Required consumer disclosures related to sales of insurance by state-chartered banks that are members of the Federal Reserve System are being reviewed for a proposed three-year extension, according to a notice published Wednesday in the Federal Register. The proposed extension is out for comment until Dec. 17.
The disclosure requirements are set out in Subpart H of the Federal Reserve Board’s Regulation H, adopted by the Board in 2003 to implement section 305 of the Gramm-Leach-Bliley Act of 1999 (GLBA). GLBA required the federal banking agencies to issue joint regulations governing retail sales practices, solicitations, advertising, and offers of insurance by, on behalf of, or at the offices of insured depository institutions.
The insurance consumer protection rules in Regulation H require state member banks (including persons at a bank office or acting on the bank’s behalf) to prepare and provide certain written and oral disclosures before the completion of the initial sale of an insurance product or annuity to a consumer, and at the time a consumer applies for an extension of credit for which an insurance product or annuity is solicited, offered, or sold.
In a section on legal authorization and confidentiality, the Fed notice points out that these disclosures are made directly to consumers and unlikely to raise confidentiality issues. Even so, it says that if the Fed Board obtains any institution-specific information during an examination of a state member bank, such information may be protected under a Freedom of Information Act provision that exempts from disclosure materials related to financial institution examinations.
The Fed Board is inviting comments specifically on the need and practical utility of the requirements; accuracy of the burden estimates; how to enhance the quality utility and clarity of the information to be collected; ways to minimize the burden (including through the use of automated collection techniques, for example); and estimates of associated costs.
The Fed estimates that 822 banks and other persons will provide disclosures, that each will take 1.5 minutes to execute, and that the total annual burden hours add up to 12,947.