209 CMR 49.06 - Consumer Protection Terms and Conditions Governing the Sale of Insurance by Banks

(1) Applicability.

(a) General. The provisions of 209 CMR 49.06 shall govern the insurance sales activities of banks, federal banks and lenders. For purposes of 209 CMR 49.06, Bank shall include a bank, federal bank and lender unless otherwise provided.

(b) Waivers. A mortgagee which is not chartered as a bank, federal bank or licensed as a small loan company, mortgage lender or broker shall not be a bank for the purposes of the waiver provisions of 209 CMR 49.06(4)(b). Federal banks shall be governed by the waiver application provisions of 211 CMR 142.05(2)(b) instead of 209 CMR 49.06(4)(b)1. and 2.

(2) Plan of Operation.

(a) Banks and Lenders. All insurance sales activities by banks or lenders shall be conducted in accordance with the plans of operation submitted to, and approved by, the Commissioner under 209 CMR 49.05(3).

(b) Federal Banks. All insurance sales activities by federal banks shall be conducted in accordance with the plans of operation, which conform to 209 CMR 49.05(3), submitted to, and approved by, the Division of Insurance under M.G.L. c. 175, § 209, and 211 CMR 142.00: Insurance Sales by Banks and Credit Unions.

(3) Solicitations and Sales by Bank Personnel .Referrals. The solicitation and sale of insurance by banks shall be conducted only by licensed insurance producers to the extent required by applicable insurance laws and regulations. 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 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) Insurance Sales on Bank Premises.

(a) Locations. 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, identify the areas where insurance product sales activities occur, and clearly delineate and distinguish those areas from the areas where the bank's retail deposit-taking activities occur.

(b) Waivers.

1. Grounds. The Commissioner, in his or her discretion, may waive the requirement under 209 CMR 49.06(4)(a) for the physical separation of bank and insurance services upon a demonstration by a bank or lender that space considerations, such as the size or design of said bank premises, preclude such separation. The burden is upon the applicant bank or lender 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.

2. Waiver Conditions.

a. Common areas may be permitted for banking and credit transaction and insurance purposes if physical constraints warranting such condition are satisfactorily demonstrated by a bank's or lender's waiver application.

b. In any instance where such waiver is granted, a bank or lender 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 lender, act as the representative of the bank or lender 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 bank or lender to institute procedures to eliminate customer misunderstanding or confusion as to the distinction between such insurance products and other bank or lender 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 M.G.L. c. 167F, § 2A(b)(3).

e. The Commissioner, in his or her discretion, may subject a waiver application under 209 CMR 49.06(4)(b) to such notice and hearing as may be required.

3. Limitation on Waivers. Notwithstanding 209 CMR 49.06(4)(b), any bank premises constructed, purchased, leased or acquired by a bank on or after September 1, 1998, or on or after June 20, 2003 for a 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 applicable provisions of M.G.L. c. 167I or c. 171, or under comparable provisions of federal law in the case of a federal bank.

4. Applications. Applications for waivers shall be available for public inspection upon request unless the information is exempt from disclosure under M.G.L. c. 167, § 2J; M.G.L. c. 66, § 10; or M.G.L. c. 4, § 7, paragraph 26. Decisions approving or denying such applications shall be in writing and shall be available for public inspection upon request.

(5) Anti-tying.

(a) General. 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 USC §§ 1971 through 1978 and its implementing regulations promulgated by the Board of Governors of the Federal Reserve System.

(b) Prohibitions on Misrepresentations. A bank may not engage in any practice or use any advertisement at any office of, or on behalf of, the bank or a subsidiary of the bank that could mislead any person or otherwise cause a reasonable person to reach an erroneous belief with respect to:

1. 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, and are not an obligation of or guaranteed by the bank;

2. 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

3. The fact that the approval of an extension of credit to a customer by the bank or subsidiary may not be conditioned on the purchase of an insurance product by the customer from the bank or subsidiary of the bank; and the customer is free to purchase the insurance product from another source.

(c) Disclosure Requirements in Credit Transactions. In the case of an application for credit wherein an insurance product is solicited, offered, or sold, the bank must disclose that the bank may not condition an extension of credit on either: the customer's purchase of an insurance product from the bank or any of its affiliates; or the customer's agreement not to obtain, or a prohibition on the customer from obtaining, an insurance product from an unaffiliated entity.

(d) Timing of Disclosures. The disclosures required by 209 CMR 49.06(5)(c) must be made orally and in writing at the time the customer applies for an extension of credit wherein an insurance product is solicited, offered, or sold.

(e) Exception for Transactions by Mail. If an application for credit is taken by mail, the bank is not required to make the oral disclosure required by 209 CMR 49.06(5)(c).

(f) Exception for Transactions by Telephone. If an application for credit is taken by telephone, the bank may provide the written disclosure required by 209 CMR 49.06(5)(c) 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.

(g) Electronic Form of Disclosures. 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 209 CMR 49.06(5)(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 209 CMR 49.06(5)(c) that is provided by electronic media is not required to be provided orally.

(6) Rebates. Rebates shall be regulated pursuant to the provisions of M.G. L. c. 175, §§ 182 through 184.

(7) Mandatory Consumer Disclosures.

(a) Disclosure Contents. A bank, through its licensed insurance producers, shall disclose in writing to a potential insurance customer that:

1. 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;

2. 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

3. the customer may file any complaints with the Office of Consumer Affairs, as provided in 209 CMR 49.06(10).

(b) Exception. The disclosure required by 209 CMR 49.06(7)(a)1. shall not apply to a lender that does not accept deposits.

(c) Disclosure Form. The disclosures required by 209 CMR 49.06(7)(a) shall be provided in writing and receipt thereof shall be acknowledged in writing by the customer.

(d) Electronic Form of Disclosures. 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 209 CMR 49.06(7)(a) 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).

(8) Customer Information Security and Confidentiality.

(a) A bank, licensed as an insurance producer under M.G.L. c. 175, § 209, shall not permit the unauthorized release, dissemination, or sharing of confidential information, including medical record information, protected by M.G.L. c. 175I, within the bank's organization, including its affiliates, subsidiary corporations and third party vendors, as well as to third parties;

(b) a bank shall not permit the unauthorized release, dissemination, or sharing of confidential credit or other information, protected by the federal Fair Credit Reporting Act, 15 USC § 1681, and its implementing regulations, within the bank's organization, including its affiliates, subsidiary corporations and third party vendors engaged in insurance sales activities, as well as to third parties; and

(c) A bank shall at all times remain in compliance with M.G.L. c. 175I, c. 93H, and the federal Fair Credit Reporting Act.

(9) Anti-discrimination Requirements. No bank engaged in the direct sales of insurance products shall unlawfully discriminate against an insurance applicant or allow an affiliate, a subsidiary corporation established for the purpose or a third party acting on its behalf, to unlawfully discriminate against an applicant for any insurance products offered by it based upon his or her membership in any class protected by M.G.L. c. 151B, § 4(3A) and (3B), including but not limited to, race, color, national origin or residence. No bank offering insurance products at its bank premises, shall refuse to offer the same at every such branch of the bank.

(10) Consumer Complaint Processing.

(a) A bank engaged in insurance sales activities, as an insurance producer, shall forthwith forward copies of all Massachusetts customer complaints relative to such activities to the Office of Consumer Affairs. 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 Commissioner or the Division of Insurance.

(b) The processing and resolution of consumer complaints under 209 CMR 49.06(10) shall be governed by the Interagency Agreement.

(c) A bank shall take reasonable steps to investigate all consumer complaints and shall make a good faith effort to resolve such customer complaints in a timely manner.

(d) Nothing in 209 CMR 49.06(10)(a) shall prohibit a consumer from filing a separate individual complaint directly with the Office of Consumer Affairs, the Commissioner and/or the Division of Insurance. Such complaints shall be processed pursuant to the Interagency Agreement.

(11) Unfair and Deceptive Acts or Practices. Any violation of 209 CMR 49.06 shall be deemed to be unfair methods of competition and unfair and deceptive acts or practices under M.G.L. c. 167, §§ 2A through 2G and c. 93A.

Notes

209 CMR 49.06

Amended by Mass Register Issue 1316, eff. 7/1/2016.