COMMITTEE SUBSTITUTE
FOR
H. B. 2198
(By Delegates Farris, Johnson, Thompson, Beane, L. White,
H. White and Clements)
(Originating in the Committee on Banking and Insurance)
[March 14, 1997]
A BILL to amend and reenact section thirteen, article four,
chapter thirty-one-a of the code of West Virginia, one
thousand nine hundred thirty-one, as amended; and to amend
chapter thirty-three of said code by adding thereto a new
article, designated article eleven-a, all relating to
providing West Virginia state-chartered banks authority and
parity with national banks in the marketing and sale of
insurance and annuities and providing for the protection of
consumers and the regulation of the business of insurance when
combined with the business of lending and the business of
financial institutions.
Be it enacted by the Legislature of West Virginia:
That section thirteen, article four, chapter thirty-one-a of
the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that chapter thirty-three of
said code be amended by adding thereto a new article, designated
article eleven-a, all to read as follows:
CHAPTER 31A. BANKS AND BANKING.
ARTICLE 4. BANKING INSTITUTIONS AND SERVICES GENERALLY.
§31A-4-13. Powers of state banking institutions generally.
(a) Any state-chartered banking institution shall have and
exercise all of the powers necessary for, or incidental to, the
business of banking, and without limiting or restricting such
general powers, it shall have the right to buy or discount
promissory notes and bonds, negotiate drafts, bills of exchange and
other evidences of indebtedness, borrow money, receive deposits on
such terms and conditions as its officers may prescribe, buy and
sell, exchange, bank notes, bullion or coin, loan money on personal
or other security, rent safe-deposit boxes and receive on deposit,
for safekeeping, jewelry, plate, stocks, bonds and personal
property of whatsoever description and provide customer services
incidental to the business of banking, including, but not limited
to, the issuance and servicing of and lending money by means of
credit cards as letters of credit or otherwise. Any state- chartered banking institution may accept, for payment at a future
date, not to exceed one year, drafts drawn upon it by its
customers. Any state-chartered banking institution may issue
letters of credit, with a specified expiration date or for a
definite term, authorizing the holders thereof to draw drafts upon
it or its correspondents, at sight or on time. Any such banking institution may organize, acquire, own, operate, dispose of, and
otherwise manage wholly owned subsidiary corporations for purposes
incident to the banking powers and services authorized by this
chapter.
(b) Any state-chartered banking institution may acquire, own,
hold, use and dispose of real estate, which shall in no case be
carried on its books at a value greater than the actual cost:
Provided, That such property shall be necessary for the convenient
transaction of its business, including any buildings, office space
or other facilities to rent as a source of income:
Provided,
however, That such investment hereafter made shall not exceed
sixty-five percent of the amount of its capital stock and surplus,
unless the consent in writing of the commissioner of banking is
first secured.
(c) Any state-chartered banking institution may acquire, own,
hold, use and dispose of real estate, which shall be carried on its
books at the lower of fair value or cost as defined in rules
promulgated by the commissioner of banking, subject to the
following limitations:
(1) Such as shall be mortgaged to it in good faith as security
for debts in its favor;
(2) Such as shall be conveyed to it in satisfaction of debts
previously contracted in the course of its business dealings; and
(3) Such as it shall purchase at sales under judgments,
decrees, trust deeds or mortgages in its favor, or shall purchase at private sale, to secure and effectuate the payment of debts due
to it.
(d) The value at which any real estate is held shall not be
increased by the addition thereto of taxes, insurance, interest,
ordinary repairs, or other charges which do not materially enhance
the value of the property.
(e) Any real estate acquired by any such banking institution
under subdivisions two and three of subsection (c) of this section
shall be disposed of by the banking institution at the earliest
practicable date, but the officers thereof shall have a reasonable
discretion in the matter of the time to dispose of such property in
order to save the banking institution from unnecessary losses:
Provided, That in every case such property shall be disposed of
within ten years from the time it is acquired by the banking
institution, unless an extension of time is given in writing by the
commissioner of banking.
(f) The sale of annuities by state-chartered banking
institutions shall be subject to the following:
(1) Any state-chartered banking institution having its main
or a branch office in any place the population of which does not
exceed five thousand inhabitants, as shown by the last preceding
decennial census, through its employees or agents, may, from that
place or office, directly or through a controlled subsidiary, act
as agent for any fire, life, casualty, liability or other insurance
company authorized by the authorities of the sStateState to do business
in this StatesState, by soliciting and selling insurance and collecting premiums on policies issued by such company; and may receive for
services so rendered all permissible fees or commissions as may be
agreed upon between the bank and the insurance company for which it
may act as agent: Provided, That no such bank shall in any case
assume or guarantee the payment on insurance policies issued
through its agency by its principal: Provided, however, That the
bank shall not guarantee the truth of any statement made by an
insured in filing his, her or its application for insurance. For
purposes of this section, a "controlled subsidiary" is one in which
the state-chartered banking institution owns at least eighty
percent of all classes of stock. This provision is intended to
give state-chartered banking institutions parity with national
banks operating in this state with regard to the marketing and sale
of insurance notwithstanding the prohibitions and limitations
contained in article eight-c or elsewhere in this chapter, and
shall be construed consistently with interpretations of 12 U.S.C.
§92, the regulations promulgated thereunder, and any successor
legislation or regulations.
(g) Any state-chartered banking institution may, through its
employees or agents, market and sell, as agent, annuities, either
at its main office or at any of its branches. The marketing and
sale of annuities may be made by the bank, through its employees or
agents, directly, or through a controlled subsidiary, as defined in
subsection (f) above. This provision is intended to give state- chartered banks parity with national banks operating in this StatesState
with regard to the sale of annuities, notwithstanding the prohibitions and limitations contained in article eight-c or
elsewhere in this chapter.
(h) Unless waived in writing by the commissioner, a state- chartered bank may not invest or otherwise expend in excess of ten
percent of its capital and surplus calculated at the end of the
previous calendar year on the activities permitted by subsections
(f) and (g) on an aggregate basis together with any of its approved
financially related products and services. For purposes of this
section, approved financially related products and services means
those products and services offered by a state-chartered bank
pursuant to an approved application submitted under article eight-c
of this chapter.
(I) The commissioner shall promulgate rules in accordance
with chapter twenty-nine-a of this code relating to the sale of
insurance or annuities, including, but not limited to, rules
requiring notice of the intention to engage in such activities and
relating to the policies and procedures state-chartered banking
institutions should adopt in connection with such activities.
(j) Any state-chartered banking institution and its employees
or agents engaged in the sale of insurance or annuities permitted
hereby must also comply with all applicable requirements for the
sale of such products imposed by the West Virginia commissioner of
insurance and by any state or federal securities regulator.
(k) No state-chartered banking institution shall hereafter
invest more than twenty percent of the amount of its capital and
surplus in furniture and fixtures, whether the same be installed in a building owned by such banking institution, or in quarters leased
by it, unless the consent in writing of the commissioner of banking
is first secured.
CHAPTER 33. INSURANCE.
ARTICLE 11A. INSURANCE SALES CONSUMER PROTECTION ACT.
§33-11A-1.Short title.
This article may be cited as the "Insurance Sales Consumer
Protection Act".
§33-11A-2. Purpose.
The purpose of this article is to regulate the business of
insurance in West Virginia when engaged in by financial
institutions and to protect the interests of consumers.
§33-11A-3. Definitions.
For the purposes of this article:
(a) "Affiliate" means a person that directly or indirectly or
through one or more intermediaries, controls or is controlled by
another or is under common control with another.
(b) "Commissioner" means the insurance commissioner of West
Virginia.
(c) "Financial institution" includes:
(1) A bank, savings bank, savings and loan association, trust
company, credit union or any other depository institution that
accepts federally insured deposits, including but not limited to
those as defined by the Federal Deposit Insurance Act, as amended,
12 U.S.C. § 1813(c)(1), and makes loans to residents of this state;
(2) Any employee or agent of a financial institution; and
(3) Any nondepository affiliate or subsidiary of a financial
institution soliciting the sale or purchase of insurance
recommended or sponsored by, on the premises of, or in connection
with a product offering of, the financial institution: Provided,
That it does not include a credit card bank, as defined in the Bank
Holding Company Act of 1956, as amended, 12 U.S.C. §1841(c)(2)(F),
or an industrial loan company as defined in 12 U.S.C.
§1841(c)(2)(H), a specialized savings association serving certain
military personnel as defined in 12 U.S.C. §1467a(m)(3)(F), or a
bank whose ownership is grandfathered under the Competitive
Equality Banking Act of 1987 as codified at 12 U.S.C. §1843(f)(1),
or an insurance company.
(d) "Insurance" means all products defined or regulated as
insurance by the state of West Virginia, except:
(1) Credit life, health and accident, accident, loss of
income, or property insurance as described in subsection b of
section one hundred nine, article three, chapter forty-six-a of the
code of West Virginia;
(2) Insurance placed by a financial institution in connection
with collateral pledged as security for a loan when the debtor
breaches the contractual obligation to provide that insurance; and (3) Private mortgage insurance.
(e) "Insurance company" means a company that possesses a
certificate under this chapter to transact insurance business in
West Virginia.
(f) "Insurance information" means copies of insurance
policies, or the information contained thereon, binders, rates and
expiration dates contained within the information supplied in
connection with the loan, which are not otherwise available to the
financial institution's affiliated broker or agent.
(g) "Person" means any natural person, partnership,
corporation, association, business trust, or other form of business
enterprise, as the case demands.
§33-11A-4. Authorization to implement regulations.
The commissioner shall promulgate rules in accordance with
chapter twenty-nine-a of this code to effectuate the provisions of
this article.
§33-11A-5. Licensure requirement for insurance sales.
Solicitation for the purchase or sale of any insurance product
by any person, including an employee or agent of a financial
institution, shall be conducted only by individuals who have
complied with all applicable state insurance licensing and
appointment laws and regulations and who have been issued an agent
or broker's license pursuant to chapter thirty-three of this code.
§33-11A-6. Insurance sales separate from loan transaction.
(a) Solicitation for the purchase or sale of insurance by a
financial institution shall be conducted only by individuals whose
responsibilities do not include loan transactions or other
transactions involving the extension of credit. Provided, however,
for a financial institution location having three or less
individuals with lending authority, solicitation for the sale of insurance may be conducted by an individual with responsibilities
for loan transactions or other transactions involving the extension
of credit, as long as the individual primarily responsible for
making the specific loan or extension of credit is not the same
individual engaged in the solicitation of the purchase or sale of
insurance for that same transaction.
(b) In the event that in any small office, the same
individual is the licensed agent or broker and the sole individual
with lending authority, the commissioner may grant a waiver of the
requirements of this section upon a written request. Such request
shall include documentation that, due to the small office staff,
compliance is not possible, and include identification of other
steps which will be taken to minimize the customer confusion
prohibited by this article.
§33-11A-7. Referrals by unlicensed persons allowed.
A person who is not licensed to sell insurance may refer a
customer who seeks to purchase, or seeks an opinion or advice on,
any insurance product to a person, or provide the phone number of
a person, who sells or provides opinions or advice on such product,
only if the person making the referral receives no fee or only a
nominal fee for such referral and such fee is not based on the
customer's application for or purchase of insurance.
§33-11A-8. Tying of products prohibited.
(a)No person shall require or imply that the purchase of an
insurance product from a financial institution by a customer or prospective customer of the institution is required as a condition
of the lending of money or extension of credit.
(b)No financial institution may offer an insurance product
in combination with its other products, unless all the products are
available separately from the financial institution.
§33-11A-9. Disclosures.
(a) A financial institution soliciting the purchase of or
selling insurance, and any person soliciting the purchase of or
selling insurance on the premises of, in connection with a product
offering of, or using a name identifiable with, a financial
institution, shall prominently disclose to customers, in writing,
in clear and concise language, including in any advertisement or
promotional material, and orally during any customer contact, that
insurance offered, recommended, sponsored, or sold:
(1) Is not a deposit;
(2) Is not insured by the federal deposit insurance
corporation or, where applicable, the National Credit Union Share
Insurance Fund;
(3) Is not guaranteed by any insured depository institution;
and
(4) Where appropriate, involves investment risk, including
potential loss of principal.
(b) Any financial institution engaged in the making of loans
or other extensions of credit and the sale of insurance shall
prominently disclose to customers in writing, in clear and concise
language, that the insurance product may be purchased from an agent or broker of the customer's choice, and the customer's choice of
another insurance provider will not affect the customer's credit
relationship with the person. For purposes of this subsection,
loans and extensions of credit shall not include financing in
connection with the insurance product offered or sold.
(c) Any person required under subsections (a) or (b) of this
section to make disclosures to a customer shall obtain a written
acknowledgment of receipt by the customer of such disclosures,
including the date of receipt and the customer's name, address, and
account number, prior to or at the time of any application for
insurance sold by the person. Such acknowledgment shall be in a
separate document.
(d) The commissioner may grant a waiver of the requirements
of this section to any person required to give the disclosures
required by this section solely because that person has a name
identifiable with a financial institution upon a written request by
such person demonstrating that his, her or its customers would not
reasonably benefit from, or might in fact be confused by, these
required disclosures.
§33-11A-10. Timing of insurance solicitation.
(a) No individual who is an employee or agent of a financial
institution, or of a subsidiary or affiliate thereof, may, directly
or indirectly, make an insurance-related referral to or solicit the
purchase of any insurance from a customer knowing that such
customer has applied for a loan or extension of credit from that
financial institution before such time as the customer has received a written commitment with respect to such loan or extension of
credit, or, in the event that no written commitment has or will be
issued in connection with the loan or extension of credit, before
such time as the customer receives notification of approval of the
loan or extension of credit by the financial institution and the
financial institution creates a written record of the loan or
extension of credit approval.
(b) This provision shall not prohibit any individual subject
to subsection (a) above from:
(1) Informing a customer that insurance is required in
connection with a loan; or
(2) Contacting persons in the course of direct or mass
mailing to a group of persons in a manner that bears no relation
to the person's loan application or credit decision.
§33-11A-11. Insurance in connection with a loan.
(a) If insurance is required as a condition of obtaining a
loan, the credit and insurance transactions shall be completed
independently and through separate documents.
(b)A loan for premiums on required insurance shall not be
included in the primary credit without the written consent of the
customer.
(c) No title insurance shall be issued until the title
insurance company has obtained a title opinion of an attorney
licensed to practice law in West Virginia, which attorney is not an employee, agent, or owner of the insured bank or its affiliates.
Said attorney shall have conducted or cause to have conducted under
the attorney's direct supervision a reasonable examination of the
title. In no event shall the authority of a state- chartered bank
to sell title insurance exceed the authority of a nationally
chartered bank to do so.
§33-11A-12.
Prohibition of discrimination against agents or
brokers.
(a) No financial institution may, in connection with a loan
or extension of credit that requires a borrower to obtain
insurance, reject an insurance policy because such policy has been
issued or underwritten by any person who is not affiliated with
such financial institution.
(b) No financial institution may impose any requirement on
any insurance agent or broker who is not affiliated with the
financial institution that is not imposed on any insurance agent or
broker who is affiliated with such financial institution.
(c) No financial institution may, unless otherwise authorized
by any applicable federal or state law, require any debtor,
insurer, broker, or agent to pay a separate charge in connection
with the handling of insurance that is required under a contract,
if such insurance is sold by an agent or broker not affiliated with
the financial institution.
(d) No financial institution may offer, as a package of
products any products which are not insurance products in
connection with insurance products, on a discounted basis, when compared with the pricing of each of the products when offered
separately: Provided, That this prohibition does not apply to:
(1) Annuity products;
(2) The packaging of noninsurance products on a discounted
basis; or
(3) The packaging of insurance products on a discounted basis
to the extent permitted by the anti-rebating statute contained in
section four, article eleven of this chapter.
(e) All of the prohibitions contained in this section shall
be subject to other applicable laws, rules and regulations relating
to the pricing of insurance products and the products of financial
institutions.
§33-11A-13.
Confidentiality of insurance information obtained by
financial institutions.
(a) When a financial institution requires a borrower to
provide insurance information in connection with the making of a
loan or extension of credit, neither such financial institution nor
an insurance agent or broker affiliated with such financial
institution may later use the information so obtained to solicit or
offer insurance to such borrower, unless the consent required in
subsection (b) below is first obtained.
(b)A borrower may consent to the financial institution's
disclosure of insurance information to an agent or broker
affiliated with the financial institution, but any such consent
must be in writing and be given at a time subsequent, which shall be no less than two days, to the time of the application for,
approval of and making of the loan or extension of credit.
(c)Consent under subsection (b) of this section shall be
obtained in a separate document, distinct from any other
transaction, and shall not be required as a condition for
performance of other services for the customer.
§33-11A-14. Physical location of insurance sales.
The place of solicitation or sale of insurance by any
financial institution or on the premises of any financial
institution shall be clearly and conspicuously signed so as to be
readily distinguishable by the public as separate and distinct from
the financial institution's lending and deposit-taking activities.
In the event that a person which would otherwise be subject to the
requirements set forth in this provision does not have the physical
space to so comply, the commissioner may grant a waiver of the
requirements of this section upon a written request by such person
demonstrating that, due to its small physical facilities,
compliance is not possible, and including identification of other
steps which will be taken to minimize customer confusion.
§33-11A-15. Insurance records to be kept separate.
(a)Books and records relating to the insurance transactions
of any person licensed to sell insurance, including all files
relating to and reflecting customer complaints, shall be kept
separate and apart from all records relating to other business
transactions of such person, and shall be made available to the
commissioner for inspection upon reasonable notice.
(b) Unless applicable provisions of chapter thirty-three of
this code or rules promulgated thereunder expressly require that an
original of any insurance record be maintained, any insurance
records may be stored in any photographic, photostatic,
microphotographic or similar miniature photographic process or by
nonerasable optical image disks such as compact disks or by other
similar retention technology and such copies, in positive or
negative form, may be substituted for the originals thereof.
Thereafter, such copy or reproduction in the form of a positive
print thereof, shall be deemed for all purposes to be an original
counterpart of and shall have the same force and effect as the
original thereof and shall be admissible in evidence in all courts
and administrative agencies in this state, to the same extent, and
for the same purposes as the original thereof, and the original may
be destroyed or otherwise disposed of; but every such person shall
retain either the originals or such copies or reproductions for as
long as required under applicable records retention requirements.
(c) All circumstances surrounding the making or issuance of
such documents, books, records, correspondence and other
instruments, papers or writings, or the photographic, photostatic
or microphotographic copies or optical disks or other permissible
reproductions thereof, when the same are offered in evidence, may
be shown to affect the weight but not the admissibility thereof. (d) Any device used to copy or reproduce such documents and
records shall be one which correctly and accurately reproduces the
original thereof in all details and any disk or film used therein shall be of durable material.
§33-11A-16. Severability.
If any provision of this article is for any reason held to be
invalid, the remainder of the article shall not be affected
thereby.
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