of the Currency to raise the limit on bonus pay that national banks can give employees who sell credit life insurance. To remain competitive, banks should reward their employees for a job well done, said Karen Drewitt, compliance officer for Calcasieu Marine National Bank, Lake Charles, La. "Incentives only work to encourage our lenders to better inform our customers of the availability of this product," she said Currently, national banks must limit bonuses to 5% of an employee's pay, or 5% of the average salary of those who sell credit life insurance, whichever is higher. The OCC, as part of a Sept. 13 proposal, suggested the 5% cap was "too rigid." Bankers overwhelmingly agreed. In comment letters that were due Nov. 13, they said the 5% cap is an anomaly, noting that regulators haven't imposed similar constraints on other bank products and services. The limitation is "arbitrarily applied," said Nancy J. Kesler, director of regulatory relations for Barnett Banks Inc. There are no limits on bonuses paid for the sale of annuities or trust products, she said. "Current safeguards are an unnecessary regulatory cost and burden to banks," agreed Richard D. Starr, chairman of the Financial Institutions Insurance Association. Consumer groups, however, said that higher incentives for credit life insurance sales could be bad news for national bank customers. In a joint letter, Consumers Union and the Consumer Federation of America said a 5% cap "is necessary to prevent banks from encouraging inappropriate hard-sell tactics on vulnerable consumers." Bankers also recommended other changes to the rules, which were first implemented in 1977 to prevent unscrupulous loan officers from boosting their pay by coercing borrowers into buying credit life policies. Richard L. Mount, president of the Independent Bankers Association of America, recommended making the rules comply with other regulations. He said the rules prevent a bank from diverting income from credit life sales to principal shareholders. But the rules define principal shareholders as owning at least 5% of the bank. Most other banking rules require a person to own at least 10% of the institution before they become a principal shareholder, he said. "Some banks feel (the current) percentage is too limiting," said Mr. Mount, who is also president of Saratoga National Bank, Saratoga, Calif. In an effort to streamline the current rule, the proposal also would delete mortgage life and disability insurance from the definition of credit life insurance. Patrick M. Frawley, NationsBank's director of regulatory relations, urged the OCC to retain the current definition. "Some state insurance commissioners have concluded that mortgage insurance is not credit insurance, and that it is therefore not a product that banks may sell," Mr. Frawley said.

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