WASHINGTON - Banks and other financial services companies are complaining that proposed consumer protection rules would hinder their insurance sales activities.

The Gramm-Leach-Bliley Act required federal regulators to write rules that would require banks and thrifts advertising, soliciting, or selling insurance to warn consumers that, unlike their bank accounts, these products are not federally insured. The rules also are supposed to bar banks and their affiliates from requiring loan applicants to buy other products as a condition for approval.

But in comment letters due Oct. 5, industry officials told the banking and thrift agencies that their proposal would go beyond the law's intent and apply to transactions where no consumer confusion exists.

Citigroup Inc. general counsel Carl V. Howard wrote that the proposed safeguards would mistakenly apply to insurance firms that share a corporate logo with a sister bank or thrift even though their products are marketed separately in a different location.

"A bank is most likely to influence an insurance consumer … when the bank markets insurance directly, permits others (including nonaffiliated entities) to market on the premises of the bank, or recommends and/or sponsors insurance products offered by a specific insurance agent and/or company," Mr. Howard wrote. "These are the only circumstances in which the insurance consumer needs the protections."

Such provisions must be pared or the proposal would "discourage affiliations and cross-marketing programs between insurers and depository institutions, which would clearly be contrary to the GLB Act." Similar complaints were registered in nearly 50 comment letters from officials at financial service companies or their trade associations.

Echoing Mr. Howard, most complained that they should not have to make the same disclosures for products such as credit and mortgage insurance, because consumers already know these are not insured. "It is hard to imagine a situation where a credit card or home equity loan applicant would confuse credit insurance fees with an insured deposit such as a savings account," wrote Household International Inc. senior counsel Martha A. Pampel. "Currently, these customers receive a description of the insurance coverage."

The Truth-in-Lending Act and state laws already mandate ample consumer disclosures, some officials said. Visa U.S.A. Inc. assistant general counsel Russell W. Schrader wrote that truth-in-lending's disclosure provisions "actually provide more consumer protections than the insurance proposal."

That law requires credit insurance sellers to tell consumers that such coverage is optional and precisely how much it will cost, as well as to obtain a signed form requesting the product. In cases where credit insurance is mandatory, Mr. Schrader wrote, the consumer must be told that it may be purchases from other sources.

The American Bankers Association also argued that the protections should not apply to banks or thrifts that forward names of potential customers to a separate insurance sales unit. "In a typical cross-marketing or referral case, a depository institution will have no contact, whatsoever, with a consumer who purchases an insurance product or annuity," ABA senior counsel Paul A. Smith wrote.

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