12 U.S.C. § 1831x — Insurance customer protections

Page 1194 TITLE 12—BANKS AND BANKING § 1831w have to take direct or indirect action with re- spect to holding companies and their function- ally regulated subsidiaries; shall also limit whatever authority that a Fed- eral banking agency might otherwise have under any statute or regulation to require reports, make examinations, impose capital require- ments, or take any other direct or indirect ac- tion with respect to any functionally regulated affiliate of a depository institution, subject to the same standards and requirements as are ap- plicable to the Board under those provisions. (b) Certain exemption authorized No provision of this section shall be construed as preventing the Corporation, if the Corpora- tion finds it necessary to determine the condi- tion of a depository institution for insurance purposes, from examining an affiliate of any de- pository institution, pursuant to section 1820(b)(4) of this title, as may be necessary to disclose fully the relationship between the de- pository institution and the affiliate, and the ef- fect of such relationship on the depository insti- tution. (c) Definitions For purposes of this section, the following definitions shall apply: (1) Functionally regulated subsidiary The term ‘‘functionally regulated sub- sidiary’’ has the meaning given the term in section 1844(c)(5) of this title. (2) Functionally regulated affiliate The term ‘‘functionally regulated affiliate’’ means, with respect to any depository institu- tion, any affiliate of such depository institu- tion that is— (A) not a depository institution holding company; and (B) a company described in any clause of section 1844(c)(5)(B) of this title. (Sept. 21, 1950, ch. 967, § 2[45], as added Pub. L. 106–102, title I, § 112(b), Nov. 12, 1999, 113 Stat. 1367.) Editorial Notes REFERENCES IN TEXT Section 1848a of this title, referred to in subsec. (a)(3), was repealed by Pub. L. 111–203, title VI, § 604(c)(2), July 21, 2010, 124 Stat. 1601. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 120 days after Nov. 12, 1999, see sec- tion 161 of Pub. L. 106–102, set out as an Effective Date of 1999 Amendment note under section 24 of this title. § 1831w. Safety and soundness firewalls applica- ble to financial subsidiaries of banks (a) In general An insured State bank may control or hold an interest in a subsidiary that engages in activi- ties as principal that would only be permissible for a national bank to conduct through a finan- cial subsidiary if— (1) the State bank and each insured deposi- tory institution affiliate of the State bank are well capitalized (after the capital deduction required by paragraph (2)); (2) the State bank complies with the capital deduction and financial statement disclosure requirements in section 24a(c) of this title; (3) the State bank complies with the finan- cial and operational safeguards required by section 24a(d) of this title; and (4) the State bank complies with the amend- ments to sections 23A and 23B of the Federal Reserve Act [12 U.S.C. 371c and 371c–1] made by section 121(b) of the Gramm-Leach-Bliley Act. (b) Preservation of existing subsidiaries Notwithstanding subsection (a), an insured State bank may retain control of a subsidiary, or retain an interest in a subsidiary, that the State bank lawfully controlled or acquired be- fore November 12, 1999, and conduct through such subsidiary any activities lawfully con- ducted in such subsidiary as of such date. (c) Definitions For purposes of this section, the following definitions shall apply: (1) Subsidiary The term ‘‘subsidiary’’ means any company that is a subsidiary (as defined in section 1813(w)(4) of this title) of 1 or more insured banks. (2) Financial subsidiary The term ‘‘financial subsidiary’’ has the meaning given the term in section 24a(g) of this title. (d) Preservation of authority (1) This chapter No provision of this section shall be con- strued as superseding the authority of the Federal Deposit Insurance Corporation to re- view subsidiary activities under section 1831a of this title. (2) Federal Reserve Act No provision of this section shall be con- strued as affecting the applicability of the 20th undesignated paragraph of section 9 of the Federal Reserve Act [12 U.S.C. 335]. (Sept. 21, 1950, ch. 967, § 2[46], as added Pub. L. 106–102, title I, § 121(d)(1), Nov. 12, 1999, 113 Stat. 1380.) Editorial Notes REFERENCES IN TEXT Section 121(b) of the Gramm-Leach-Bliley Act, re- ferred to in subsec. (a)(4), is section 121(b) of Pub. L. 106–102, title I, Nov. 12, 1999, 113 Stat. 1378, which amended section 371c of this title. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 120 days after Nov. 12, 1999, see sec- tion 161 of Pub. L. 106–102, set out as an Effective Date of 1999 Amendment note under section 24 of this title. § 1831x. Insurance customer protections (a) Regulations required (1) In general The Federal banking agencies shall prescribe and publish in final form, before the end of the Page 1195 TITLE 12—BANKS AND BANKING § 1831x 1-year period beginning on November 12, 1999, customer protection regulations (which the agencies jointly determine to be appropriate) that— (A) apply to retail sales practices, solicita- tions, 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 chapter and provide such additional protections for customers to whom such sales, solicitations, advertising, or offers are directed. (2) Applicability to subsidiaries The regulations prescribed pursuant to para- graph (1) shall extend such protections to any subsidiary of a depository institution, as deemed appropriate by the regulators referred to in paragraph (3), where such extension is de- termined to be necessary to ensure the con- sumer protections provided by this section. (3) Consultation and joint regulations The Federal banking agencies shall consult with each other and prescribe joint regula- tions pursuant to paragraph (1), after con- sultation with the State insurance regulators, as appropriate. (b) Sales practices The regulations prescribed pursuant to sub- section (a) shall include antitying and anticoercion rules applicable to the sale of in- surance products that prohibit a depository in- stitution from engaging in any practice that would lead a customer to believe an extension of credit, in violation of section 1972 of this title, is conditional upon— (1) the purchase of an insurance product from the institution or any of its affiliates; or (2) an agreement by the consumer not to ob- tain, or a prohibition on the consumer from obtaining, an insurance product from an unaf- filiated entity. (c) Disclosures and advertising The regulations prescribed pursuant to sub- section (a) shall include the following provisions relating to disclosures and advertising in con- nection with the initial purchase of an insur- ance product: (1) Disclosures (A) In general Requirements that the following disclo- sures be made orally and in writing before the completion of the initial sale and, in the case of clause (iii), at the time of application for an extension of credit: (i) Uninsured status As appropriate, the product is not in- sured by the Federal Deposit Insurance Corporation, the United States Govern- ment, or the depository institution. (ii) Investment risk In the case of a variable annuity or other insurance product which involves an in- vestment risk, that there is an investment risk associated with the product, including possible loss of value. (iii) Coercion The approval of an extension of credit may not be conditioned on— (I) the purchase of an insurance prod- uct from the institution in which the ap- plication for credit is pending or of any affiliate of the institution; or (II) an agreement by the consumer not to obtain, or a prohibition on the con- sumer from obtaining, an insurance product from an unaffiliated entity. (B) Making disclosure readily understand- able Regulations prescribed under subpara- graph (A) shall encourage the use of disclo- sure that is conspicuous, simple, direct, and readily understandable, such as the fol- lowing: (i) ‘‘NOT FDIC—INSURED’’. (ii) ‘‘NOT GUARANTEED BY THE BANK’’. (iii) ‘‘MAY GO DOWN IN VALUE’’. (iv) ‘‘NOT INSURED BY ANY GOVERN- MENT AGENCY’’. (C) Limitation Nothing in this paragraph requires the in- clusion of the foregoing disclosures in adver- tisements of a general nature describing or listing the services or products offered by an institution. (D) Meaningful disclosures Disclosures shall not be considered to be meaningfully provided under this paragraph if the institution or its representative states that disclosures required by this subsection were available to the customer in printed material available for distribution, where such printed material is not provided and such information is not orally disclosed to the customer. (E) Adjustments for alternative methods of purchase In prescribing the requirements under sub- paragraphs (A) and (F), necessary adjust- ments shall be made for purchase in person, by telephone, or by electronic media to pro- vide for the most appropriate and complete form of disclosure and acknowledgments. (F) Consumer acknowledgment A requirement that a depository institu- tion shall require any person selling an in- surance product at any office of, or on behalf of, the institution to obtain, at the time a consumer receives the disclosures required under this paragraph or at the time of the initial purchase by the consumer of such product, an acknowledgment by such con- sumer of the receipt of the disclosure re- quired under this subsection with respect to such product. (2) Prohibition on misrepresentations A prohibition on any practice, or any adver- tising, at any office of, or on behalf of, the de- pository institution, or any subsidiary, as ap- Page 1196 TITLE 12—BANKS AND BANKING § 1831x propriate, that could mislead any person or otherwise cause a reasonable person to reach an erroneous belief with respect to— (A) the uninsured nature of any insurance product sold, or offered for sale, by the insti- tution or any subsidiary of the institution; (B) in the case of a variable annuity or in- surance product that involves an investment risk, the investment risk associated with any such product; or (C) in the case of an institution or sub- sidiary at which insurance products are sold or offered for sale, the fact that— (i) the approval of an extension of credit to a customer by the institution or sub- sidiary may not be conditioned on the pur- chase of an insurance product by such cus- tomer from the institution or subsidiary; and (ii) the customer is free to purchase the insurance product from another source. (d) Separation of banking and nonbanking ac- tivities (1) Regulations required The regulations prescribed pursuant to sub- section (a) shall include such provisions as the Federal banking agencies consider appropriate to ensure that the routine acceptance of de- posits is kept, to the extent practicable, phys- ically segregated from insurance product ac- tivity. (2) Requirements Regulations prescribed pursuant to para- graph (1) shall include the following require- ments: (A) Separate setting A clear delineation of the setting in which, and the circumstances under which, trans- actions involving insurance products should be conducted in a location physically seg- regated from an area where retail deposits are routinely accepted. (B) Referrals Standards that permit any person accept- ing deposits from the public in an area where such transactions are routinely con- ducted in a depository institution to refer a customer who seeks to purchase any insur- ance product to a qualified person who sells such product, only if the person making the referral receives no more than a one-time nominal fee of a fixed dollar amount for each referral that does not depend on whether the referral results in a transaction. (C) Qualification and licensing requirements Standards prohibiting any depository in- stitution from permitting any person to sell or offer for sale any insurance product in any part of any office of the institution, or on behalf of the institution, unless such per- son is appropriately qualified and licensed. (e) Domestic violence discrimination prohibition (1) In general In the case of an applicant for, or an insured under, any insurance product described in paragraph (2), the status of the applicant or insured as a victim of domestic violence, or as a provider of services to victims of domestic violence, shall not be considered as a criterion in any decision with regard to insurance un- derwriting, pricing, renewal, or scope of cov- erage of insurance policies, or payment of in- surance claims, except as required or expressly permitted under State law. (2) Scope of application The prohibition contained in paragraph (1) shall apply to any life or health insurance product which is sold or offered for sale, as principal, agent, or broker, by any depository institution or any person who is engaged in such activities at an office of the institution or on behalf of the institution. (3) Domestic violence defined For purposes of this subsection, the term ‘‘domestic violence’’ means the occurrence of one or more of the following acts by a current or former family member, household member, intimate partner, or caretaker: (A) Attempting to cause or causing or threatening another person physical harm, severe emotional distress, psychological trauma, rape, or sexual assault. (B) Engaging in a course of conduct or re- peatedly committing acts toward another person, including following the person with- out proper authority, under circumstances that place the person in reasonable fear of bodily injury or physical harm. (C) Subjecting another person to false im- prisonment. (D) Attempting to cause or cause damage to property so as to intimidate or attempt to control the behavior of another person. (f) Consumer grievance process The Federal banking agencies shall jointly es- tablish a consumer complaint mechanism, for receiving and expeditiously addressing consumer complaints alleging a violation of regulations issued under the section, which shall— (1) establish a group within each regulatory agency to receive such complaints; (2) develop procedures for investigating such complaints; (3) develop procedures for informing con- sumers of rights they may have in connection with such complaints; and (4) develop procedures for addressing con- cerns raised by such complaints, as appro- priate, including procedures for the recovery of losses to the extent appropriate. (g) Effect on other authority (1) In general No provision of this section shall be con- strued as granting, limiting, or otherwise af- fecting— (A) any authority of the Securities and Ex- change Commission, any self-regulatory or- ganization, the Municipal Securities Rule- making Board, or the Secretary of the Treasury under any Federal securities law; or (B) except as provided in paragraph (2), any authority of any State insurance com- mission (or any agency or office performing Page 1197 TITLE 12—BANKS AND BANKING § 1831y like functions), or of any State securities commission (or any agency or office per- forming like functions), or other State au- thority under any State law. (2) Coordination with State law (A) In general Except as provided in subparagraph (B), in- surance customer protection regulations prescribed by a Federal banking agency under this section shall not apply to retail sales, solicitations, advertising, or offers of any insurance product by any depository in- stitution or to any person who is engaged in such activities at an office of such institu- tion or on behalf of the institution, in a State where the State has in effect statutes, regulations, orders, or interpretations, that are inconsistent with or contrary to the reg- ulations prescribed by the Federal banking agencies. (B) Preemption (i) In general If, with respect to any provision of the regulations prescribed under this section, the Board of Governors of the Federal Re- serve System, the Comptroller of the Cur- rency, and the Board of Directors of the Corporation determine jointly that the protection afforded by such provision for customers is greater than the protection provided by a comparable provision of the statutes, regulations, orders, or interpre- tations referred to in subparagraph (A) of any State, the appropriate State regu- latory authority shall be notified of such determination in writing. (ii) Considerations Before making a final determination under clause (i), the Federal agencies re- ferred to in clause (i) shall give appro- priate consideration to comments sub- mitted by the appropriate State regu- latory authorities relating to the level of protection afforded to consumers under State law. (iii) Federal preemption and ability of States to override Federal preemption If the Federal agencies referred to in clause (i) jointly determine that any provi- sion of the regulations prescribed under this section affords greater protections than a comparable State law, rule, regula- tion, order, or interpretation, those agen- cies shall send a written preemption notice to the appropriate State regulatory au- thority to notify the State that the Fed- eral provision will preempt the State pro- vision and will become applicable unless, not later than 3 years after the date of such notice, the State adopts legislation to override such preemption. (h) Non-discrimination against non-affiliated agents The Federal banking agencies shall ensure that the regulations prescribed pursuant to sub- section (a) shall not have the effect of discrimi- nating, either intentionally or unintentionally, against any person engaged in insurance sales or solicitations that is not affiliated with a deposi- tory institution. (Sept. 21, 1950, ch. 967, § 2[47], as added Pub. L. 106–102, title III, § 305, Nov. 12, 1999, 113 Stat. 1410.) § 1831y. CRA sunshine requirements (a) Public disclosure of agreements Any agreement (as defined in subsection (e)) entered into after November 12, 1999, by an in- sured depository institution or affiliate with a nongovernmental entity or person made pursu- ant to or in connection with the Community Re- investment Act of 1977 [12 U.S.C. 2901 et seq.] in- volving funds or other resources of such insured depository institution or affiliate— (1) shall be in its entirety fully disclosed, and the full text thereof made available to the appropriate Federal banking agency with su- pervisory responsibility over the insured de- pository institution and to the public by each party to the agreement; and (2) shall obligate each party to comply with this section. (b) Annual report of activity by insured deposi- tory institution Each insured depository institution or affil- iate that is a party to an agreement described in subsection (a) shall report to the appropriate Federal banking agency with supervisory re- sponsibility over the insured depository institu- tion, not less frequently than once each year, such information as the Federal banking agency may by rule require relating to the following ac- tions taken by the party pursuant to the agree- ment during the preceding 12-month period: (1) Payments, fees, or loans made to any party to the agreement or received from any party to the agreement and the terms and con- ditions of the same. (2) Aggregate data on loans, investments, and services provided by each party in its community or communities pursuant to the agreement. (3) Such other pertinent matters as deter- mined by regulation by the appropriate Fed- eral banking agency with supervisory respon- sibility over the insured depository institu- tion. (c) Annual report of activity by nongovernmental entities (1) In general Each nongovernmental entity or person that is not an affiliate of an insured depository in- stitution and that is a party to an agreement described in subsection (a) shall report to the appropriate Federal banking agency with su- pervisory responsibility over the insured de- pository institution that is a party to such agreement, not less frequently than once each year, an accounting of the use of funds re- ceived pursuant to each such agreement dur- ing the preceding 12-month period. (2) Submission to insured depository institu- tion A nongovernmental entity or person referred to in paragraph (1) may comply with the re-