RegH7_20160127_omb

Supporting Statement for the
Disclosure Requirements of Subpart H of Regulation H
(Consumer Protections in Sales of Insurance)
(Reg H-7; OMB No. 7100-0298)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority from
the Office of Management and Budget (OMB), proposes to extend for three years, without
revision, the mandatory Disclosure Requirements of Subpart H of Regulation H (Consumer
Protections in Sales of Insurance) (Reg H-7; OMB No. 7100-0298), 12 C.F.R. § 208.81 et seq.
The disclosure requirements apply to the sale of insurance by or on behalf of a state member
bank, or on its premises.1 The Paperwork Reduction Act (PRA) classifies reporting,
recordkeeping, or disclosure requirements of agency regulations as an “information collection.”2
The Federal Reserve is required to renew the disclosure requirements of Regulation H every
three years pursuant to the PRA. The total annual burden for the disclosure requirements
associated with the insurance regulation is estimated to be 13,372 hours.
Subpart H of Regulation H was adopted pursuant to section 305 of the Gramm-LeachBliley Act of 1999 (GLBA), which required the federal banking agencies to issue joint
regulations governing retail sales practices, solicitations, advertising, and offers of insurance by,
on behalf of, or at the offices of insured depository institutions. The insurance consumer
protection rules in Regulation H require depository institutions to prepare and provide certain
disclosures to consumers. Covered persons are required to make certain disclosures before the
completion of the initial sale of an insurance product or annuity to a consumer and at the time a
consumer applies for an extension of credit in connection with which and insurance product or
annuity is solicited, offered, or sold.
Background and Justification
The provisions in Regulation H for Consumer Protection in Sales of Insurance were
adopted pursuant to section 305 of the GLBA. Section 305 required the federal banking
agencies3 to issue joint regulations applicable to retail sales practices, solicitations, advertising,
and offers of insurance by, on behalf of, or at the offices of insured depository institutions.4
Section 305 applies to any depository institution5 and any person selling, soliciting, advertising,
or offering insurance products or annuities to a consumer at an office of a depository institution
or on behalf of the institution. Congress directed the federal banking agencies to prescribe rules
to carry out section 305, including specific provisions relating to sales practices, disclosures and
1

There are no required forms associated with these disclosure requirements.
See 44 U.S.C. § 3501 et seq.
3
The federal banking agencies are the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board
(Board), and the Federal Deposit Insurance Corporation (FDIC).
4
See Public Law No. 106-102, which added section 47 to the Federal Deposit Insurance Act, codified at 12 U.S.C.
§ 1831x.
5
Section 305 applies to all depository institutions, including national banks, state member banks, state nonmember
banks, and savings associations. The OCC and the FDIC have separate regulations governing this subject for
depository institutions subject to their supervision.
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advertising, physical separation of banking and insurance activities, and discrimination against
victims of domestic violence in the sale of insurance. Regulations were published in final form
in December 2000, and became effective on October 1, 2001. The Board’s Regulation H applies
only to state member banks.
As required by Section 305 of the GLBA, the Board’s Regulation H contains the
following provisions:












A prohibition against conditioning an extension of credit on the purchase of an insurance
product or annuity from the bank or its affiliate, or conditioning an extension of credit on an
agreement by the consumer not to obtain such products from an unaffiliated entity (12 C.F.R.
§ 208.83(a));
A prohibition against engaging in any practice or using any advertisement that could mislead
a person or cause a person to reach an erroneous belief with respect to:
 the fact that the insurance product or annuity is not backed by the federal government
or the bank, and is not insured by the FDIC;
 the existence of any investment risk; or
 the fact that an extension of credit may not be conditioned upon the purchase of an
insurance product or annuity from the bank or its affiliate, or an agreement by the
consumer not to obtain such products from an unaffiliated entity (12 C.F.R. §
208.83(b));
Requirements for written and oral disclosures to consumers in connection with the initial sale
of an insurance product or annuity. The disclosures inform consumers that the products are
not FDIC-insured, that there is an investment risk associated with the product (if applicable)
and that any investment may lose value, and that extensions of credit may not be conditioned
upon the purchase of an insurance product or an agreement not to purchase such products
from unaffiliated entities (12 C.F.R. § 208.84(a) and (b));
A prohibition on discrimination against victims of domestic violence or persons providing
services to them in connection with the offer or sale of insurance (12 C.F.R. § 208.83(c));
Requirements to physically segregate, to the extent practical, the area where insurance
products and annuities are sold from areas where the bank routinely accepts deposits from the
public, and to identify and delineate those areas where insurance activities occur (12 C.F.R. §
208.85(a));
A limitation on fees that can be paid to persons who routinely accept deposits for referring
customers who seek to purchase an insurance product or annuity to a qualified insurance
salesperson (12 C.F.R. § 208.85(b)); and
A requirement that persons selling insurance in any part of or on behalf of the bank be
qualified and licensed under applicable laws (12 C.F.R. § 208.86).

Description of Information Collection
As required by section 305 of the GLBA, the insurance consumer protection rules in
Regulation H require depository institutions to prepare and provide certain disclosures to
consumers.

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12 C.F.R. 208.84(a). Requires covered persons to disclose before the completion of the
initial sale of an insurance product or annuity to a consumer 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 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. The disclosure generally must be made
orally and in writing to the consumer. In the case of transactions conducted by mail, the
regulation does not require oral disclosures.
12 C.F.R. 208.84(b). Requires covered persons to disclose at the time a consumer
applies for an extension of credit in connection with which an insurance product or annuity is
solicited, offered, or sold, 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. The disclosure generally must be made
orally and in writing. In the case of transactions conducted by mail, the regulation does not
require oral disclosures.
Institutions are also required to obtain a written acknowledgment by the consumer that
the consumer received the disclosures or, in certain circumstances, to obtain an oral
acknowledgment.
Time Schedule for Information Collection
This information collection contains two disclosure requirements, as mentioned above.
These disclosure requirements are mandatory under section 305 of the GLBA and Regulation H
and are triggered by the specific events described above.
Consultation Outside of the Agency
On October 22, 2015, the Federal Reserve published a notice in the Federal Register
(80 FR 64000) requesting public comment for 60 days on the extension, without revision, of the
Reg H-7. The comment period for this notice expired on December 21, 2015. The Federal
Reserve did not receive any comments. On December 29, 2015, the Federal Reserve published a
final notice in the Federal Register (80 FR 81324).
Legal Status
The Board’s Legal Division has determined that section 305 of the Gramm-Leach-Bliley
Act of 1999 requires that the Board and the other federal banking agencies issue joint regulations
applicable to retail sales practices, solicitations, advertising, or offers of insurance by depository
institutions (12 U.S.C. § 1831x). Subpart H of the Board’s Regulation H, Consumer Protection
in Sales of Insurance, implements section 305 on behalf of the Board, and provides for the
disclosures outlined above (12 C.F.R. Part 208, Subpart H). The obligation of state member

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banks to make these disclosures is mandatory. Since the Federal Reserve does not collect any
information, no issue of confidentiality normally arises.
Estimate of Respondent Burden
The estimated annual burden for the disclosure requirements associated with the
insurance regulation is 13,372 hours, as shown in the table below. The Federal Reserve
estimates that each state member bank, on average, will make approximately 630 such
disclosures each year. Using an estimate of one and a half minutes for each disclosure, a state
member bank would spend on average about 16 hours per year making these disclosures. This
burden represents less than 1 percent of the total Federal Reserve System paperwork burden.

Reg H-7
Insurance (208.84(a)) and
Extension of Credit
(208.84(b))

Number of
respondents6

Annual
frequency

Estimated
average time
per response

Estimated
annual burden
hours

849

630

1.5 minutes

13,372

The estimated cost to the public for this information collection is $692,001.7
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
Since the Federal Reserve does not collect any information, there is no cost to the Federal
Reserve System.

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Of these respondents required to comply with this information collection, 631 are considered small entities as
defined by the Small Business Administration (i.e., entities with less than $550 million in total assets)
www.sba.gov/content/small-business-size-standards.
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Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $17, 45% Financial Managers at
$63, 15% Lawyers at $64, and 10% Chief Executives at $87). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2014, published March 25, 2015, www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

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