Bankers again urged the Office the Comptroller of the Currency to preempt a Rhode Island law restricting bank insurance sales.
In 49 comment letters sent to the agency last week, bankers wrote that the state law significantly interferes with the sale of insurance by national banks and is therefore preempted by the National Bank Act.
"The Rhode Island law is designed solely for the purpose of discriminating against banks," wrote Daniel Glassberg, senior vice president at First Union Corp.
Insurance and consumer groups, however, said the statute does not hamper bank insurance sales.
"This act provides fair and reasonable consumer-protection measures for Rhode Island's consumers," wrote Everett J. Federici, executive vice president of the Independent Insurance Agents of Rhode Island.
The law, enacted Aug. 8, bars most bank employees from selling insurance, prohibits the use of nonpublic customer information in marketing insurance products, and requires insurance activities to be conducted in a "physically separate" part of the bank. The Financial Institutions Insurance Association on Sept. 5 asked the OCC to preempt the statute. The agency responded by requesting public comment.
Bankers said the employee restrictions in the law, which ban staffers who make loans or take deposits from selling insurance, will be prohibitively costly for many banks.
"Subjecting banks to this additional requirement either forces uneconomical staffing decisions or makes delivery of insurance services a practical impossibility in smaller offices," wrote Richard J. McCullen, senior vice president and legal counsel at First Chicago Corp.
The Rhode Island law allows a bank to use only a customer's name, address, and phone number when marketing insurance. Richard M. Whiting, general counsel for the Bankers Roundtable, argued this makes it difficult for a banker to match insurance products with customer needs.
"This provision would prevent a banker that knows that a woman has been widowed from offering her life insurance, even if the banker knows she needs or wants it," Mr. Whiting wrote.
Consumer groups, however, argued that banks should be subject to different requirements because they can coerce customers into purchasing products they do not need.
"The only activity the law prevents or significantly interferes with is the ability of banks to use their status as insured depository institutions and lenders to pressure insurance sales on customers," officials at the Consumer Federation of America, Consumers Union, and the U.S. Public Interest Research Group wrote in a joint letter.
Several argued that it is too early to determine whether the statute should be preempted, because the Rhode Island Department of Business Regulation has not yet issued rules to implement the law. A proposal is expected as early as this week.
"No one has all of the facts necessary to make an informed determination as to whether or not federal law preempts the Rhode Island statute," wrote Kentucky Commissioner of Insurance George Nichols.
