211 CMR 142.05 - Consumer Protection Terms and Conditions Governing the Sale of Insurance by Banks

(1) A Bank shall be permitted to conduct insurance sales activities at the main office or at any branch thereof.

(2) A Bank must, to the extent practicable, keep the area where the Bank conducts insurance sales activities physically segregated from areas where retail deposits are routinely accepted from the general public. A Bank must identify the areas where insurance sales activities occur, and clearly delineate and distinguish those areas from the areas where the Bank's retail deposit-taking activities occur.

(a) A State Bank, State-chartered Credit Union or Lender may obtain a waiver for the requirement of physical separation of transactions involving insured deposits or extensions of credit and insurance sales activities from the Commissioner of Banks pursuant to 209 CMR 49.06(4): Insurance Sales on Bank Premises. If a State Bank or Lender obtains such a waiver from the Division of Banks, it shall promptly forward a copy of the order approving the waiver to the Division.

(b) With respect to a Federal Bank or Federal Credit Union, the Commissioner, in his or her discretion, may waive the requirement under 211 CMR 142.05(2) for the physical separation of transactions involving insured deposits or extensions of credit and insurance sales activities upon a demonstration by a Federal Bank or Federal Credit Union that space considerations, such as the size or design of said bank premises, preclude such separation. The burden is upon the applicant Federal Bank or Federal Credit Union to demonstrate that size, design, landmark status, National Register of Historic Places designation, site impediments, local zoning requirements, building codes, fire codes or other relevant considerations warrant the granting of a waiver.

1. The following conditions shall apply to any waiver granted under 211 CMR 142.05(2)(b):

a. Common areas may be permitted for banking and credit transactions and insurance purposes if physical constraints warranting such condition are satisfactorily demonstrated by a Federal Bank's or Federal Credit Union's waiver application.

b. In any instance where such waiver is granted, a Federal Bank or Federal Credit Union employee, licensed as an insurance producer, shall not, in any manner involving the application by a customer for an extension of credit by said bank or credit union, act as the representative of the Federal Bank or Federal Credit Union 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.

c. It shall be the responsibility of a Federal Bank or Federal Credit Union 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 if a waiver is granted.

d. The Commissioner, in his or her discretion, may impose such other conditions as may be deemed necessary to effectuate the purposes of 211 CMR 142.05(2).

e. The Commissioner, in his or her discretion, may subject a waiver application under 211 CMR 142.05(2)(b) to such notice and hearing as may be required.

2. Notwithstanding 211 CMR 142.05(2)(b), any Federal Bank premises constructed, purchased, leased or acquired by a Federal Bank on or after September 1, 1998, or on or after June 20, 2003 for a Federal Credit Union subject to M.G.L. c. 171, § 75B, 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 federal law.

3. Applications for waivers shall be available for public inspection from the Division upon request unless the information is exempt from disclosure under M.G.L. c. 66, § 10, and M.G.L. c. 4, § 7, cl. 26. Decisions approving or denying such applications shall be in writing and shall be available for public inspection from the Division upon request.

(3) Insurance sales activities conducted at the main office or at any branch location of a Bank shall be conducted only by insurance producers licensed pursuant to M.G.L. c. 175, § 162I. Unlicensed personnel who accept deposits from the public in an area where such transactions are routinely conducted in the Bank may refer a customer who seeks to purchase an insurance product to a licensed insurance producer of the Bank 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. Unlicensed Bank personnel shall not discuss specific insurance policy terms and conditions.

(4) A Bank is prohibited from tying the availability and extension of credit by a Bank to the purchase of insurance products from said Bank in violation of M.G.L. c. 176D, § 4, or 12 U.S.C. §§ 1971 through 1978 and its implementing regulations promulgated by the Board of Governors of the Federal Reserve System.

(5) A Bank may not engage in any practice or use any advertisement at any office of, or on behalf of, the Bank that could mislead any consumer or otherwise cause a reasonable person to reach an erroneous belief with respect to:

(a) The fact that an insurance product sold or offered for sale by the Bank is not backed by the Federal government or the Bank, or the fact that the insurance product is not insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration or any other type of deposit insurance, are not an obligation of or guaranteed by the Bank, and may be subject to risk;

(b) In the case of an insurance product that involves investment risk, the fact that there is an investment risk, including the potential that principal may be lost and that the product may decline in value; or

(c) The fact that the approval of an extension of credit to a customer by the Bank may not be conditioned on the purchase of an insurance product by the customer from the Bank; and the customer is free to purchase the insurance product from another source.

(6) A Bank, through its licensed insurance producers, shall disclose in writing to a potential insurance customer that:

(a) the insurance products which are available are not deposits of the Bank, are not protected by the Federal Deposit Insurance Corporation, the National Credit Union Administration or any other type of deposit insurance, are not an obligation of or guaranteed by the Bank, and may be subject to risk;

(b) 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 insurance producer or insurance company of the customer's choice; and

(c) the customer may file any complaints with the Office of Consumer Affairs, as provided in 211 CMR 142.09(4).

(7)

(a) In the instance of an application to a Bank for an extension of credit in connection with which an insurance product is solicited, offered, or sold, the Bank must make the disclosures required under 211 CMR 142.05(6) orally and in writing at the time the consumer applies for an extension of credit.

(b) If an application for credit is taken by mail, the Bank is not required to make the oral disclosure required by 211 CMR 142.05(7)(a).

(c) If an application for credit is taken by telephone, the Bank may provide the written disclosure required by 211 CMR 142.05(7)(a) by mail, provided it is mailed to the customer within three days beginning the first business day after the application is taken, excluding Sundays and the legal public holidays specified under federal and state laws.

(d) Subject to the requirements of § 101(c) of the Electronic Signatures in Global and National Commerce Act ( 12 U.S.C. 7001(c) ) and the Uniform Electronic Transactions Act, M.G.L. c. 110G, the Bank may provide the written disclosures required by 211 CMR 142.05(7)(c) through electronic media instead of on paper, if the customer affirmatively consents to receiving the disclosures electronically and if the disclosures are provided in a format that the consumer may retain or obtain later, for example, by printing or storing electronically (such as downloading). Any disclosure required by 211 CMR 142.05(7)(a) that is provided by electronic media is not required to be provided orally.

(8)211 CMR 142.05(7) shall not apply in situations where a Bank contacts a consumer 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.

(9) Rebates shall be regulated pursuant to M.G.L. c. 175, §§ 182 through 184 and M.G.L. c. 176D, § 3(8).

(10) The disclosure required by 211 CMR 142.05(6)(a) shall not apply to a Lender that does not accept deposits.

(11) The disclosures required by 211 CMR 142.05 shall be provided in writing and receipt thereof shall be acknowledged in writing by the customer. A copy of all disclosure forms shall be kept in the records of the Bank.

Notes

211 CMR 142.05

Amended by Mass Register Issue 1317, eff. 7/15/2016. Amended by Mass Register Issue 1342, eff. 6/30/2017.