The Office of the Comptroller of the Currency has toned down its insurance sales guidelines, ceding some ground to state insurance commissioners.

For example, a new draft would subject banks that sell annuities to state consumer protection laws and would bar banks from requiring customers to buy annuities in order to get loans. The proposal released for comment in June did not mention annuities.

The draft was obtained and first reported by Bank Mutual Fund Report, a sister publication of American Banker.

In interviews last week, Comptroller Eugene A. Ludwig and OCC Chief Counsel Julie L. Williams refused to discuss the document and insisted it is not final. The agency does not plan to complete the guidelines until late October, Ms. Williams said.

In the draft, the agency said any state law that would "interfere" with a national bank's ability to sell insurance "to a degree that is more than insignificant" may be preempted. A long list of synonyms for "interfere" such as "frustrate" and "infringe" has been relegated to a footnote.

The draft also makes it clear that tellers would have to refer potential insurance customers to licensed agents. Also, banks could not refer to an annuity or insurance policy as an "account" or a premium payment as a "deposit."

It also would require bank management to forward all consumer complaints about insurance sales to state insurance regulators and to follow state laws requiring insurance salesmen to notify consumers of their right to lodge complaints with regulators.

Finally, the draft said banks would have to follow state laws governing unfair trade practices and the use of confidential customer information. The June proposal covered only consumer protection statutes.

Banking lawyers, however, said most of the changes are cosmetic - they make the document appear more friendly to state regulators without actually giving them a significantly increased role.

"It appears to be more of a sop than anything substantive," said David Roderer, a partner at the Washington law firm of Winston & Strawn.

"This draft contemplates a role for well-intentioned state insurance commissioners in fairly regulating national banks that sell insurance," said Kathleen Collins, Washington counsel to the Financial Institutions Insurance Association. "But it requires that state laws and regulations be applied in a nondiscriminatory manner."

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