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  • Acts
  • 2002
  • Chapter 454 AN ACT RELATIVE TO CREDIT UNIONS.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:


SECTION 1. Chapter 171 of the General Laws is hereby amended by inserting after section 75A the following section:-

Section 75B. (a) For purposes of this section, the word "company" shall mean an insurance company licensed pursuant to chapter 175 and the word "affiliate" shall mean a credit union service organization as established pursuant to 12 U.S.C. section 1786a(e)(1) or by section 6A of chapter 171 and by regulations promulgated thereunder by the commissioner.

(b) A credit union shall have the power to sell, either directly or indirectly through an affiliate 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, insurance products as a company, for which the credit union, affiliate or third party acts as agent or broker, is authorized to issue in the commonwealth. No credit union exercising the power shall assume or guarantee the payment on any premiums on the products or guarantee the truth of any statement contained in the application therefor. The sales shall be conducted in accordance with conditions and limitations that the commissioner shall promulgate by regulation which shall reflect the substance of conditions established by the National Credit Union Administration and other federal regulatory agencies governing the sale of insurance products. The conditions and limitations shall be in addition to and consistent with 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. The conditions and limitations shall include, but not be limited to, the following:

(1) No credit union, except a credit union licensed as an agent for the Savings Bank Life Insurance Company of Massachusetts and only to the extent of the authority granted under the 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 the credit union that conforms with the regulations promulgated pursuant to this section. The plan shall include a detailed description of the complaint resolution procedure, including credit union personnel designated for its enforcement, required pursuant to paragraph (9).

(2) Officers, tellers and other employees of a credit union who are not licensed as insurance agents may refer a member of the credit union to a licensed insurance agent of the credit union only when the member 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 the referrals.

(3) The solicitation or sale of insurance products shall be permitted at the main office of a credit union, or at any branch thereof established pursuant to chapter 171 or 12 U.S.C. section 1752(9), or at any other credit union office, not including an electronic branch established pursuant to chapter 167B. The solicitation or sale shall be conducted on the premises of a credit union 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 credit union and insurance services only upon a demonstration by a credit union that space considerations, such as the size or design of the credit union 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, the waiver application demonstrates physical constraints that are consistent with criteria the commissioner shall establish for the waivers. In any instance where a waiver is granted, a credit union employee, licensed as an insurance agent, shall not, in any manner involving the application by a member for an extension of credit by the credit union, act as the representative of the credit union both with respect to the application and with respect to the solicitation and sale of insurance products to the member, whether or not the insurance is required for the extension of credit. It shall be the responsibility of a credit union to institute procedures to eliminate member misunderstanding or confusion as to the distinction between insurance products and other credit union functions, and to prevent any misrepresentation thereof. Notwithstanding the foregoing, any premises constructed, purchased, leased or acquired by a credit union 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 the acquisition results from a merger or consolidation pursuant to chapter 171.

(4)(A) A credit union is hereby prohibited from tying the availability and extension of credit by a credit union to the purchase of insurance products from the credit union.

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

(C) In the instance of an application to a credit union 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 the credit union as loss payee, (i) the credit union shall make the initial disclosure of the necessity of insurance in its letter of commitment to the applicant approving the requested extension of credit; (ii) the credit union shall not, in any manner, solicit the applicant member to purchase the required insurance from the credit union until the commitment has been accepted by the applicant member; and (iii) the credit union shall not reject any policy, so long as it satisfies the required insurance, because the policy was issued by a company other than that for which the credit union acts as agent in the sale of insurance products.

(5) Rebates shall be regulated pursuant to section 183 of chapter 175.

(6) A credit union, through its licensed insurance agents or brokers, shall disclose in writing to a member who is a potential insurance purchaser that: (i) the insurance products which are available are not deposits of the credit union, are not protected by the national credit union share insurance fund or any other type of deposit insurance, are not an obligation of or guaranteed by the credit union, and may be subject to risk; (ii) any insurance required as a condition of the extension of credit by the credit union need not be purchased from the credit union but may, without affecting the approval of the application for an extension of credit, be purchased from an agent or insurance company of the member's choice; and (iii) the member 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 member.

(7) Credit union member information security and confidentiality shall be regulated pursuant to chapter 175I and the federal Fair Credit Reporting Act.

(8) No credit union engaged in the direct sales of insurance products shall discriminate against an applicant member or allow an affiliate 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 credit union offering insurance products at its main office or any branch thereof established pursuant to chapter 171 or 12 U.S.C. section 1752(9), shall refuse to offer the same at every such branch of the credit union.

(9) A credit union engaged in the direct sale of insurance products, or an affiliate or third party acting on its behalf, and whether acting as insurance agent or broker, shall forthwith forward copies of all member 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 the office shall cause a record of all complaints received to be maintained and shall, depending upon the nature of the complaint, refer any 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 member complaints. Regulations promulgated by the commissioner under this section shall include provisions for investigation and resolution by a credit union of member 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 chapter 167, including, but not limited to, sections 2A to 2G, inclusive, and to applicable chapter 175 and chapter 176D, including, but not limited to, penalties, cease and desist orders, and suspension or loss of license.

(d) This section shall not apply to the authority granted by the seventh and ninth paragraphs of section 75 of chapter 171 and section 12G of chapter 255.

(e) The commissioner shall promulgate regulations necessary to carry out this section.

(f) Notwithstanding any other 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 credit unions under his supervision which are licensed by the division of insurance pursuant to section 209 of chapter 175.

SECTION 2. Chapter 175 of the General Laws is hereby amended by striking out sections 209, 210 and 211, as appearing in the 2000 Official Edition, and inserting in place thereof the following 3 sections:-

Section 209. The commissioner may issue a license pursuant to section 163 and section 166 to a bank or credit union chartered by the commonwealth pursuant to chapter 168, 170, 171 or 172, and to a bank or credit union 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 and section 75B of chapter 171, respectively, for the solicitation and sale of insurance products as the company, for which such bank or credit union 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 or credit union as a licensed insurance 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 those terms are defined in section 1 of chapter 167, and to federal credit union regulatory agencies information relating to the insurance activities of any credit union or federal credit union, as those terms are defined in section 1 of chapter 171, which are licensed pursuant to section 209.

SECTION 3. 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 credit unions 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 the credit unions act as agents or brokers, and other related information as the commissioners may determine to be necessary. The 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 the waiver is sought, and the disposition of the applications, including the reasons therefor. The report shall be filed 1 year after the effective date of this act, and annually thereafter for a period of 3 years.

SECTION 4. Any license issued under 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 the license may be renewed by the Savings Bank Life Insurance Company of Massachusetts and the issuance or renewal of the license shall not be subject to section 75B of chapter 171 of the General Laws.

SECTION 5. Nothing in this act shall be construed so as to prohibit a bank or credit union from selling annuity products pursuant to state or federal law.

SECTION 6. The regulations required by section 75B of chapter 171 of the General Laws, inserted by section 1 of this act, and the procedures for promoting the prompt resolution of consumer complaints as provided for by said section 75B of said chapter 171 and section 210 of chapter 175 of the General Laws, shall be promulgated not later than December 31, 2002. The provisions of this act allowing the sale of insurance products by credit unions shall not be in effect until the regulations and procedures required by section 75B of chapter 171 are so promulgated.

Approved January 1, 2003.