States to Push Congress On Insurance Sales Rules

State lawmakers plan to lobby Congress for legislation that would force national banks to obey all state insurance regulations.

The National Conference of State Legislatures, holding its annual meeting here, is expected to endorse today a resolution asking Congress to rein in the Office of the Comptroller of the Currency, which has claimed the right to override state laws that restrict national bank insurance sales.

State Rep. Robert Brawley, R-N.C., put it simply when he told lawmakers Sunday that the Comptroller's Office is trying to "bypass state regulators."

Ironically, the state officials were piqued by draft insurance guidelines that OCC officials have insisted were intended as a peace offering. The proposal, released in June, noted that state licensing, training, and consumer protection laws apply to national banks. But the guidelines said banks could challenge other types of state insurance laws and the Comptroller's Office would make case-by-case determinations on which apply. To judge this, the OCC will rely on the recent Barnett case, in which the U.S. Supreme Court said state laws may not prevent or significantly interfere with banks' insurance operations.

But state officials claim the OCC's interpretation of the decision is too broad. Speaking at the state legislatures' meeting Sunday, Maine Commissioner Brian Atchinson said the OCC's draft guidelines would void any law that "frustrates, hampers, impairs, or interferes with the ability of a national bank to exercise its insurance authority."

"That's not the Barnett standard," Mr. Atchinson said. "It's not up to the Comptroller of the Currency to decide when state laws apply and when they don't."

Mr. Atchinson and other state insurance commissioners will meet with Comptroller Eugene A. Ludwig and his senior staff Thursday to discuss the draft guidelines.

Julie Williams, the OCC's chief counsel, said Monday that the agency took the language to which Mr. Atchinson and other regulators object straight from a series of cases cited by the Supreme Court in the Barnett decision. "We are definitely not trying to bypass state regulators or state legislatures," Ms. Williams said. "What we have a problem with are state laws that discriminate against banks."

The National Conference of State Legislatures is the umbrella group for state lawmakers. The NCSL commerce committee met Sunday to hear a panel discussion on bank insurance sales. Afterward, the committee voted unanimously to recommend that NCSL lobby Congress to protect states' authority to regulate national bank insurance activities. The NCSL is expected to accept the commerce committee's advice without debate, according to the group's staff.

Representing the banking industry at Sunday's panel discussion, consultant Philip Corwin agreed state regulation of insurance will remain the domain of states, but denied that Mr. Ludwig "is the regulatory equivalent of the Boston Strangler."

Mr. Corwin, who worked for the American Bankers Association until recently, when he became a principal at Federal Legislative Associates in Washington, D.C., urged lawmakers to oppose legislation being pressed by the independent insurance agents that would restrict which bank employees could sell insurance to which customers under what circumstances. For example, the agent's model legislation would bar bank employees involved in lending from selling insurance.

Rhode Island's legislature already has adopted this particular provision. But it may not become law. Ms. Williams said her agency believes the measure violates the Barnett standard because it discriminates against banks.

Representing the insurance industry Sunday, lawyer Ann Kappler said the OCC's interpretation of the Barnett decision "borders on the irresponsible." The Jenner & Block partner, who represented Florida's insurance commissioner in that case, added that the agent's model legislation contains no provision that would prevent or significantly interfere with bank insurance sales.

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