WASHINGTON - As part of his push to protect consumers, Comptroller of the Currency Eugene Ludwig plans to issue guidelines for national banks that sell insurance.
Much like the guidelines Comptroller's office issued in July on mutual funds, the ones for insurance will recommend how national banks should sell policies to their customers.
Mr. Ludwig said Friday that the guidelines will be published in several weeks.
|Potential Abuses'
The move is meant to head off potential problems, rather than to remedy existing ones, Mr. Ludwig said.
"We will identify a number of unacceptable practices," Mr. Ludwig said in a speech to the Consumer Federation of America. "Although I do not believe such practices are common in the banking industry, some observers have identified them as potential abuses."
He added: "I believe this is an area in which a modest amount of proactive advice to the industry could forestall problems down the road."
In an interview following his speech, Mr. Ludwig cited illegal tying among bank products as an example of potential abuse. Senior adviser David P. Apgar is heading the agency's effort.
Appeal to Activists
News of the insurance guidelines was a small portion of Mr. Ludwig's speech, which was designed to enlist consumer advocates' support in his campaign to broaden bank powers.
"We must work together to find safe, responsible ways for banks to enter new lines of business," he said.
It is in consumer advocates' self-interest to help banks, Mr. Ludwig said, because banks offer consumers more protection than any other financial service provider.
"Consumers need to understand that America's insured banks and thrifts alone offer completely safe investments in the form of interest-bearing deposits, provide the greatest support to their communities, and face the most rigorous requirements for equal opportunity in lending."
New Powers Defended
Mr. Ludwig, in essence, told the consumer advocates that if they continue to oppose the banking industry, they may not have one to kick around.
"You have the power, I believe, to either push the industry farther along in its slide toward marginality, or to arrest that slide and ensure that the industry remains a vital force in our economy," Mr. Ludwig said.
Without new powers, banks will continue to lose market share, Mr. Ludwig said.
"In another generation, at the current rate of decline, the banking industry will have dwindled to economic insignificance."
At that point, he said, the overwhelming number of retail transactions will be conducted by less-regulated financial institutions that offer consumers fewer protections than banks.
"As the industry shrinks, the safety net shrinks and these consumer protections shrink."
Response Mixed
Chris Lewis, banking and housing director at the Consumer Federation, praised Mr. Ludwig's willingness to consider consumer's concerns.
But Deepak Bhargava, banking lobbyist at the Association of Community Organizations for Reform Now, was skeptical.
"I think it's a tough argument to make in a year of record profits, that the banks are the poor cousins of the financial services industry," he said. "I think we should be making a clear case for leveling the playing field upwards, for tightening regulations on nonbank financial intermediaries rather than loosening regulations for banks and thrifts."
Allen Fishbein, general counsel at the Center for Community Change, agreed. Consumer advocates should work to extend consumer protection laws to other, nonbank financial companies, he said.
