Reg H-7 Disclosure Requirements of Subpart H of Regulation H (Consumer Protections in Sales of Insurance)

§ 208.83

12 CFR Ch. II (1–1–06 Edition)

harm, severe emotional distress, psychological trauma, rape, or sexual assault;
(2) Engaging in a course of conduct or
repeatedly committing acts toward another person, including following the
person without proper authority, under
circumstances that place the person in
reasonable fear of bodily injury or
physical harm;
(3) Subjecting another person to false
imprisonment; or
(4) Attempting to cause or causing
damage to property so as to intimidate
or attempt to control the behavior of
another person.
(g) Electronic media includes any
means for transmitting messages electronically between you and a consumer
in a format that allows visual text to
be displayed on equipment, for example, a personal computer monitor.
(h) Office means the premises of a
bank where retail deposits are accepted
from the public.
(i) Subsidiary has the same meaning
as in section 3(w)(4) of the Federal Deposit
Insurance
Act
(12
U.S.C.
1813(w)(4)).
(j)(1) You means:
(i) A bank; or
(ii) Any other person only when the
person sells, solicits, advertises, or offers an insurance product or annuity to
a consumer at an office of the bank or
on behalf of a bank.
(2) For purposes of this definition, activities on behalf of a bank include activities where a person, whether at an
office of the bank or at another location sells, solicits, advertises, or offers
an insurance product or annuity and at
least one of the following applies:
(i) The person represents to a consumer that the sale, solicitation, advertisement, or offer of any insurance
product or annuity is by or on behalf of
the bank;
(ii) If the bank refers a consumer to
a seller of insurance products or annuities and the bank has a contractual
arrangement to receive commissions or
fees derived from the sale of an insurance product or annuity resulting from
that referral; or
(iii) Documents evidencing the sale,
solicitation, advertising, or offer of an
insurance product or annuity identify
or refer to the bank.

§ 208.83

Prohibited practices.

(a) Anticoercion and antitying rules.
You may not engage in any practice
that would lead a consumer to believe
that an extension of credit, in violation
of section 106(b) of the Bank Holding
Company Act Amendments of 1970 (12
U.S.C. 1972), is conditional upon either:
(1) The purchase of an insurance
product or annuity from the bank or
any of its affiliates; or
(2) An agreement by the consumer
not to obtain, or a prohibition on the
consumer from obtaining, an insurance
product or annuity from an unaffiliated entity.
(b) Prohibition on misrepresentations
generally. You may not engage in any
practice or use any advertisement at
any office of, or on behalf of, the bank
or a subsidiary of the bank that could
mislead any person or otherwise cause
a reasonable person to reach an erroneous belief with respect to:
(1) The fact that an insurance product or annuity sold or offered for sale
by you or any subsidiary of the bank is
not backed by the Federal government
or the bank or the fact that the insurance product or annuity is not insured
by the Federal Deposit Insurance Corporation;
(2) In the case of an insurance product or annuity that involves investment risk, the fact that there is an investment risk, including the potential
that principal may be lost and that the
product may decline in value; or
(3) In the case of a bank or subsidiary
of the bank at which insurance products or annuities are sold or offered for
sale, the fact that:
(i) The approval of an extension of
credit to a consumer by the bank or
subsidiary may not be conditioned on
the purchase of an insurance product
or annuity by the consumer from the
bank or a subsidiary of the bank; and
(ii) The consumer is free to purchase
the insurance product or annuity from
another source.
(c) Prohibition on domestic violence discrimination. You may not sell or offer
for sale, as principal, agent, or broker,
any life or health insurance product if
the status of the applicant or insured
as a victim of domestic violence or as

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Federal Reserve System

§ 208.84

a provider of services to victims of domestic violence is considered as a criterion in any decision with regard to
insurance underwriting, pricing, renewal, or scope of coverage of such
product, or with regard to the payment
of insurance claims on such product,
except as required or expressly permitted under State law.
§ 208.84 What you must disclose.
(a) Insurance disclosures. In connection with the initial purchase of an insurance product or annuity by a consumer from you, you must disclose to
the consumer, except to the extent the
disclosure would not be accurate, that:
(1) The insurance product or annuity
is not a deposit or other obligation of,
or guaranteed by, the bank or an affiliate of the bank;
(2) The insurance product or annuity
is not insured by the Federal Deposit
Insurance Corporation (FDIC) or any
other agency of the United States, the
bank, or (if applicable) an affiliate of
the bank; and
(3) In the case of an insurance product or annuity that involves an investment risk, there is investment risk associated with the product, including
the possible loss of value.
(b) Credit disclosure. In the case of an
application for credit in connection
with which an insurance product or annuity is solicited, offered, or sold, you
must disclose that the bank may not
condition an extension of credit on either:
(1) The consumer’s purchase of an insurance product or annuity from the
bank or any of its affiliates; or
(2) The consumer’s agreement not to
obtain, or a prohibition on the consumer from obtaining, an insurance
product or annuity from an unaffiliated entity.
(c) Timing and method of disclosures—
(1) In general. The disclosures required
by paragraph (a) of this section must
be provided orally and in writing before
the completion of the initial sale of an
insurance product or annuity to a consumer. The disclosure required by paragraph (b) of this section must be made
orally and in writing at the time the
consumer applies for an extension of
credit in connection with which insurance is solicited, offered, or sold.

(2) Exceptions for transactions by mail.
If a sale of an insurance product or annuity is conducted by mail, you are not
required to make the oral disclosures
required by paragraph (a) of this section. If you take an application for
credit by mail, you are not required to
make the oral disclosure required by
paragraph (b) of this section.
(3) Exception for transactions by telephone. If a sale of an insurance product
or annuity is conducted by telephone,
you may provide the written disclosures required by paragraph (a) of this
section by mail within 3 business days
beginning on the first business day
after the sale, excluding Sundays and
the legal public holidays specified in 5
U.S.C 6103(a). If you take an application for such credit by telephone, you
may provide the written disclosure required by paragraph (b) of this section
by mail, provided you mail it to the
consumer within three days beginning
the first business day after the application is taken, excluding Sundays and
the legal public holidays specified in 5
U.S.C. 6103(a).
(4) Electronic form of disclosures. (i)
Subject to the requirements of section
101(c) of the Electronic Signatures in
Global and National Commerce Act (12
U.S.C. 7001(c)), you may provide the
written disclosures required by paragraphs (a) and (b) of this section
through electronic media instead of on
paper, if the consumer affirmatively
consents to receiving the disclosures
electronically and if the disclosures are
provided in a format that the consumer
may retain or obtain later, for example, by printing or storing electronically (such as by downloading).
(ii) Any disclosures required by paragraphs (a) or (b) of this section that are
provided by electronic media are not
required to be provided orally.
(5) Disclosures must be readily understandable. The disclosures provided
shall be conspicuous, simple, direct,
readily understandable, and designed
to call attention to the nature and significance of the information provided.
For instance, you may use the following disclosures, in visual media,
such as television broadcasting, ATM
screens, billboards, signs, posters and
written
advertisements
and
promotional materials, as appropriate and

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§ 208.85

12 CFR Ch. II (1–1–06 Edition)

consistent with paragraphs (a) and (b)
of this section:
• NOT A DEPOSIT
• NOT FDIC-INSURED
• NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
• NOT GUARANTEED BY THE BANK
• MAY GO DOWN IN VALUE

(6) Disclosures must be meaningful. (i)
You must provide the disclosures required by paragraphs (a) and (b) of this
section in a meaningful form. Examples of the types of methods that could
call attention to the nature and significance of the information provided include:
(A) A plain-language heading to call
attention to the disclosures;
(B) A typeface and type size that are
easy to read;
(C) Wide margins and ample line
spacing;
(D) Boldface or italics for key words;
and
(E) Distinctive type size, style, and
graphic devices, such as shading or
sidebars, when the disclosures are combined with other information.
(ii) You have not provided the disclosures in a meaningful form if you merely state to the consumer that the required disclosures are available in
printed material, but you do not provide the printed material when required and do not orally disclose the
information to the consumer when required.
(iii) With respect to those disclosures
made through electronic media for
which paper or oral disclosures are not
required, the disclosures are not meaningfully provided if the consumer may
bypass the visual text of the disclosures before purchasing an insurance
product or annuity.
(7) Consumer acknowledgment. You
must obtain from the consumer, at the
time a consumer receives the disclosures required under paragraphs (a) or
(b) of this section, or at the time of the
initial purchase by the consumer of an
insurance product or annuity, a written acknowledgment by the consumer
that the consumer received the disclosures. You may permit a consumer to
acknowledge receipt of the disclosures
electronically or in paper form. If the
disclosures required under paragraphs
(a) or (b) of this section are provided in

connection with a transaction that is
conducted by telephone, you must:
(i) Obtain an oral acknowledgment of
receipt of the disclosures and maintain
sufficient documentation to show that
the acknowledgment was given; and
(ii) Make reasonable efforts to obtain
a written acknowledgment from the
consumer.
(d) Advertisements and other promotional material for insurance products
or annuities. The disclosures described
in paragraph (a) of this section are required in advertisements and promotional material for insurance products or annuities unless the advertisements and promotional materials are
of a general nature describing or listing the services or products offered by
the bank.
§ 208.85 Where insurance
may take place.

(a) General rule. A bank must, to the
extent practicable, keep the area where
the bank conducts transactions involving insurance products or annuities
physically segregated from areas where
retail deposits are routinely accepted
from the general public, identify the
areas where insurance product or annuity sales activities occur, and clearly
delineate and distinguish those areas
from the areas where the bank’s retail
deposit-taking activities occur.
(b) Referrals. Any person who accepts
deposits from the public in an area
where such transactions are routinely
conducted in the bank may refer a consumer who seeks to purchase an insurance product or annuity to a qualified
person who sells that product only if
the person making the referral receives
no more than a one-time, nominal fee
of a fixed dollar amount for each referral that does not depend on whether
the referral results in a transaction.
§ 208.86 Qualification and licensing requirements for insurance sales personnel.
A bank may not permit any person to
sell or offer for sale any insurance
product or annuity in any part of its
office or on its behalf, unless the person is at all times appropriately qualified and licensed under applicable
State insurance licensing standards

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Federal Reserve System

§ 208.101

with regard to the specific products
being sold or recommended.
APPENDIX A TO SUBPART H OF PART
208—CONSUMER GRIEVANCE PROCESS
Any consumer who believes that any bank
or any other person selling, soliciting, advertising, or offering insurance products or annuities to the consumer at an office of the
bank or on behalf of the bank has violated
the requirements of this subpart should contact the Consumer Complaints Section, Division of Consumer and Community Affairs,
Board of Governors of the Federal Reserve
System at the following address: 20th & C
Streets, NW, Washington, D.C. 20551.

Subpart I—Interpretations
SOURCE: Reg. H, 63 FR 37658, July 13, 1998,
unless otherwise noted. Redesignated at 65
FR 14814, Mar. 20, 2000. Redesignated further
at 65 FR 75841, Dec. 4, 2000.

§ 208.100 Sale of bank’s money orders
off premises as establishment of
branch office.
(a) The Board of Governors has been
asked to consider whether the appointment by a member bank of an agent to
sell the bank’s money orders, at a location other than the premises of the
bank, constitutes the establishment of
a branch office.
(b) Section 5155 of the Revised Statutes (12 U.S.C. 36), which is also applicable to member banks, defines the
term branch as including ‘‘any branch
bank, branch office, branch agency, additional office, or any branch place of
business * * * at which deposits are received, or checks paid, or money lent.’’
The basic question is whether the sale
of a bank’s money orders by an agent
amounts to the receipt of deposits at a
branch place of business within the
meaning of this statute.
(c) Money orders are classified as deposits for certain purposes. However,
they bear a strong resemblance to traveler’s checks that are issued by banks
and sold off premises. In both cases,
the purchaser does not intend to establish a deposit account in the bank, although a liability on the bank’s part is
created. Even though they result in a
deposit liability, the Board is of the
opinion that the issuance of a bank’s
money orders by an authorized agent
does not involve the receipt of deposits

at a ‘‘branch place of business’’ and accordingly does not require the Board’s
permission to establish a branch.
§ 208.101 Obligations concerning institutional customers.
(a) As a result of broadened authority
provided by the Government Securities
Act Amendments of 1993 (15 U.S.C. 78o–
3 and 78o–5), the Board is adopting
sales practice rules for the government
securities market, a market with a
particularly broad institutional component. Accordingly, the Board believes it is appropriate to provide further guidance to banks on their suitability obligations when making recommendations to institutional customers.
(b) The Board’s Suitability Rule,
§ 208.37(d), is fundamental to fair dealing and is intended to promote ethical
sales practices and high standards of
professional conduct. Banks’ responsibilities include having a reasonable
basis for recommending a particular
security or strategy, as well as having
reasonable grounds for believing the
recommendation is suitable for the
customer to whom it is made. Banks
are expected to meet the same high
standards
of
competence,
professionalism, and good faith regardless of
the financial circumstances of the customer.
(c) In recommending to a customer
the purchase, sale, or exchange of any
government security, the bank shall
have reasonable grounds for believing
that the recommendation is suitable
for the customer upon the basis of the
facts, if any, disclosed by the customer
as to the customer’s other security
holdings and financial situation and
needs.
(d) The interpretation in this section
concerns only the manner in which a
bank determines that a recommendation is suitable for a particular institutional customer. The manner in which
a bank fulfills this suitability obligation will vary, depending on the nature
of the customer and the specific transaction. Accordingly, the interpretation
in this section deals only with guidance regarding how a bank may fulfill

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