Rule to Cap Bonuses For Credit Life Sales
WASHINGTON - A new rule will require national banks to limit bonuses for credit life insurance sales to 5% of an employee's pay or 5% of the average salary of those who sell it, whichever is higher.
In making the ruling, the Office of the Comptroller of the Currency decided not to increase the limit on bonuses, despite banking industry complaints. The rule, which takes effect Dec. 31, was published today in the Federal Register.
The agency said the limit has prevented loan officers from loosening underwriting standards in order to make more loans and improve their chances for commissions from credit life sales.
"We were concerned about the customer protection as well as prudent underwriting implications of making this rule too lax," OCC Chief Counsel Julie L. Williams said.
The revised rule, like the earlier version, prevents a bank from diverting income from credit life sales to principal shareholders. However, the OCC changed the definition of principal shareholder from a person owning 5% of a bank to someone who owns 10%, the standard in most other banking reglations.
The rule mandates that recommendations to buy credit life insurance be based on the benefits to the customer, not on the revenue from commissions.
- Olaf de Senerpont Domis Fed Letting Chase Mellon Buy Wells' Transfer Agent
WASHINGTON - Chase Mellon Shareholder Services has won Federal Reserve Board approval to acquire the shareholder service operations of Wells Fargo Bank, San Francisco.
Chase Mellon, Ridgefield Park, N.J., is a joint venture subsidiary of Chase Manhattan Corp. and Mellon Bank Corp. Fed-approved services for shareholders include acting as an agent for stock transfers and dividend disbursements.
The Fed also gave Cambridge (Mass.) Bancorp permission to supply discretionary investment management services to retail customers through its subsidiary, Cambridge Investment Services of New Hampshire.
Cambridge Investment will market its services in branches of the $405 million-asset holding company's bank, Cambridge Trust Co. However, the Fed said Cambridge Investment must make certain disclosures to customers, including the fact that the products are not insured by the government.
- Pieter J. Ketelaar