, Number 118 (Wednesday, September 20, 2006)]
[House]
[Pages H6786-H6793]
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 Senate bill (S. 418) to protect members of the Armed Forces
from unscrupulous practices regarding sales of insurance, financial,
and investment products.
The Clerk read as follows:
S. 418
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.
Sec. 2. Congressional findings.
Sec. 3. Definitions.
Sec. 4. Prohibition on future sales of periodic payment plans.
Sec. 5. Required disclosures regarding offers or sales of securities on
military installations.
Sec. 6. Method of maintaining broker and dealer registration,
disciplinary, and other data.
Sec. 7. Filing depositories for investment advisers.
Sec. 8. State insurance and securities jurisdiction on military
installations.
Sec. 9. Required development of military personnel protection standards
regarding insurance sales; administrative coordination.
Sec. 10. Required disclosures regarding life insurance products.
Sec. 11. Improving life insurance product standards.
Sec. 12. Required reporting of disciplinary actions.
Sec. 13. Reporting barred persons selling insurance or securities.
Sec. 14. Study and reports by Inspector General of the Department of
Defense.
SEC. 2. CONGRESSIONAL FINDINGS.
Congress finds that--
(1) members of the Armed Forces perform great sacrifices in
protecting our Nation in the War on Terror;
(2) the 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) members of the Armed Forces are being offered high-cost
securities and life insurance products by some financial
services companies engaging in abusive and misleading sales
practices;
[[Page H6787]]
(4) one securities product offered to service members,
known as the ``mutual fund contractual plan'', largely
disappeared from the civilian market in the 1980s, due to
excessive sales charges;
(5) with respect to a mutual fund contractual plan, a 50
percent sales commission is assessed against the first year
of contributions, despite an average commission on other
securities products of less than 6 percent on each sale;
(6) excessive sales charges allow abusive and misleading
sales practices in connection with mutual fund contractual
plan;
(7) certain life insurance products being offered to
members of the Armed Forces are improperly marketed as
investment products, providing minimal death benefits in
exchange for excessive premiums that are front-loaded in the
first few years, making them entirely inappropriate for most
military personnel; and
(8) the need for regulation of the marketing and sale of
securities and life insurance products on military bases
necessitates Congressional action.
SEC. 3. DEFINITIONS.
For purposes of this Act, the following definitions shall
apply:
(1) Life insurance product.--
(A) In general.--The term ``life insurance product'' means
any product, including individual and group life insurance,
funding agreements, and annuities, that provides insurance
for which the probabilities of the duration of human life or
the rate of mortality are an element or condition of
insurance.
(B) Included insurance.--The term ``life insurance
product'' includes the granting of--
(i) endowment benefits;
(ii) additional benefits in the event of death by accident
or accidental means;
(iii) disability income benefits;
(iv) additional disability benefits that operate to
safeguard the contract from lapse or to provide a special
surrender value, or special benefit in the event of total and
permanent disability;
(v) benefits that provide payment or reimbursement for
long-term home health care, or long-term care in a nursing
home or other related facility;
(vi) burial insurance; and
(vii) optional modes of settlement or proceeds of life
insurance.
(C) Exclusions.--Such term does not include workers
compensation insurance, medical indemnity health insurance,
or property and casualty insurance.
(2) NAIC.--The term ``NAIC'' means the National Association
of Insurance Commissioners (or any successor thereto).
SEC. 4. 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 the
Investment Company Act of 1940 (15 U.S.C. 80a-27(i)(2)(B)) is
amended by striking ``section 26(e)'' each place that term
appears and inserting ``section 26(f)''.
(c) Report on Refunds, Sales Practices, and Revenues From
Periodic Payment Plans.--Not later than 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
5 years preceding the date of submission of the report 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 5
years preceding the date of submission of the report, and the
products marketed by such brokers or dealers to replace the
revenue generated from the sales of periodic payment plan
certificates prohibited under subsection (a).
SEC. 5. REQUIRED DISCLOSURES REGARDING OFFERS OR SALES OF
SECURITIES ON MILITARY INSTALLATIONS.
Section 15A(b) of the Securities Exchange Act of 1934 (15
U.S.C. 78o-3(b)) is amended by inserting immediately after
paragraph (13) the following:
``(14) The rules of the association include provisions
governing the sales, or offers of sales, of securities on the
premises of any military installation to any member of the
Armed Forces or a dependent thereof, which rules require--
``(A) the broker or dealer performing brokerage services to
clearly and conspicuously disclose to potential investors--
``(i) that the securities offered are not being offered or
provided by the broker or dealer on behalf of the Federal
Government, and that its offer is not sanctioned,
recommended, or encouraged by the Federal Government; and
``(ii) the identity of the registered broker-dealer
offering the securities;
``(B) such broker or dealer to perform an appropriate
suitability determination, including consideration of costs
and knowledge about securities, prior to making a
recommendation of a security to a member of the Armed Forces
or a dependent thereof; and
``(C) that no person receive any referral fee or incentive
compensation in connection with a sale or offer of sale of
securities, unless such person is an associated person of a
registered broker or dealer and is qualified pursuant to the
rules of a self-regulatory organization.''.
SEC. 6. METHOD OF MAINTAINING BROKER AND DEALER REGISTRATION,
DISCIPLINARY, AND OTHER DATA.
Section 15A(i) 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.--A registered securities
association may charge persons making inquiries described in
paragraph (1)(B), other than individual investors, reasonable
fees for responses to such inquiries.
``(3) Process for disputed information.--Each registered
securities 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 on liability.--A registered securities
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. 7. FILING DEPOSITORIES FOR INVESTMENT ADVISERS.
(a) Investment Advisers.--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.--
``(A) In general.--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 registration
information (including disciplinary actions, regulatory,
judicial, and arbitration proceedings, and other information
required by law or rule to be reported) involving investment
advisers
[[Page H6788]]
and persons associated with investment advisers.
``(B) Applicability.--This subsection shall apply to any
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 described in 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) Investment advisers act of 1940.--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) National securities markets improvement act of 1996.--
Section 306 of the National Securities Markets Improvement
Act of 1996 (15 U.S.C. 80b-10, note) is repealed.
SEC. 8. STATE INSURANCE AND SECURITIES JURISDICTION ON
MILITARY INSTALLATIONS.
(a) Clarification of Jurisdiction.--Any provision of law,
regulation, or order of a State with respect to regulating
the business of insurance or securities shall apply to
insurance or securities 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 the
laws of which 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 entity engaged in the business of
insurance, such entity is domiciled;
(C) 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; 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. 9. REQUIRED DEVELOPMENT OF MILITARY PERSONNEL PROTECTION
STANDARDS REGARDING INSURANCE SALES;
ADMINISTRATIVE COORDINATION.
(a) State Standards.--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, not later
than 12 months after the date of enactment of this Act.
(b) State Report.--It is the sense of Congress that the
NAIC should, after consultation with the Secretary of Defense
and, not later than 12 months after the date of enactment of
this Act, conduct a study to determine the extent to which
the States have met the requirement of subsection (a), and
report the results of 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.
(c) Administrative Coordination; Sense of Congress.--It is
the sense of the Congress that senior representatives of the
Secretary of Defense, the Securities and Exchange Commission,
and the NAIC should meet not less frequently than twice a
year to coordinate their activities to implement this Act and
monitor the enforcement of relevant regulations relating to
the sale of financial products on military installations of
the United States.
SEC. 10. REQUIRED DISCLOSURES REGARDING LIFE INSURANCE
PRODUCTS.
(a) Requirement.--Except as provided in subsection (e), no
person may sell, or offer for sale, any life insurance
product to any member of the Armed Forces or a dependent
thereof on a military installation of the United States,
unless a disclosure in accordance with this section is
provided to such member or dependent at the time of the sale
or offer.
(b) Disclosure.--A disclosure in accordance with this
section is a written disclosure that--
(1) states that subsidized life insurance is available to
the member of the Armed Forces from the Federal Government
under the Servicemembers' Group Life Insurance program (also
referred to as ``SGLI''), under subchapter III of chapter 19
of title 38, United States Code;
(2) states the amount of insurance coverage available under
the SGLI program, together with the costs to the member of
the Armed Forces for such coverage;
(3) states that the life insurance product that is the
subject of the disclosure is not offered or provided by the
Federal Government, and that the Federal Government has in no
way sanctioned, recommended, or encouraged the sale of the
life insurance product being offered;
(4) fully discloses any terms and circumstances under which
amounts accumulated in a savings fund or savings feature
under the life insurance product that is the subject of the
disclosure may be diverted to pay, or reduced to offset,
premiums due for continuation of coverage under such product;
(5) states that no person has received any referral fee or
incentive compensation in connection with the offer or sale
of the life insurance product, unless such person is a
licensed agent of the person engaged in the business of
insurance that is issuing such product;
(6) 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 solicitation material used with respect to or
relating to the life insurance product; and
(7) with respect to a sale or solicitation on Federal land
or facilities located outside of the United States, lists the
address and phone number at which consumer complaints are
received by the State insurance commissioner for the State
having the primary jurisdiction and duty to regulate the sale
of such life insurance products pursuant to section 8.
(c) Voidability.--The sale of a life insurance product in
violation of this section shall be voidable from its
inception, at the sole option of the member of the Armed
Forces, or dependent thereof, as applicable, to whom the
product was sold.
(d) Enforcement.--If it is determined by a Federal or State
agency, or in a final court proceeding, that any person has
intentionally violated, or willfully disregarded the
provisions of, this section, in addition to any other penalty
under applicable Federal or State law, such person 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.
(e) Exceptions.--This section shall not apply to any life
insurance product specifically contracted by or through the
Federal Government.
SEC. 11. IMPROVING LIFE INSURANCE PRODUCT STANDARDS.
(a) In General.--It is the sense of Congress that the NAIC
should, after consultation with the Secretary of Defense, and
not later than 6 months after the date of enactment of this
Act, conduct a study and submit a report to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of
Representatives on--
(1) ways of improving the quality of and sale of life
insurance products sold on military installations of the
United States, which may include--
(A) limiting such sales authority to persons that are
certified as meeting appropriate best practices procedures;
and
(B) creating standards for products specifically designed
to meet the particular needs of members of the Armed Forces,
regardless of the sales location; and
(2) the extent to which life insurance products marketed to
members of the Armed Forces comply with otherwise applicable
provisions of State law.
(b) Conditional GAO Report.--If the NAIC does not submit
the report as described in subsection (a), the Comptroller
General of the United States shall--
(1) study any proposals that have been made to improve the
quality of and sale of life insurance products sold on
military installations of the United States; and
(2) not later than 6 months after the expiration of the
period referred to in subsection (a), submit a report on such
proposals to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial Services
of the House of Representatives.
SEC. 12. REQUIRED REPORTING OF DISCIPLINARY ACTIONS.
(a) Reporting by Insurers.--Beginning 1 year after the date
of enactment of this Act, no insurer may enter into or renew
a contractual relationship with any other person that sells
or solicits the sale of any life insurance product on any
military installation of the United States, unless the
insurer has implemented a system to report to the State
insurance commissioner of the State of domicile of the
insurer and the State of residence of that other person--
(1) any disciplinary action taken by any Federal or State
government entity with respect to sales or solicitations of
life insurance products on a military installation that
[[Page H6789]]
the insurer knows, or in the exercise of due diligence should
have known, to have been taken; and
(2) any significant disciplinary action taken by the
insurer with respect to sales or solicitations of life
insurance products on a military installation of the United
States.
(b) Reporting by States.--It is the sense of Congress that,
not later than 1 year after the date of enactment of this
Act, the States should collectively implement a system to--
(1) receive reports of disciplinary actions taken against
persons that sell or solicit the sale of any life insurance
product on any military installation of the United States by
insurers or Federal or State government entities with respect
to such sales or solicitations; and
(2) disseminate such information to all other States and to
the Secretary of Defense.
(c) Definition.--As used in this section, the term
``insurer'' means a person engaged in the business of
insurance.
SEC. 13. REPORTING BARRED PERSONS SELLING INSURANCE OR
SECURITIES.
(a) Establishment.--The Secretary of Defense shall maintain
a list of the name, address, and other appropriate
information relating to persons engaged in the business of
securities or insurance that have been barred 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 that have engaged in any transaction
that is prohibited by this Act.
(b) Notice and Access.--The Secretary of Defense shall
ensure that--
(1) the appropriate Federal and State agencies responsible
for securities and insurance regulation are promptly notified
upon the inclusion in or removal from the list required by
subsection (a) of a person under the jurisdiction of one or
more of such agencies; 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
or limitation by the appropriate Federal personnel, including
commanders of military installations.
(c) Regulations.--
(1) In general.--The Secretary of Defense shall issue
regulations in accordance with this subsection to provide for
the establishment and maintenance of the list required by
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 enactment of this
Act, the Secretary of Defense shall prepare and submit to the
appropriate Committees of Congress a copy of the regulations
required by 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 on the date of such submission to
the appropriate Committees of Congress.
(B) Final regulations.--Not later than 90 days after the
date of enactment of this Act, the Secretary of Defense shall
submit to the appropriate Committees of Congress a copy of
the regulations under this section to be published in final
form.
(C) Effective date.--Final regulations under this paragraph
shall become effective 30 days after the date of their
submission to the appropriate Committees of Congress under
subparagraph (B).
(d) Definition.--For purposes of this section, the term
``appropriate Committees of Congress'' means--
(1) the Committee on Financial Services and the Committee
on Armed Services of the House of Representatives; and
(2) the Committee on Banking, Housing, and Urban Affairs
and the Committee on Armed Services of the Senate.
SEC. 14. STUDY AND REPORTS BY INSPECTOR GENERAL OF THE
DEPARTMENT OF DEFENSE.
(a) Study.--The Inspector General of the Department of
Defense shall conduct a study on the impact of Department of
Defense Instruction 1344.07 (as in effect on the date of
enactment of this Act) and the reforms included in this Act
on the quality and suitability of sales of securities and
insurance products marketed or otherwise offered to members
of the Armed Forces.
(b) Reports.--Not later than 12 months after the date of
enactment of this Act, the Inspector General of the
Department of Defense shall submit an initial report on the
results of the study conducted under subsection (a) to the
Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services of the House
of Representatives, and shall submit followup reports to
those committees on December 31, 2008 and December 31, 2010.
The SPEAKER pro tempore (Mr. Bonner). Pursuant to the rule, the
gentleman from Kentucky (Mr. Davis) and the gentleman from Georgia (Mr.
Scott) each will control 20 minutes.
The Chair recognizes the gentleman from Kentucky.
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 on this legislation and insert extraneous material
thereon.
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 but first would like to recognize the distinguished chairman of
the Financial Services Committee, Mr. Oxley of Ohio.
Mr. OXLEY. Mr. Speaker, I rise in support of S. 418, the Military
Personnel Financial Services Protection Act, which protects the men and
women serving in our Nation's military from deceptive financial
practices and unsuitable financial products.
I want to pay a particular tribute to the sponsor of the House
legislation that came through the Financial Services Committee. This
bill that we have before us is almost identical to the bill that passed
out of our committee. Mr. Davis, a veteran and West Point graduate, led
the way in protecting our military men and women on this issue early
last year. Early last year he secured a bipartisan voice vote in
committee and a resounding 405-2 bipartisan victory in the House.
Congratulations also go to former Congressman Max Burns of Georgia
who led the charge protecting our military personnel in the 108th
Congress.
{time} 1615
We are pleased with giving the Senate credit for their bill number if
we get to enact the protections for our military as envisioned by Mr.
Davis and Max Burns.
Mr. Speaker, since the tragic day of September 11, 2001, our country
has been at war with terrorism around the world. In the prosecution of
that war, our armed services have performed heroically. Many have made
the ultimate sacrifice for the cause of freedom, and all have worried
about the safety and security of their loved ones as they leave to
serve our country.
Unfortunately, there are a few bad actors in the financial services
industry who have been taking financial advantage of our soldiers.
These unscrupulous companies and their sales teams infiltrate our
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
most 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
investor protection standards for certain financial products, it is
clear that our military personnel can never be adequately protected
unless Congress enacts this bill.
The Davis bill bans bad financial products and coercive sales
practices on military bases, including obscure and high-cost
``contractual plans.'' It clarifies the regulatory jurisdiction on
military installations within the U.S. and abroad, adds appropriate
consumer protections and disclosures for financial products sold on
military bases, and ensures proper reporting systems between our
military and the financial regulators to catch bad actors before they
can do more harm.
It also makes the process of selecting a financial adviser more
transparent for all investors by providing online access to background
information on broker-dealers, including disciplinary actions. This
last provision was taken from legislation introduced by the gentleman
from Arizona (Mr. Shadegg) that passed the House in April 2005.
The overwhelmingly bipartisan support for this bill within Congress
and the military is the result of strong leadership by the gentleman
from Kentucky (Mr. Davis) as well as former Member Max Burns, as well
as the chairman of the Subcommittee on Capital Markets, Mr. Baker, who
led our committee's investigation into abusive practices and bad
products, Congressman Jim Ryun and Congressman Steve Israel. Mr. Ryun
and Mr. Israel worked closely together on the reporting requirements of
this bill, and the gentlewoman from Florida (Ms. Ginny Brown-Waite) for
ensuring appropriate SEC review of broker-dealer sales practices on
military installations.
Their hard work and passion for protecting our military personnel is
well reflected on this legislation. I urge my colleagues in the full
House to vote ``yes'' on S. 418.
Mr. DAVIS of Kentucky. Mr. Speaker, I reserve the balance of my time.
[[Page H6790]]
Mr. SCOTT of Georgia. Mr. Speaker, I yield myself such time as I may
consume.
First, let me extend my deep appreciation and thanks to our
distinguished chairman, Chairman Oxley of Ohio. As many of us know,
Chairman Oxley will be leaving us and I want to take this opportunity
to recognize what an outstanding chairman you have been to our
Committee on Financial Services. It has been a pleasure serving with
you, and you have been an outstanding chairman.
It is also a pleasure to stand here as I represent our ranking
member, the gentleman from Massachusetts (Mr. Frank), who has provided
outstanding leadership on our Financial Services Committee, and has led
the way for this to be a strong bipartisan effort, to Mr. Davis of
Kentucky. Certainly it is a pleasure to work with you on this measure.
I think this is a very important bill because of the timeliness of
it, especially with so many of our military men and women in harm's way
overseas, especially in Iraq and Afghanistan, that we put forward a
measure designed to help protect their financial security.
Senate 418, the Military Personnel Financial Services Protection Act,
the measure before us today, will address some serious problems of
predatory lending and financial abuse targeted at our military men and
women.
In 2004, the New York Times ran a series of very good stories which
detailed misleading sales practices of financial products to members of
the military. A few unscrupulous agents had made misleading pitches to
captive audiences by posing as counselors on veterans benefits, and
they solicited soldiers while on duty.
This issue is important to me, as it is to all of us in this
Congress, but especially to me and those of us from Georgia, because so
many of these reported scams occurred at Fort Benning in my State of
Georgia.
So I joined with my colleagues on the Financial Services Committee
and we held hearings to investigate these predatory and abusive lending
practices, and then we went to work on finding legislative remedies.
This legislation that we worked on is very similar to Senate 418. Our
legislation was passed by a large majority in the House, but was not
brought up for action on the Senate floor until recently. What we have
before us as Senate 418 represents the final bipartisan and bicameral
product in addressing these important issues. This is indeed the work
of the House and the Senate.
What S. 418 will do, it will ban all future sales of periodic payment
plans. It will require greater regulation of insurance sales on
military bases. It will require the Department of Defense to create a
registry of agents who are prohibited from selling financial policies
on bases, and it will expand investor access to registration
information for brokers, for dealers and advisers.
I would like to give just a little more detail about a few of the
protections afforded our military personnel in this measure. Senate 418
will give State insurance regulators jurisdiction over insurance sales
on Federal facilities and bases within the United States as well as
abroad. Many of the abuses that occurred on bases continued because of
confusion about regulatory jurisdiction, and especially at overseas
bases. This bill resolves that. This provision clears up that concern.
Also my colleague, the gentleman from New York (Mr. Israel), authored
a provision contained in section 13 of this measure. This provision
requires the Secretary of Defense to notify the appropriate State
regulators when an insurance agent or financial adviser is added or
deleted from a registry of agents or advisers banned from military
bases. This provision will prevent unscrupulous sales agents from
moving to other jurisdictions to avoid detection.
Further, insurance companies could not sell or solicit policies to
military personnel on a base without first providing clear written
notice that federally subsidized life insurance is available through
the Federal Government, and that the sale of the private plan is not
sanctioned or recommended by the government.
To ensure our servicemembers are capable of addressing their
financial needs, we must first provide them with adequate compensation.
At the same time, we must help our soldiers exercise financial
responsibility. It is necessary that military personnel have financial
literacy, something that I have worked very hard on since my first day
arriving in Congress. These individuals can face financial questions
from Internet-based sales, from sales off base, and from being faced
with decisions in the civilian world. As we know, predatory sales
practices are not limited to the base.
Our military folks have enough to worry about. They constantly live
in a life-and-death situation. They certainly do not need these added
financial insecurity pressures that are placed upon them by predatory
lenders and financial abusers.
Mr. Speaker, I reserve the balance of my time.
Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I want to commend the work of the gentleman from Georgia
on this important issue which affects so many of our men and women in
uniform.
I rise today in support of S. 418, the Military Personnel Financial
Services Protection Act. First, let me thank Senators Enzi and Clinton
for sponsoring the Senate companion to my bill, H.R. 458, which passed
the House last year by a vote of 405-2.
This important legislation will protect our troops from certain
insurance and investment products, and in particular, the contractual
plan.
Contractual plans have virtually disappeared from the civilian market
due to excessive sales charges, but sales persist among servicemembers
and their families, who are often new to managing finances and unaware
that there are alternative or more cost-effective opportunities out
there. The hallmark of the deceptively expensive plans are front-loaded
commission fees of up to 50 percent. S. 418 prohibits the sales of
these predatory investment products.
Unfortunately, there are some bad actors still out there in the
insurance and securities industry that have been taking advantage of
military personnel by marketing these questionable products.
Mr. Speaker, I understand firsthand the sales tactics used by these
companies on our soldiers. As a young officer in the Army, a group of
salesmen showed up on my post and convinced me and my fellow soldiers
to purchase a contractual plan. I fell for the sales pitch for this
contractual plan because the company made it appear as though they were
part of the Armed Forces family, and the salesman, a respected military
veteran, was somebody I thought I could trust because of his record in
the military. That trust was betrayed simply because of our ignorance.
What we discovered as time went by was that there were tremendous
other options out there; and that many, many service personnel were
losing tens of thousands of dollars that could have gone directly into
investment products that were available in the commercial world.
I invested what was a lot of money to me at the time, not because I
was a financial expert, I was a combat arms officer, but because a
retired servicemember was working as a salesman and was pushing a
product with the referral of other veterans. It was not until I got out
of the Army and into the business world that I discovered how
uncompetitive these products were when compared to other investment
opportunities. However, it was too late. My wife and I lost nearly half
our life savings on this so-called investment.
S. 418 also addresses the sale of life insurance to servicemembers.
The bill requires life insurance companies to provide written
disclosures that, among other disclosures, state that subsidized life
insurance is available through the Servicemembers' Group Life Insurance
Program and fully disclose the terms of the agreement and any savings
feature of the product. The disclosure must be in plain and readily
understandable language and in a normal type font.
Additionally, I would like to state I am disappointed that the Senate
removed the qualifying words ``in person'' from the requirements
provision of section 10 on disclosures regarding life insurance
products. I have concerns that this could prevent certain well-
respected life insurance companies from
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continuing to do business the way they have for many years, which
enables the issuing of insurance in a timely manner to servicemembers
who are often about to be deployed or go into combat.
I plan to continue monitoring the status of this issue, and I will
pursue legislative options in the future should my concern manifest
itself.
Regulation of these types of insurance and investment products on
military bases has clearly been inadequate to this point. The situation
required congressional action to address the situation and protect our
servicemembers.
I applaud my colleagues in the Senate for moving forward with S. 418,
and I appreciate the leadership of the House for bringing it to the
floor for a vote.
I would encourage the Department of Defense to continue with its
efforts to improve financial literacy of our troops. I cannot emphasize
strongly enough how I agree with my colleague from Georgia on the
importance of teaching our young soldiers, sailors, airmen and marines
about the opportunities that they have and the benefits they can accrue
from taking wise counsel and go for sure and certain return on their
investment while they are serving this Nation.
However, we as a Congress cannot allow these abusive sales practices
to continue. We must not ask the men and women of our armed services to
make sacrifices for our security without doing all we can to protect
their financial futures. They are laying their lives on the line and
putting their families under tremendous stresses and pressures right
now. The last thing we must permit to take place is predatory sales
practices upon these soldiers while they are getting ready to deploy
and weigh these serious life decisions without proper information.
Working together, we will solve this problem.
Thank you again to Senators Enzi and Clinton for sponsoring the
Senate version of my bill, H.R. 458, and to Chairman Baker and Chairman
Oxley for their diligent examination of this issue in the House
Financial Services Committee.
I also want to emphasize that this has truly been a bipartisan effort
working together on a compromise that never weakened the provisions but
actually made a stronger bill in the long run, particularly with the
House version that came out last year.
I thank the ranking member, Mr. Frank, and Chairman Oxley for their
leadership and the example they set for every committee in the House of
Representatives on working together in a bipartisan manner to craft
legislation that benefits the American people.
The gentleman from Georgia (Mr. Scott), the gentleman from New York
(Mr. Israel), the gentleman from Kansas (Mr. Ryun), the gentleman from
Pennyslvania (Mr. Fitzpatrick), and the gentlewoman from Florida (Ms.
Ginny Brown-Waite) have all been integral to this dialogue to offer key
provisions and key counsel to strengthen this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. SCOTT of Georgia. Mr. Speaker, I yield 4 minutes to the
distinguished gentleman who has long championed the military, and on
this issue has been at the forefront in providing great leadership on
this issue, protecting our military from financial abuses, and that is
the gentleman from North Dakota (Mr. Pomeroy).
{time} 1630
Mr. POMEROY. Mr. Speaker, I thank my friend for yielding.
In a prior life I used to be a State insurance commissioner, and I
want to tell you how completely disgusted I am that there are still
companies and agents that would prey upon the young men and women that
are serving our country, in many instances young soldiers preparing for
deployment to Iraq. Seizing this incredibly sensitive and exposed
period in their lives, they use every trick in the book to load them up
with coverages that are inappropriately priced, may well be ill-matched
to the financial needs of the soldier, and they do it all for one lousy
reason, personal profiteering, profiteering on those who would
literally put their lives on the line to protect our freedoms. That is
about as low as you can get.
And I very much appreciate the debate that we have had here.
Congressman Davis, you related your own story about how, as a young
soldier, you had some respected veteran peddling a product from a
company that just fills the sales materials with flags and banners.
This is just so wrong.
Frankly, I am disappointed that the State insurance commissioners
have allowed this to go as far as they have. Maybe there was some
confusion about what their regulatory enforcements could be relative to
proximity to Air Force or Army bases. I don't understand. I believe
more could have been done at the State regulatory level, and I hope
this represents a good swift kick in the behind to any enforcement
official looking at predatory lending practices.
This is a clear bipartisan statement from Congress that we don't
countenance this at all, and we want to crack heads on anybody engaged
in this kind of activity.
I also want us to note there is more to do. Both sides of the aisle
have so well expressed our need for financial literacy. Let me just
give you exhibit A in terms of why we need it so badly. Right outside
the base gates, payday loans, predatory lending shops, not addressed in
this bill, unfortunately, and still a matter we need to look at because
soldiers, often young, trying to make it on pretty skinny checks, fall
prey to these predatory lending practices of the payday lenders.
And I want to send a signal to this industry: We see what you are
doing. We hate it, and we are going to try to figure out how we address
those payday loan practices, the predatory lending practices. Surely
any reputable lender, any major bank that would engage in a surcharge
lending practice for the subprime market of military bases is wrong. We
will not accept this surcharge on the subprime market of young
soldiers, and we intend to expose and we intend to further and fully
discuss these practices. So if you don't want to see your names in the
paper relative to ripping off our soldiers, quit those payday loan
practices. We are coming after you next. Agents, insurance companies,
we are getting you with this legislation, but the subprime market is
coming next. Don't make any mistake about it.
I thank the sponsors of this legislation.
Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may
consume.
I want to echo some comments that were made by Mr. Pomeroy. Our title
II language of the original House bill directly addressed the predatory
lending issue, and we were disappointed, many of us, that that language
was removed from the Senate version. However, I believe that there will
be good news in the defense authorization. We have worked very
tirelessly over the past couple of weeks, and I am serving as a
conferee on the joint House/Senate committee, and I believe that we are
going to have some very strong language to begin to address this issue,
to control the fees and the percentage rates and ultimately to dissuade
our young soldiers, sailors, and airmen from participating in these
processes that take advantage of them financially.
One thing that I would like to point out is an aspect of my own story
and the nature of this behind the bill. I remember experiencing the
invitation to the steak dinner at a meeting hall where many soldiers
came out to hear a presentation about how much money they could
possibly make by joining these programs, and the importance of
insurance and how that was going to help, and how one salesperson asked
my wife if she would feel safe on the amount of insurance that she had
from the servicemen's group life program at that time. She even won a
$50 lucky drawing during that. And it wasn't until several years later
that we realized that we had based our trust on a false premise and had
purchased a product that we didn't need.
One of the great things in America is the equalizing capability of
the American people, that every person has a say with votes, that we
can pursue goals and opportunities, and as the old saying goes, ``What
goes around comes around.'' I remember sitting as a new Member in the
House of Representative when the then CEO of that very company was
sitting across from my desk
[[Page H6792]]
wanting us to not bring H.R. 458, the Military Personnel Financial
Services Protection Act, to the floor. And having lived that, and
knowing the concern of the other Members on the committee, we are very
pleased to take this first step as we are addressing many steps in
protecting our servicemembers and also enhancing their financial
literacy.
With that, I want to commend both sides for having worked together. I
thank the gentleman from Georgia especially for his long-time interest
in this. And I want to say a special note to outgoing Financial
Services Committee Chairman Mike Oxley. I believe that he has set a
stellar example of leadership in his tenure. He has been a mentor to me
and other members of the committee. What he has shown is that we can
work in a spirit of comity and comedy, that we can have fun as we deal
with very, very serious issues. He always kept the vision, the end
goal, in sight that we were working toward to keep things in
perspective so that when the pressures of the time or the fatigue of
the long days might move emotions in a different direction, he was
always there to keep us pointed towards that end goal as we run that
race to have good financial services legislation like this bill that we
have today.
Mr. Speaker, I yield back the balance of my time
Mr. SCOTT of Georgia. Mr. Speaker, I yield myself such time as I may
consume.
I just want to extend my feelings of great appreciation to Mr. Davis
from Kentucky, the distinguished gentleman, who has truly provided the
leadership on this bill. And you could tell from his eloquent
statements earlier of his own experience in this issue that really
clearly points to why we need this bill.
And I thank you, and it has been a pleasure working with you on this,
Mr. Davis.
I again want to echo when he said about the chairman. I am very
fortunate on this committee to have two mentors, Democrat and
Republican. And as a Democrat, I am not ashamed to say one of my
mentors is a Republican, and that is Oxley. Chairman Oxley. I call him
``Oxley.'' On top of everything else, he is a great baseball man. And,
of course, with Ranking Member Frank, it gives a great balance to the
bipartisanship on that committee, which I think enables us to deal with
ticklish matters like this very appropriately.
As far as the payday situation is concerned, we will visit that
another day. There is no question about that. We want to make sure that
we get the good apples out of the way of the bad apples and move
forward. But this bill here clearly gives us a very important
statement. And it is with this statement that we are saying to these
predators, keep your grubby hands off of our soldiers. We have got 18-
and 19-year-old kids who are just getting out of high school, many of
them, and there these predators are, waiting on them at a time when
they are faced with such life-and-death issues as going into harm's
way, all of those pressures. It is not right. It is not fair. And this
is why we are moving on this very important legislation, so that we can
protect our fighting men and women against unscrupulous investment
sales.
I urge the House to move to pass this important bipartisan measure
today.
Mr. SPRATT. Mr. Speaker, I rise in support of this bill, to defend
those who defend us. Our young men and women in uniform should not be
prey to unscrupulous types who take advantage of their inexperience, in
ways that they pay for, and for years thereafter.
Our service members are focused on the mission at hand: defending our
nation. In their enthusiasm, and on the eve of their deployments, they
should not be subjected to unscrupulous agents who exploit their fears
of family members not being provided for, should they be killed or
wounded in the line of the duty. They should not be exposed to brokers
making promises of big returns on investments, while extracting
exorbitant fees up front.
We have worked hard to improve the benefits that our government
provides for our troops and their families. We have increased the death
gratuity dramatically. We have increased life insurance coverage.
But we can do better.
We can ban the sale of periodic payment plan certificates.
We can clarify the law by making it known that the states have a duty
to regulate sales conducted on military bases.
We can ensure that our young men and women in uniform are educated
about the benefits the government provides for them and their families,
and that they receive clear and comprehensible information about the
federally subsidized life insurance available to them.
We can require registration of agents and a registry for complaints
about agents so that our service members can see who has had complaints
and disciplinary actions.
And Congress can monitor these practices better.
This bill does these things. And while it does not go as far as some
of us in the House would like, I believe it is a good place to start.
It enables us to stop some of the most damaging practices against those
who defend our
I urge support of this bill.
Mr. SHADEGG. Mr. Speaker, today we are considering S. 418, the
Military Personnel Financial Services Protection Act. At a time when so
many of our brave men and women are deployed across the world defending
our freedom, this bill is a small step to ensure that our military
personnel to not fall victim to deceptive financial practices at home.
Furthermore, Mr. Speaker, this bill includes provisions that reach
beyond just our military personnel to protect all investors. I would
like to thank the Chairmen of the Financial Services and Banking
Committees for including language from H.R. 1077, the Realtime Investor
Protection Act, which I authored and which passed as a stand alone bill
last year.
This language will require the National Association of Securities
Dealers (NASD) to make its database of complaints against brokers
publicly available on a secure Internet site. This is extraordinarily
simple and extraordinarily efficient. The result will be more informed
investors with greater trust in the markets.
Although the NASD already maintains this database, BrokerCheck, the
organization is prohibited from making it available online. The current
system requires potential investors to submit a request for broker/
dealer information via telephone or e-mail The investor must then wait
for a response. In today's high tech world, this procedure is outdated
and highly inefficient.
BrokerCheck is an invaluable tool for investors, through which they
can learn about the professional background, business practices, and
conduct of NSD-registered firms and brokers, free of charge.
Specifically, an investor can discover: Whether or not their broker has
a criminal record; whether or not they have been subject to a
regulatory action by the Securities Exchange Commission (SEC); and,
whether or not they had customer complaints filed against them.
This bill will bring investor protection up to speed with investing
technologies. Interestingly, of the 4.4 million requests NASD received
through BrokerCheck for information in 2004, 99 percent were through
the Internet e-mail request system, only 1 percent were by telephone.
Clearly, investors prefer using the Internet to request information.
I encourage my colleagues to support this bill to protect military
personnel, and the public at large, by prohibiting abusive practices
and encouraging investor education.
Ms. BORDALLO. Mr. Speaker, I rise today in support of S. 418, a bill
that speaks to an issue that has been of concern to Congress for
several years now. I believe that the time has come to stop talking
about unscrupulous practices that unfairly target U.S. servicemen and
women and to act to end them. This bill serves that end.
This bill addresses the issue of deceitful insurance schemes that
take advantage of U.S. service men and women by pitching important
investment and insurance programs while hiding within them antiquated
fee schemes. For those who offer important financial and life planning
programs to hide within such plans unfair, this bill removes the
ability to hide expansive and outdated fee schedules that bilk
vulnerable, young service men and women.
S. 418 protects the financial interests of those who serve. I urge my
colleagues to support this legislation and to support our men and women
in uniform and their families.
Mr. SCOTT of Georgia. Mr. Speaker, I yield back the balance of my
time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Kentucky (Mr. Davis) that the House suspend the rules
and pass the Senate bill, S. 418.
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 question will
be postponed.
[[Page H6793]]
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