[Federal Register Volume 65, Number 136 (Friday, July 14, 2000)]
[Notices]
[Pages 43827-43829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17826]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket No. 00-15]


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 opinion about 
whether Federal law preempts certain provisions of the Massachusetts 
bank insurance sales statute and regulations promulgated pursuant to 
that statute by the Division of Banks and the Division of Insurance. 
This Notice refers to the statute and regulations collectively as the 
Massachusetts 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 a written opinion in this matter.

DATES: Comments must be received on or before August 14, 2000.

ADDRESSES: Comments should be sent to the Communications Division, 
Office of the Comptroller of the Currency, 250 E Street, SW, Third 
Floor, Attention: Docket No. 00-15, 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 Massachusetts Bankers 
Association (Requester) for a determination that Federal law preempts 
certain provisions of the Massachusetts Law.
    Section 114 of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 generally requires the OCC to publish in the 
Federal Register a descriptive notice of certain requests that the OCC 
receives for preemption opinions. 12 U.S.C. 43. 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

[[Page 43828]]

notice and comment procedures given the broad interest in the issues 
presented. The OCC will publish in the Federal Register any final 
opinion letter we issue concluding that Federal law preempts the 
provisions of Massachusetts Law that are the subject of the request.

Description of the Request for OCC Preemption Opinion

    The OCC has been asked to determine whether section 104 the Gramm-
Leach-Bliley Act (GLBA), Pub. L. 106-102, 113 Stat. 1338, 1352-59 (Nov. 
12, 1999) (to be codified at 15 U.S.C. 6701), preempts certain specific 
provisions of the Massachusetts 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 crossmarketing 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 the Act (Safe 
Harbors). The Requester asserts that GLBA preempts three prohibitions 
contained in the Massachusetts Law and that none of the Safe Harbors 
protects these limitations.

The Referral Prohibition and the Referral Fee Prohibition

    The Requester asserts that section 2A(b)(2) of the Massachusetts 
bank insurance sales statute, Mass. Gen. Laws Ann. Ch. 167F, Sec. 2A 
(Lexis 2000 Supp.), and the corresponding regulations set forth in 209 
CMR 49.06(3) and 211 CMR 142.05(3) (2000) prohibit non-licensed bank 
personnel from referring prospective customers to a licensed insurance 
agent or broker except upon an inquiry initiated by the customer (the 
Referral Prohibition). The Requester further asserts that these 
provisions prohibit non-licensed bank personnel from receiving any 
additional compensation for making a referral, even if the compensation 
is not conditioned upon the sale of insurance (the Referral Fee 
Prohibition). For example, section 2A(b)(1) of the Massachusetts 
statute provides that:

    Officers, tellers, and other employees of a bank who are not 
licensed as insurance agents may refer a customer of said bank to a 
licensed insurance agent of the bank only when such customer 
initiates an inquiry relative to the availability or acquisition of 
insurance products. No such officer, teller, or other employee shall 
be further or additionally compensated for making said referrals.

    The Requester asserts that the Referral Prohibition and Referral 
Fee Prohibition are not protected by any of the Safe Harbors. The 
Requester contends that these prohibitions are broader than section 
104(d)(2)(B)(iv), the Safe Harbor which generally protects restrictions 
prohibiting the payment or receipt of any commission, brokerage fee, or 
other valuable consideration for services as an insurance agent or 
broker to or by any persons other than validly licensed insurance 
personnel. This Safe Harbor specifically excludes from protection any 
state law limiting compensation for ``a referral by an unlicensed 
person of a customer or potential customer to a licensed insurance 
agent or broker that does not include a discussion of specific 
insurance policy terms and conditions.'' Based on this exclusion, the 
Requester asserts that the Referral Prohibition and Referral Fee 
Prohibition are the type of state limitation that Congress explicitly 
declined to protect in GLBA.
    Similarly, the Requester contends that the Referral Prohibition and 
Referral Fee Prohibition extend beyond the protections of the Safe 
Harbor contained in section 104(d)(2)(B)(v). That Safe Harbor protects 
limitations on the payment of insurance commissions and referral fees 
to unlicensed personnel based upon the purchase of insurance by a 
prospective customer. The Requestor asserts that the Massachusetts Law 
does not come within this Safe Harbor because it prohibits referral 
fees regardless of whether they are based upon the sale of insurance.
    The Requester further asserts that GLBA preempts both the Referral 
Prohibition and the Referral Fee Prohibition because these prohibitions 
significantly interfere with the ability of a depository institution to 
engage in insurance sales, solicitation, and crossmarketing activities. 
In the case of the Referral Prohibition, bank employees may not refer 
customers to licensed insurance personnel unless the customer initiates 
the inquiry. In the case of the Referral Fee Prohibition, a bank 
employee may not receive compensation for making a referral to licensed 
insurance personnel, even if such compensation is not contingent on the 
sale of insurance. The Requester asserts that these prohibitions 
effectively prevent bank employees from engaging in the crossmarketing 
activities permitted by the GLBA.

Waiting Period Requirement

    The Requester also asserts that GLBA preempts section 2A(b)(4)(ii) 
of the Massachusetts bank insurance sales statute and the corresponding 
regulations, 209 CMR 49.06(5)(2000) and 211 CMR 142.06 (2000), that 
require a bank to refrain from making an insurance solicitation in 
connection with an application for an extension of credit until after 
the application has been approved and, in the case of an extension of 
credit secured by a mortgage on real estate, until after the customer 
has accepted the bank's written commitment to extend credit (the 
Waiting Period Requirement). Specifically, section 2A(b)(4)(ii) 
provides that:

    No solicitation for the sale of insurance in conjunction with 
any application for the extension of credit shall be permitted until 
said application has been approved, such approval and the 
disclosures required by this section have been provided to said 
applicant in writing, and the receipt of both said approval and 
disclosures has been acknowledged in writing by said applicant. The 
date, time and method of the communication of said approval and 
disclosures to the applicant, together with the applicant's 
acknowledgment of the receipt thereof, shall be made a permanent 
part of the bank record of such extension of credit. This paragraph 
shall not apply in situations where a bank contacts a customer in 
the course of direct or mass marketing of insurance products to a 
group of persons in a manner that bears no relation to any such 
person's loan application or credit decision.

    The Requester asserts that none of the Safe Harbors protects the 
Waiting Period Requirement. Although the Safe Harbor contained in 
section 104(d)(2)(B)(viii) protects certain types of state anti-tying 
limitations, it specifically excludes any limitation that would prevent 
a depository institution from informing a customer that insurance is 
available from the depository institution. Thus, the Requester contends 
that the Waiting Period Requirement is not substantially the same as 
any of the Safe Harbors and, in fact, is the type of state limitation 
that Congress explicity declined to protect in GLBA.
    The Requester further asserts that GLBA preempts the Waiting Period 
Requirement because it requires a depository institution to complete 
processing of a credit application before even informing an applicant 
that insurance is available through the institution. Thus, a depository 
institution may never have an opportunity to market its insurance

[[Page 43829]]

products to loan customers, who may arrange to obtain insurance through 
another firm while the loan is in process. Accordingly, the Requester 
asserts that the Waiting Period Requirement significantly interferes 
with the ability of a depository institution to sell, solicit, and 
cross-market insurance. The Requester also asserts that the Waiting 
Period Requirement is overbroad because it applies to all types of 
insurance and not simply insurance required in connection with a loan.

Request for Comments

    The OCC requests comments on whether Federal law preempts the 
provisions of Massachusetts Law cited and described in this notice.

    Dated: June 30, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-17826 Filed 7-13-00; 8:45 am]
BILLING CODE 4810-33-P