Background

The four principal banking regulatory agencies published final consumer protection rules regarding bank insurance sales on Dec. 4, 2000. The published rules may be obtained from the Federal Register, Volume 65, Number 233. The federal regulators recently agreed to postpone the effective date for implementation of the consumer protection rules from April 1, 2001 to Oct. 1, 2001. This was done to accommodate requests from depository institutions for more time to prepare to implement the regulations.

The federal banking agencies promulgated consumer protection regulations pursuant to Section 305 of the Gramm-Leach-Bliley Act (GLBA), governing the sale of insurance products by depository institutions. Among other things, the regulations require depository institutions that sell insurance products to make certain disclosures and receive consumer acknowledgements, which are intended to reduce consumer confusion in the sale of insurance products by depository institutions. To best ensure that these requirements are met, depository institutions may prefer to have these disclosures included on insurance application forms. In order to comply with the federal regulations in this fashion, depository institutions that sell insurance products will need to ask insurers to make the necessary filings with appropriate State insurance regulators. These form filings would be subject to the filing and review requirements under section 631.20, Stats.

In pertinent part, Section 305 of the GLBA requires:

The Federal banking agencies shall prescribe and publish in final form . . . customer protection regulations (which the agencies jointly determine to be appropriate) that -

(A) apply to retail sales practices, solicitations, advertising, or offers of any insurance product by any depository institution or any person that is engaged in such activities at an office of the institution or on behalf of the institution; and
(B) are consistent with the requirements of this Act and provide such additional protections for customers to whom such sales, solicitations, advertising, or offers are directed.

The following are two model notices, developed by the NAIC, for use by depository institutions and other "covered persons" in complying with the written disclosure requirements related to insurance sales that are imposed by Section 305 of the GLBA and the corresponding regulations promulgated by the federal banking agencies. (In addition to depository institutions, a "covered person" is any other person who sells, solicits, advertises, or offers an insurance product or annuity to a consumer at an office of the depository institution or on behalf of a depository institution.) One notice provides the written disclosures that must be given to a consumer in connection with an initial purchase of an insurance or annuity product that is unrelated to an extension of credit. The second notice provides the written disclosures that must be given to a consumer in connection with the solicitation, offer or sale of an insurance or annuity product that is related to an extension of credit.

The federal banking agencies have reviewed the content of both notices and have determined that it meets the requirements of 12 C.F.R. 14.40 (a) and (b) in the case of national banks; 12 C.F.R. 208.84 (a) and (b) in the case of state member banks; 12 C.F.R. 343.40 (a) and (b) in the case of state non-member banks; and 12 C.F.R. 536.40 (a) and (b) in the case of savings associations. We have determined that these notices are not contrary to State law and would be acceptable for use in Wisconsin once properly filed and approved.

In addition to the content of the notices, the disclosures required by these regulations must be "readily understandable" and in a "meaningful" form. Examples of the types of methods that an institution could use to call attention to the nature and significance of the information provided include: (i) a plain-language heading to call attention to the disclosures; (ii) a typeface and type size that are easy to read; (iii) wide margins and ample line spacing; (iv) boldface or italics for key words; and (v) distinctive type style, and graphic devices, such as shading or sidebars, when the disclosures are combined with other information. See 12 C.F.R. 14.40(c)(6) in the case of national banks; 12 C.F.R. 208.84(c)(6) in the case of state member banks; 12 C.F.R. 343.40(c)(6) in the case of state non-member banks; and 12 C.F.R. 536.40(c)(6) in the case of savings associations.

References to "the bank" should be to "the savings association" in the case of a savings association, or may be to the actual name of the bank or savings association.

DISCLOSURE NOTICE 1: Model Written Disclosure for the Initial Purchase of Insurance or Annuity Products that are not Sold in Connection with an Extension of Credit

Insurance products and annuities:

• Are not a deposit or other obligation of, or guaranteed by, the bank or any affiliate of the bank;
• Are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency of the United States, the bank, or any affiliate of the bank;
• [Involve investment risk, including the possible loss of value.] Note: This disclosure may not be required for all products.

Please sign to acknowledge receipt of these disclosures:

Name of Customer:	___________________________________
Customer Signature:	___________________________________
Date: _______________

DISCLOSURE NOTICE 2: Model Written Disclosure for Insurance Products that are Solicited, Offered, or Sold in Connection with an Extension of Credit

In connection with your credit application, [name of bank or savings association] advises you of the following:

• [Name of bank or savings association] may not condition the extension of credit you are applying for on whether you purchase an insurance product or annuity from the bank or the bank's affiliate.
• [Name of bank or savings association] may not condition the extension of credit you are applying for on your agreement not to obtain, or a prohibition on your obtaining, an insurance product or annuity from an entity not affiliated with the bank.

Insurance products and annuities:

• Are not a deposit or other obligation of, or guaranteed by, the bank or any affiliate of the bank;
• Are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency of the United States, the bank, or any affiliate of the bank;
• [Involve investment risk, including the possible loss of value.] Note: This disclosure may not be required for all products.

Please sign to acknowledge receipt of these disclosures:

Name of Customer:	___________________________________
Customer Signature:	___________________________________
Date: _______________

Filing Instructions for Section 305 Submissions

In order to provide the most expeditious and efficient manner to implement these disclosure requirements in Wisconsin, form filings submitted to meet the requirements of Section 305 of GLBA will be deemed approved by this office provided that they meet the following:

1. The only form filing(s) in the submission is to meet the requirements of Section 305 of GLBA.
2. The form(s) contained in the submission are identical to Disclosure Notice 1 or Disclosure Notice 2, above.
3. A proper Wisconsin Transmittal Form, including the required certificate of compliance is attached to the submission; and
4. A cover letter that prominently states that the submission is being made to meet the requirements of Section 305 of GLBA.

Section 305 of GLBA requires that these disclosures be implemented by no later than October 1, 2001. In order to accommodate this federal deadline, submissions that meet the above criteria must be filed with this office by no later than September 4, 2001.

Any questions concerning the above topic may be directed to Mike Honeck, Chief, Life and Health Section at michael.honeck@wisconsin.gov or at (608)266-0097.

Thank you.