[Federal Register Volume 65, Number 185 (Friday, September 22, 2000)]
[Notices]
[Pages 57427-57429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24340]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket No. 00-18]


Notice of Request for Preemption Determination

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

ACTION: Notice and request for comment.

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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 Financial 
Institutions Insurance Sales Act (FIISA), enacted by the State of Rhode 
Island in 1996. 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 October 23, 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. 00-18, 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: Jean Campbell, Attorney, or Stuart 
Feldstein, Assistant Director, Legislative and Regulatory Activities 
Division, (202) 874-5090.

SUPPLEMENTARY INFORMATION:

Background

    In 1996, the Financial Institutions Insurance Association 
(Requester) filed with the OCC a request for the OCC's opinion on 
whether Federal law preempts certain provisions of a Rhode Island 
statute pertaining to insurance sales by financial institutions. The 
OCC published a notice and request for comment on January 14, 1997.\1\ 
On March 18, 1997, the OCC extended the comment period until May 15, 
1997,\2\ so that interested persons could consider, and comment on, the 
effect of a regulation implementing the Rhode Island statute that was 
then under consideration by the Rhode Island Department of Business 
Regulation. Throughout this time period, the Congress was actively 
considering various financial modernization bills containing provisions 
relevant to the issues raised by the Requester. Congress passed such 
legislation--the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 Stat. 
1338)--in November 1999 (GLBA). On July 26, 2000, the Requester renewed 
its request that the OCC issue an opinion on whether or not Federal 
law, now including the relevant provisions of GLBA, preempts certain 
provisions of Rhode Island Law.\3\
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    \1\ 62 FR 1950 (January 14, 1997).
    \2\ 62 FR 12883 (March 18, 1997).
    \3\ This notice refers to the statutory provisions and their 
implementing regulations, where applicable, collectively as the 
Rhode Island Law.
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    Section 114 of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. 2338) 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 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 the Rhode Island Law that are the subject of 
the request.

Description of the Request for OCC Preemption Opinion

    The OCC has been asked to provide its views on whether section 104 
of the GLBA \4\ preempts certain specific provisions of the Rhode 
Island Law.
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    \4\ 113 Stat. 1338, 1352-59 (November 12, 1999) (to be codified 
at U.S.C. 6701).
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    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, 
State provisions are not preempted pursuant to section 104 if they are 
substantially the same as but no more burdensome or restrictive than 
any of the thirteen specific provisions--or Safe Harbors--described in 
section 104(d)(2)(B).\5\ The Requester asserts that five specific 
provisions of the FIISA are preempted and that none of the Safe Harbors 
protects these provisions.
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    \5\ The thirteen Safe Harbors are enumerated in clauses (i) 
through (xiii) of section 104(d)(2)(B). Each Safe Harbor is referred 
to in this notice by clause. Thus, Safe Harbor (viii) refers to 
seciton 104(d)(2)(B)(viii).
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Anti-tying Prohibition

    The Requester contends that Federal law should preempt the anti-
tying provisions in section 6 of the FIISA and its implementing 
regulation. Specifically, section 6 provides that:

    (a) No financial institution may offer a banking product or 
service, or fix or vary the conditions of this offer, on a condition 
or requirement that the customer obtains insurance from the 
financial institution, or any particular insurance producer.
    (b) 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, or is in any way related to, the lending of money or extension 
of credit, the establishment or maintenance of a trust account, the 
establishment or maintenance of a checking or savings account or 
other deposit account, or the provision of services related to any 
of these activities. R.I. Gen. Laws 27-58-6.

    The Requester contends that this prohibition is much broader than a 
prohibition against coercive tying because it 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. The Requester 
further contends that these prohibitions are more burdensome and 
restrictive than Safe Harbor (viii) and frustrate, hamper,

[[Page 57428]]

impair or interfere with a national bank's ability to exercise its 
insurance powers.

Sales Force Restrictions

    Section 8 of the FIISA, and its implementing regulation, prohibits 
bank employees with lending or deposit taking responsibilities from 
soliciting and selling insurance. Specifically, section 8 provides 
that:

    Solicitation for the purchase or sale of insurance by a 
financial institution shall be conducted only by persons whose 
responsibilities do not include loan transactions or other 
transactions involving the extension of credit, or the taking of 
deposits. For the purposes of this section however, solicitation 
does not include signage on the premises. (R.I. Gen. Laws 27-58-8.)

    The Requester contends that this provision would prohibit a 
properly state-licensed private banker from both accepting deposits and 
selling insurance products to a private banking customer. The Requester 
further contends that this prohibition would destroy ``platform 
programs'' and those in which staff members work as dual employees, and 
could limit the ability of certain financial institutions, particularly 
smaller ones, to exercise their insurance powers. The Requester asserts 
that this provision is more burdensome and restrictive than any of the 
Safe Harbors and would prevent or significantly interfere with the 
ability of a financial institution to exercise its authority to sell 
insurance.

Confidential Customer Information

    Section 10 of the FIISA, and its implementing regulation, prohibits 
financial institutions from using or disclosing certain customer 
information for the purpose of selling or soliciting insurance. 
Specifically, section 10 provides that:

    (1)(b) ``Nonpublic customer information'' means information 
regarding a person that has been derived from a record of a 
financial institution, including information concerning the terms 
and conditions of insurance coverage, insurance expirations, 
insurance claims, or insurance history of an individual. Nonpublic 
customer information does not include customer names, addresses or 
telephone numbers.
    (2) No financial institution shall use any nonpublic customer 
information for the purpose of selling or soliciting the purchase of 
insurance or provide the nonpublic customer information to a third 
party for the purpose of another's sale or solicitation of the 
purchase of insurance. (R.I. Gen. Laws 27-58-10.)

    The Requester contends that this provision would prevent a bank 
from using information it has obtained to identify customer needs. The 
Requester further contends that this provision would hurt third party 
marketing programs as well as bank-owned agencies with dedicated agents 
and ``platform programs,'' and damage marketing and sales techniques 
such as remote or direct marketing and retail-face-to-face programs.
    The Requester contends that section 10 of the FIISA is not 
substantially the same as and is more burdensome and restrictive than 
Safe Harbor (vi) and would prevent or significantly interfere with a 
financial institution's ability to exercise its insurance powers.

Insurance in Connection With a Loan

    Section 11 of the FIISA generally requires that loan and insurance 
applications be completed independently and through separate documents. 
Specifically, section 11 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.

(R.I. Gen. Laws 27-58-11.)

    The Requester contends that the requirement that loan and insurance 
transactions be completed ``independently'' as well as through separate 
documents will inconvenience both the applicant and the financial 
institution involved in the two transactions by requiring the applicant 
to make a separate trip to the bank, complete a separate set of 
documents, and meet with more than one employee of the bank. The 
Requester contends that this requirement is particularly burdensome 
when coupled with other requirements contained in the FIISA, such as 
the requirements governing physical location of insurance activities 
and sales force.
    The Requester contends that this provision is not protected by any 
of the Safe Harbors. The Requester asserts that although Safe Harbor 
(xi) protects State laws requiring that credit and insurance 
transactions be completed through separate documents, the Safe Harbor 
does not protect States laws that require that the transactions be 
completed ``independently.'' Thus, the Requester contends that this 
provision is not protected by any of the Safe Harbors and would prevent 
or significantly interfere with the ability of a financial institution 
to exercise its insurance powers.

Physical Separation of Insurance Activities

    Section 12 of the FIISA, and its implementing regulation, generally 
permits financial institutions to solicit and sell insurance only from 
an office physically separated from the banking activities of the 
institution. Specifically, section 12 provides that:

    The place of solicitation or sale of insurance by any financial 
institution shall be from an office physically separated from the 
banking activities of the institution. Physical separation shall not 
be defined as a separate building. The commissioner shall have the 
authority to promulgate rules to implement this section pursuant to 
Sec. 27-58-4.

(R.I. Gen. Laws 27-58-12.)

    The Requester contends that this requirement would prevent a 
trained and licensed bank employee from soliciting a sale of a life 
insurance product if the employee (1) was also a loan officer; (2) had 
an office not physically separated from core banking activities; (3) 
had just accepted a loan application from the customer; or (4) had 
learned of the customer's need for the product as a result of reading 
his loan application. Thus, the Requester contends that none of the 
Safe Harbors protects this requirement from preemption, and that these 
limitations would prevent or significantly interfere with the financial 
institution's ability to exercise its authority to sell insurance. The 
Requester also contends that this requirement would impact small 
institutions most severely.

Regulations Implementing the FIISA Provisions

    The Requester also asks the OCC to address whether or not Federal 
law would preempt the regulations implementing the State statutory 
provisions for the same reasons described above. \6\ In addition, the 
Requester also specifically asks the OCC to opine on whether a 
regulatory provision that would confer on the Rhode Island Department 
of Business Regulation authority to examine the insurance activities of 
the bank for compliance with the Rhode Island implementing regulations 
conflicts with Federal law. \7\ The OCC invites comments on this 
provisions and all the implementing regulations, including how they 
interact with the FIISA provisions.
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    \6\ R.I. Code R. 02-030-090 (2000).
    \7\ R.I. Code R. 02-030-090, Sec. 3 (2000).
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Request for Comments

    The OCC requests comments on the issues described above.

    Dated: September 14, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.

Request for Comments

    The OCC requests comments on the issues described above.


[[Page 57429]]


    Dated: September 14, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-24340 Filed 9-21-00; 8:45 am]
BILLING CODE 4810-33-P