AN ACT PROVIDING CONSUMER PROTECTION RELATIVE TO THE SALE OF INSURANCE BY BANKS.
Whereas , The deferred operation of this act would tend to defeat its purpose, which is to provide forthwith for consumer protection relative to the sale of insurance by banks, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.
SECTION 1. This act shall be known and may be cited as the Consumer Protection Act relative to the sale of insurance by banks.
SECTION 2. Chapter 167F of the General Laws is hereby amended by inserting after section 2 the following section:-
Section 2A. (a) For purposes of this section, the word "company" shall mean an insurance company licensed pursuant to chapter 175 and the word "affiliate" shall have the same meaning as established in section 1 of chapter 167A.
(b) A bank shall have the power to sell, either directly or indirectly through an affiliate or a subsidiary corporation established for the purpose or a third party agreement, and acting either as an agent licensed pursuant to section 163 of chapter 175 or a broker licensed pursuant to section 166 of said chapter 175, such insurance products as a company, for which such bank, affiliate, subsidiary corporation or third party acts as agent or broker, is authorized to issue in the commonwealth. No bank exercising such power shall assume or guarantee the payment on any premiums on such products or guarantee the truth of any statement contained in the application therefor. Said sales shall be conducted in accordance with conditions and limitations that the commissioner shall promulgate by regulation and which shall reflect the substance of conditions established by the comptroller of the currency of the United States governing the sale of insurance products by a national bank as a licensed agent of an insurance company. Said conditions and limitations shall be in addition to and consistent with the provisions of said chapter 175 and regulations promulgated thereunder by the commissioner of insurance with respect to the licensing of insurance agents and brokers and the sale of insurance products. Said conditions and limitations shall include, but not be limited to, the following provisions:-
(1) No bank, except a bank licensed as an agent for the savings bank life insurance company of Massachusetts and only to the extent of the authority granted under such license, shall undertake to act directly or indirectly as an insurance agent or broker, in any manner permitted by this section, until the commissioner approves a general plan of operation submitted by such a bank that conforms with the regulations promulgated pursuant to this section. Said plan shall include a detailed description of the complaint resolution procedure, including bank personnel designated for its enforcement, required pursuant to subparagraph (9) of this section.
(2) 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.
(3) The solicitation or sale of insurance products shall be permitted at the main office of a bank, or at any branch thereof established pursuant to chapter 167C, or at any other bank office, not including an electronic branch established pursuant to chapter 167B. Said solicitation or sale shall be conducted on the premises of a bank in a distinctly designated area which is separate and apart from any physical setting in which services for insured deposit account transactions or transactions involving applications for the extension of credit are conducted. The commissioner may waive the requirement for the physical separation of bank and insurance services only upon a demonstration by a bank that space considerations, such as the size or design of said bank premises, preclude such separation. The commissioner may allow for such use of a common area for both purposes if, subject to notice and hearing at the commissioner's discretion, said waiver application demonstrates physical constraints that are consistent with criteria the commissioner shall establish for such waivers. In any instance where such waiver is granted, a bank employee, licensed as an insurance agent, shall not, in any manner involving the application by a customer for an extension of credit by said bank, act as the representative of the bank both with respect to said application and with respect to the solicitation and sale of insurance products to said customer, whether or not such insurance is required for the extension of credit. It shall be the responsibility of a bank to institute procedures to eliminate customer misunderstanding or confusion as to the distinction between such insurance products and other bank functions, and to prevent any misrepresentation thereof. Notwithstanding the foregoing, any premises constructed, purchased, leased or acquired by a bank on and after the effective date of this section for the conduct of its authorized business, including the solicitation and sale of insurance, shall not be eligible for the waiver provided for herein, unless said acquisition results from a merger, consolidation or purchase of assets pursuant to chapters 168, 170 and 172.
(4)(i) A bank is hereby prohibited from tying the availability and extension of credit by a bank to the purchase of insurance products from said bank.
(ii) 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.
(iii) In the instance of an application to a bank for an extension of credit to be secured by a mortgage on real estate and in which it is necessary for the applicant to obtain a policy insuring said premises against loss and designating such bank as loss payee, (i) said bank shall make the initial disclosure of the necessity of such insurance in its letter of commitment to the applicant approving the requested extension of credit; (ii) such bank shall not, in any manner, solicit the applicant to purchase the required insurance from the bank until said commitment has been accepted by the applicant; and (iii) such bank shall not reject any such policy, so long as it satisfies the required insurance, because the policy was issued by a company other than that for which the bank acts as agent in the sale of insurance products.
(5) Rebates shall be regulated pursuant to the provisions of section 185 of chapter 175.
(6) A bank, through its licensed insurance agents or brokers, shall disclose in writing to a potential insurance customer that: (i) the insurance products which are available are not deposits of the bank, are not protected by the federal deposit insurance corporation or any other type of deposit insurance, are not an obligation of or guaranteed by the bank, and may be subject to risk; (ii) any insurance required as a condition of the extension of credit by the bank need not be purchased from the bank but may, without affecting the approval of the application for an extension of credit, be purchased from an agent or insurance company of the customer's choice; and (iii) the customer may file any complaints with the office of consumer affairs and business regulations as hereinafter provided. The disclosures required by this section shall be provided in writing, and receipt thereof shall be acknowledged in writing by the customer.
(7) Bank customer information security and confidentiality shall be regulated pursuant to the provisions of chapter 175I of the General Laws and the provisions of the federal Fair Credit Reporting Act.
(8) No bank engaged in the direct sales of insurance products shall discriminate against an applicant or allow an affiliate, a subsidiary corporation established for the purpose or a third party acting on its behalf to discriminate against an applicant for any insurance products offered by it based upon the race, color, national origin or residence of the applicant, or on such other basis as the commissioner may determine. No bank offering insurance products at its main office or any branch thereof established pursuant to chapter 167C, shall refuse to offer the same at every such branch of the bank.
(9) A bank engaged in the direct sale of insurance products, or an affiliate, subsidiary corporation or third party acting on its behalf, and whether acting as insurance agent or broker, shall forthwith forward copies of all customer complaints relative to its insurance sales activities to the office of consumer affairs and business regulation established by section 1 of chapter 24A. The director of said office shall cause a record of all such complaints received to be maintained and shall, depending upon the nature of the complaint, refer any such complaint for resolution to the appropriate banking or insurance regulator in the division of banks and loan agencies or the division of insurance. The commissioner, in conjunction with the commissioner of insurance, shall establish a procedure for the prompt resolution of such consumer complaints. Regulations promulgated by the commissioner under this section shall include provisions for investigation and resolution by a bank of customer complaints and for the requirement to forward all complaints so received to the office of consumer affairs and business regulation.
(c) Any violations of the provisions contained in this section shall be subject to the applicable provisions of chapter 167, including, but not limited to, sections 2A to 2G, inclusive, and to applicable provisions of chapter 175 and chapter 176D, including, but not limited to, penalties, cease and desist orders, and suspension or loss of license.
(d) The provisions of this section shall not be applicable to the authority granted by paragraphs 16 and 17 of section 2 of chapter 167F and section 12G of chapter 255.
(e) The commissioner shall promulgate regulations necessary to carry out the provisions of this section.
(f) For purposes of this section, the term "bank" shall include small loan companies licensed pursuant to section 96 of chapter 140, and mortgage lenders and mortgage brokers licensed pursuant to chapter 255E; provided, however, that the provisions of clause (i) of paragraph (6) shall not apply to such small loan companies or to such mortgage lenders and mortgage brokers which do not accept deposits; and provided, further, that said licensees shall be eligible to apply to the commissioner of banks for a waiver, in accordance with the provisions of this section, for premises utilized for the conduct of authorized business in the commonwealth.
(g) Notwithstanding any other provision of law to the contrary, the commissioner, in his discretion, may furnish to the commissioner of insurance information, reports and statements relating to the sale of insurance by banks under his supervision which are licensed by the division of insurance pursuant to section 209 of chapter 175.
SECTION 3. Section 174E of chapter 175 of the General Laws is hereby repealed.
SECTION 4. Said chapter 175 is hereby further amended by adding the following three sections:-
Section 209. The commissioner may issue a license pursuant to section 163 and section 166 to a bank chartered by the commonwealth pursuant to chapter 168, 170 or 172, and to a bank chartered by the United States, to act as an insurance agent or broker pursuant to this chapter and in accordance with the provisions of section 2A of chapter 167F, for the solicitation and sale of such insurance products as the company, for which such bank acts as agent or broker, is authorized to issue in the commonwealth.
Section 210. The commissioner, in conjunction with the commissioner of banks, shall establish a procedure for the prompt resolution of consumer complaints relative to the activities of a bank as such licensed agent or broker.
Section 211. The commissioner may, in his discretion, furnish to the commissioner of banks and to federal bank regulatory agencies information relating to the insurance activities of any bank or federal bank, as such terms are defined in section 1 of chapter 167, which are licensed pursuant to section 209.
SECTION 5. The fourth paragraph of section 4 of chapter 178A of the General Laws, as appearing in the 1996 Official Edition, is hereby amended by striking out the first and second sentences.
SECTION 6. Chapter 183 of the General Laws is hereby amended by adding the following section:-
Section 68. Any mortgagee doing business in the commonwealth and licensed as an insurance agent pursuant to section 163 of chapter 175, when making a mortgage loan secured by residential real estate located in the commonwealth, shall be subject, in addition to all applicable provisions of said chapter 175, to conditions and limitations established by the commissioner of banks pursuant to section 2A of chapter 167F; provided, however, that the provisions of clause (a) of subparagraph (6) of said section 2A shall not be applicable to any such mortgagee which does not accept deposits.
SECTION 7. In the event that any of the provisions of this act, as they relate to national banks, are preempted by the Comptroller of the Currency of the United States pursuant to section 114 of the federal Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994 (P.L. 103-328), or by a court of competent jurisdiction, the commissioner of banks, with respect to section 2A of chapter 167F of the General Laws, and the commissioner of insurance, with respect to sections 209 and 210 of chapter 175 of the General Laws, may waive, in writing, the applicability of such preempted provisions to said banks chartered by the commonwealth if it is determined such waiver is necessary in order to permit banks so chartered by the commonwealth to compete with national banks in the sale of insurance. Such waiver shall be filed with the state secretary and shall, unless otherwise provided by law, become effective on the sixtieth day following the date of said filing. A copy of any such waiver shall be filed simultaneously with the committee on banks and banking and the committee on insurance of the general court.
SECTION 8. The commissioner of banks and the commissioner of insurance shall jointly file a report with the committee on banks and banking and the committee on insurance of the general court delineating the number of applications for insurance agent or broker licenses filed by state and federally chartered banks directly or through affiliates, subsidiary corporations or pursuant to third party agreements, the number of applications approved, the names and addresses of the licensees, the business names and addresses of insurance agencies for which said banks act as such agents or brokers, and such other related information as said commissioners may deem necessary. Such report shall also include the number of applications filed for the waiver provided for in section 2, the names of the applicants, the addresses of the premises for which said waiver is sought, and the disposition of such applications, including the reasons therefor. Said report shall be filed one year after the effective date of this act, and annually thereafter for a period of three years.
SECTION 9. Any license issued under the provisions of chapter 178A of the General Laws for a bank or its officers or employees to act as agent for the Savings Bank Life Insurance Company of Massachusetts shall continue in force until its stated expiration date after the effective date of this act, at which time such license may be renewed by said Savings Bank Life Insurance Company of Massachusetts and the issuance or renewal of said license shall not be subject to the provisions of section 2A of chapter 167F of the General Laws.
SECTION 10. Nothing in this act shall be construed so as to prohibit a bank from selling annuity products pursuant to state or federal law.
SECTION 11. The regulations required by section 2A of chapter 167F of the General Laws, inserted by section 2 of this act, and the procedures for promoting the prompt resolution of consumer complaints as provided for by said section 2A of said chapter 167F and section 210 of chapter 175 of the General Laws, shall be promulgated not later than September 1, 1998. The provisions of this act allowing the sale of insurance products by banks shall not be in effect until such regulations and procedures are so promulgated.