Financial Update (January-March 2001)

Masthead

Cover Story

Fannie Mae and Freddie Mac

2001 Outlook

Economic Review Article

New Birmingham Building

New Consumer Protections

Board Appointments

Financial Literacy Conference

Updated Brochure

DEPARTMENTS

Did You Know?

Data Bank

The Docket

Agencies Adopt Consumer Protection Rules for Insurance Sales

Final consumer protection rules for the sale of insurance products by depository institutions were announced in December by the Federal Reserve Board of Governors, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The rules go into effect April 1, 2001, implementing section 305 of the Gramm-Leach-Bliley Act of 1999.

The new rules apply to depository institutions or any person that sells, advertises or offers insurance products or annuities to consumers or solicits such purchases at an office of the institution or on behalf of the institution.

Under the new rules, a depository institution must make a number of disclosures.

  • The depository institution must reveal that an insurance product or annuity is not a deposit or other obligation of, or guaranteed by, the depository institution or its affiliate and that such products are not insured by the FDIC or any other U.S. agency, the depository institution or its affiliate.
  • If an insurance product or annuity involves an investment risk, the depository institution must reveal that risk, including the possible loss of value.
  • The depository institution may not make an extension of credit conditional on the consumer’s purchase of an insurance product or annuity from the institution or any of its affiliates or on the consumer’s agreement not to obtain an insurance product or annuity from an unaffiliated entity. The depository institution also may not prohibit the consumer from obtaining such products elsewhere.

These disclosures must be made orally and in writing before the sale of an insurance product or annuity is completed or, for an extension of credit, at the time the consumer applies for the credit. Disclosure may also be made electronically if certain conditions are met.

For more information, see the press release at www.federalreserve.gov/boarddocs/press/boardacts/2000/20001204.