[Federal Register Volume 65, Number 107 (Friday, June 2, 2000)]
[Notices]
[Pages 35420-35423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13855]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket No. 00-12]


Notice of Request for Preemption Determination

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice and request for comment.

-----------------------------------------------------------------------

SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
publishing for comment a written request for the OCC's determination of 
whether Federal law preempts certain provisions of the West Virginia 
Insurance Sales Consumer Protection Act (West Virginia Law). The 
purpose of this notice and request for comment is to provide interested 
persons with an opportunity to submit comments prior to the OCC's 
issuance of any final opinion in this matter.

DATES: Comments must be received on or before July 3, 2000.

ADDRESSES: Comments should be sent to the Communications Division, 
Office of the Comptroller of the Currency, 250 E

[[Page 35421]]

Street, SW, Third Floor, Attention: Docket No. 00-12, Washington, DC 
20219. You may submit comments electronically to 
[email protected] or by facsimile transmission to (202) 874-
5274. You can inspect and photocopy the comments at the OCC's Public 
Reference Room, 250 E Street, SW, Washington, DC, between 9:00 a.m. and 
5:00 p.m. on business days. You can make an appointment to inspect the 
comments by calling (202) 874-5043.

FOR FURTHER INFORMATION CONTACT: MaryAnn Orr Nash, Senior Attorney, or 
Stuart Feldstein, Assistant Director, Legislative and Regulatory 
Activities Division, (202) 874-5090.

SUPPLEMENTARY INFORMATION:

Background

    The OCC has received a request from the West Virginia Bankers 
Association (Requester) for a determination that Federal law preempts 
certain provisions of the West Virginia Law.
    Section 114 of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (section 114), Pub. L. 103-328 (12 U.S.C. 43) 
generally requires the OCC to publish in the Federal Register a 
descriptive notice of certain requests that the OCC receives for 
preemption opinions. Under section 114, the OCC must publish notice 
before it issues any opinion letter or interpretive rule concluding 
that Federal law preempts the application to a national bank of any 
State law in four designated areas: community reinvestment, consumer 
protection, fair lending, or the establishment of intrastate branches. 
Pursuant to section 114, interested persons have at least 30 days to 
submit written comments. Without making a determination as to whether 
section 114 applies to this request, the OCC has decided that it is 
appropriate to use notice and comment procedures given the broad 
interest in the issues presented. The OCC will publish in the Federal 
Register any final opinion letter or interpretive rule that concludes 
that Federal law preempts State law.

Specific Request for OCC Preemption Determination

    The OCC has been asked to determine whether section 104 the Gramm-
Leach-Bliley Act (GLBA) preempts certain provisions of West Virginia 
Law.
    Section 104(d)(2)(A) of GLBA provides that ``[i]n accordance with 
the legal standards for preemption set forth in the decision of the 
Supreme Court of the United States in Barnett Bank of Marion County 
N.A. v. Nelson, 517 U.S. 25 (1996), no State may, by statute, 
regulation, order, interpretation, or other action prevent or 
significantly interfere with the ability of a depository institution, 
or an affiliate thereof, to engage, directly or indirectly, either by 
itself or in conjunction with an affiliate or any other person, in any 
insurance sales, solicitation, or cross marketing activity.'' However, 
GLBA does not preempt state actions that are ``substantially the same 
as but no more burdensome or restrictive than'' any of the thirteen 
specific actions described in section 104(d)(2)(B) of GLBA (Safe 
Harbors). The Requester asserts that the following provisions contained 
in seven sections of the West Virginia Law are preempted by the GLBA--
    (1) Section 33-11A-6 of the West Virginia Law, entitled ``Insurance 
sales separate from loan transaction,'' generally prohibits financial 
institution employees with lending responsibilities from soliciting the 
purchase or sale of insurance. Specifically, the law provides that:
    (a) Solicitation for the purchase or sale of insurance by a 
financial institution shall be conducted only by individuals whose 
responsibilities do not include loan transactions or other transactions 
involving the extension of credit. Provided, That for a financial 
institution location having three or less individuals with lending 
authority, solicitation for the sale of insurance may be conducted by 
an individual with responsibilities for loan transactions or other 
transactions involving the extension of credit, as long as the 
individual primarily responsible for making the specific loan or 
extension of credit is not the same individual engaged in the 
solicitation of the purchase or sale of insurance for that same 
transaction.
    (b) In the event that in any small office, the same individual is 
the licensed agent or broker and the sole individual with lending 
authority, the commissioner may grant a waiver of the requirements of 
this section upon a written request. Such request shall include 
documentation that, due to the small office staff, compliance is not 
possible, and include identification of other steps which will be taken 
to minimize the customer confusion prohibited by this article.
    The Requester contends that Federal law preempts this provision 
because it does not fit within any of the Safe Harbors and, if given 
effect, would prevent or significantly interfere with the ability of 
financial institutions to engage in insurance activities. The Requester 
asserts that limitations on bank use of personnel will significantly 
interfere with the ability of community banks to offer insurance 
services to customers and generally will require the use of more 
personnel than may be needed to conduct the business. The Requester 
also contends that this provision will significantly limit the use of 
supermarket branches and developing technologies that are intended to 
minimize use of personnel.
    (2) Section 33-11A-8 of the West Virginia Law, entitled ``Tying of 
products prohibited,'' generally prohibits a financial institution from 
requiring or implying that the purchase of an insurance product from 
that institution is required as a condition to the approval of a loan. 
Specifically, that section provides that:
    (a) No person shall require or imply that the purchase of an 
insurance product from a financial institution by a customer or 
prospective customer of the institution is required as a condition of 
the lending of money or extension of credit.
    (b) No financial institution may offer an insurance product in 
combination with its other products, unless all the products are 
available separately from the financial institution.
    The Requester contends that this provision is not within the Safe 
Harbor set forth in section 104(d)(2)(B)(viii) of GLBA, which protects 
state restrictions prohibiting the tying of loan and insurance 
products. The Requester asserts that this provision is preempted 
because it essentially prohibits a loan officer from mentioning to a 
customer that insurance products may be available at a discount as part 
of a package of bank services, and thus, would significantly interfere 
with bank sales of insurance products. The Requester also contends that 
this provision is more restrictive than the anti-tying provisions of 
the Bank Holding Company Act, 12 U.S.C. 1972 and the implementing 
Federal regulation.
    (3) Section 33-11A-9 of the West Virginia Law, entitled 
``Disclosures,'' generally provides that a financial institution 
engaged in the sale of insurance must disclose to customers in writing 
the nature of the product sold. Specifically, the section provides 
that--
    (a) A financial institution soliciting the purchase of or selling 
insurance, and any person soliciting the purchase of or selling 
insurance on the premises of, in connection with a product offering, or 
using a name identifiable with, a financial institution, shall 
prominently disclose to customers, in writing, in clear and concise 
language, including in any advertisement or promotional material, and 
orally during any

[[Page 35422]]

customer contact, that insurance offered, recommended, sponsored, or 
sold:
    (1) Is not a deposit;
    (2) Is not insured by the federal deposit insurance corporation or, 
where applicable, the National Credit Union Share Insurance Fund;
    (3) Is not guaranteed by any insured depository institution; and
    (4) Where appropriate, involves investment risk, including 
potential loss of principal.
    (b) Any financial institution engaged in the making of loans or 
other extensions of credit and the sale of insurance shall prominently 
disclose to customers in writing, in clear and concise language, that 
the insurance product may be purchased from an agent or broker of the 
customer's choice, and the customer's choice of another insurance 
provider will not affect the customer's credit relationship with the 
person. For purposes of this subsection, loans and extensions of credit 
shall not include financing in connection with the insurance product 
offered or sold.
    (c) Any person required under subsections (a) or (b) of this 
section to make disclosures to a customer shall obtain a written 
acknowledgment of receipt by the customer of such disclosures, 
including the date of receipt and the customer's name, address, and 
account number, prior to or at the time of any application for 
insurance sold by the person. Such acknowledgment shall be in a 
separate document.
    (d) The commissioner may grant a waiver of the requirements of this 
section to any person required to give the disclosures required by this 
section solely because that person has a name identifiable with a 
financial institution upon a written request by such person 
demonstrating that his, her or its customer would not reasonably 
benefit from, or might in fact be confused by, these required 
disclosures.
    The Requester contends that Federal law preempts subsection (a) of 
this section because the requirement that a financial institution 
include the disclosure ``in any advertisement or promotional material'' 
is more burdensome and restrictive than the disclosure requirement 
contained in section 104(d)(2)(B)(x) of the Safe Harbors. The Requester 
further contends that this requirement is not protected by section 
104(d)(2)(B)(iii) of the Safe Harbors, which permits restrictions 
prohibiting a bank from using misleading advertising. The Requester 
asserts that Federal law also preempts subsection (c) of this section 
because the requirement that the bank obtain the written disclosures in 
a separate document is unduly burdensome and restrictive, and thus, 
would significantly interfere with bank insurance sales.
    (4) Section 33-11A-10 of the West Virginia Law, entitled ``Timing 
of insurance solicitation,'' generally prohibits a financial 
institution from making an insurance-related referral or solicitation 
of a loan customer until after the loan has been approved. 
Specifically, the section provides that--
    (a) No individual who is an employee or agent of a financial 
institution, or of a subsidiary or affiliate thereof, may, directly or 
indirectly, make an insurance-related referral to or solicit the 
purchase of any insurance from a customer knowing that such customer 
has applied for a loan or extension of credit from that financial 
institution before such times as the customer has received a written 
commitment with respect to such loan or extension of credit, or, in the 
event that no written commitment has or will be issued in connection 
with the loan or extension of credit, before such time as the customer 
receives notification of approval of the loan or extension of credit by 
the financial institution and the financial institution creates a 
written record of the loan or extension of credit approval.
    (b) This provision shall not prohibit any individual subject to 
subsection (a) above from:
    (1) Informing a customer that insurance is required in connection 
with a loan; or
    (2) Contacting persons in the course of direct or mass mailing to a 
group of persons in a manner that bears no relation to the person's 
loan application or credit decision.
    The Requester contends that Federal law preempts this provision 
because it does not fit within the Safe Harbors and would prevent or 
significantly interfere with the ability of a financial institution to 
engage in insurance sales activities by prohibiting loan officers from 
marketing the full range of products offered by an institution.
    (5) Section 33-11A-11 of the West Virginia Law, entitled 
``Insurance in connection with the loan,'' generally provides that 
extensions of credit and insurance sales be completed independently and 
through separate documents. Specifically, the section provides that--
    (a) If insurance is required as a condition of obtaining a loan, 
the credit and insurance transactions shall be completed independently 
and through separate documents.
    (b) A loan for premiums on required insurance shall not be included 
in the primary credit without the written consent of the customer.
    (c) No title insurance shall be issued until the title insurance 
company has obtained a title opinion of an attorney licensed to 
practice law in West Virginia, which attorney is not an employee, 
agent, or owner of the insured bank or its affiliates. Said attorney 
shall have conducted or cause to have conducted under the attorney's 
direct supervision a reasonable examination of the title. In no event 
shall the authority of a state-chartered bank to sell title insurance 
exceed the authority of a nationally chartered bank to do so.
    The Requester contends that the use of the term ``independently'' 
removes the provision from the protection of section 104(d)(2)(B)(xiii) 
of the Safe Harbors which requires the maintenance of separate and 
distinct books and records relating to insurance transactions. The 
Requester also contends that Federal law should preempt this provision 
because the West Virginia Law would impose burdens on the bank and 
require its customers to make separate trips to the bank and sign 
separate documents to purchase bank and insurance products, thus 
significantly interfering with bank insurance sales.
    (6) Section 33-11A-13 of the West Virginia Law, entitled 
``Confidentiality of insurance information obtained by financial 
institutions,'' generally prohibits a financial institution from using 
insurance information obtained in the making of a loan unless the 
customer consents to such use. Specifically, the section provides 
that--
    (a) When a financial institution requires a borrower to provide 
insurance information in connection with the making of a loan or 
extension of credit, neither such financial institution nor an 
insurance agent or broker affiliated with such financial institution 
may later use the information so obtained to solicit or offer insurance 
to such borrower, unless the consent required in subsection (b) below 
is first obtained.
    (b) A borrower may consent to the financial institution's 
disclosure of insurance information to an agent or broker affiliated 
with the financial institution, but any such consent must be in writing 
and be given at a time subsequent, which shall be no less than two 
days, to the time of the application for, approval of and making of the 
loan or extension of credit.
    (c) Consent under subsection (b) of this section shall be obtained 
in a separate document, distinct from any

[[Page 35423]]

other transaction, and shall not be required as a condition for 
performance of other services for the customer.
    The Requester contends that this provision is more burdensome and 
restrictive than section 104(d)(2)(B)(vi) of the Safe Harbors, which 
protects restrictions on the release of insurance information to non-
affiliated third parties for the purpose of soliciting or selling 
insurance. The Requester states that the West Virginia Law goes beyond 
the protection of the Safe Harbor because it prohibits transfers to 
affiliated as well as non-affiliated third parties. The Requester 
further contends that Federal law should preempt this provision because 
it significantly interferes with national bank insurance sales by 
limiting an institution's ability to identify customer needs and 
suitable products to meet the needs of those customers.
    (7) Section 33-11A-14 of the West Virginia Law, entitled ``Physical 
location of insurance sales,'' generally provides that the sale of an 
insurance product by a financial institution must take place in an 
office physically separated from the institution's lending and deposit-
taking activities. Specifically, the section provides that --
    The place of solicitation or sale of insurance by any financial 
institution or on the premises of any financial institution shall be 
clearly and conspicuously signed so as to be readily distinguishable by 
the public as separate and distinct from the financial institution's 
lending and deposit-taking activities. In the event that a person which 
would otherwise be subject to the requirements set forth in this 
provision does not have the physical space to so comply, the 
commissioner may grant a waiver of the requirements of this section 
upon a written request by such person demonstrating that, due to its 
small physical facilities, compliance is not possible, and including 
identification of other steps which will be taken to minimize customer 
confusion.
    The Requester contends that Federal law preempts this provision 
because it does not fall within any Safe Harbor and would prevent or 
significantly interfere with the ability of a financial institution to 
engage in insurance sales activities by requiring physical separation 
of the insurance activities from core banking activities. The Requester 
states that this requirement would significantly interfere with bank 
sales of insurance products, particularly with regard to smaller 
institutions with limited space and personnel.

Request for Comments

    The OCC requests comments on whether Federal law preempts the 
provisions of the West Virginia Law cited above.

    Dated: May 25, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-13855 Filed 6-1-00; 8:45 am]
BILLING CODE 4810-33-P