Financial Services Alert

Developments of Note

OCC Issues Opinion that Finds that Certain Provisions of West Virginia Insurance Sales Statute Should be Preempted

The OCC published a preemption opinion (OCC 01-22, the "Opinion"), in which it concluded that certain provisions of the West Virginia Insurance Sales Consumer Protection Act (the "WV Act") are preempted by Section 104 ("Section 104") of the federal Gramm-Leach-Bliley Act of 1999 (the "GLBA"). The Opinion responds to a request by the West Virginia Bankers Association, described in the June 13, 2000 issue of the Alert, that requested that the OCC determine that 8 provisions of the WV Act were preempted by Section 104. Section 104 bars state action that prevents or significantly interferes with insurance sales by depository institutions or their affiliates. Section 104, however, does not preempt state laws that are "substantially the same as but no more burdensome or restrictive than" any of 13 safe harbors described in the GLBA.

The OCC concluded in the Opinion that, with respect to national banks, 4 provisions of the WV Act are preempted by Section 104. The provisions preempted concern: (1) requirements that banks use separate employees for insurance solicitations; (2) restrictions on the timing of referral or solicitation of insurance business by a bank from customers who have loan applications pending with the bank; (3) restrictions on sharing with bank affiliates information obtained during a loan transaction that could be used to solicit insurance sales; and (4) segregation of the place of insurance solicitations and sales from deposit-taking and lending areas.

The OCC further concluded in the Opinion that 3 sections of the WV Act are not preempted by Section 104. Those concern: (a) a ban on requiring or implying that purchase of insurance from a bank is a condition to receiving a loan; (b) a ban on offering insurance products in combination with other products unless each is made available separately; and (c) requirements that the sale of insurance related to a loan occur independently from the extension of the loan and that the insurance product and the loan be documented separately. Furthermore, the OCC concluded that one provision of the WV Act, a provision dealing with disclosures to customers, is preempted in part.

The OCC concluded in the Opinion that Section 104 does not preempt a requirement that disclosures made in connection with the solicitation of an insurance product or a requirement...

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