[First Reprint]

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, No. 1638

STATE OF NEW JERSEY

ADOPTED MARCH 3, 1997

Sponsored by Assemblyman FELICE, Assemblywoman Buono, Assemblyman LeFevre, Assemblywoman Weinberg

and Assemblyman Barnes

An Act concerning consumer protections applicable to insurance sales by financial institutions.

      Be It Enacted by the Senate and General Assembly of the State of New Jersey:

      1. This act shall be known and may be cited as the "Insurance Sales Consumer Protection Act."

      2. As used in this act:

      "Confidential customer financial information" means information derived from a financial institution record regarding a person with an investment, security, deposit, trust or credit relationship with the financial institution, including information concerning the terms and conditions of insurance coverage, insurance expirations, insurance claims, or insurance history of the person; but shall not include the name, address or telephone number of the person.

      "Customer" means a person with an investment, security, deposit, trust or credit relationship with a financial institution.

      "Financial institution" means any federally or state chartered bank, savings bank, savings and loan association or credit union, ¹[or any]¹ finance company, mortgage loan company, ¹[insurance agency owned by a financial institution or any other institution, association, partnership, company, corporation, individual or individuals] or other entity¹ whose principal business is the lending of money or the extension of credit¹, or subsidiary thereof¹.

      "Insurance" means all products regulated as insurance by the Department of Banking and Insurance except:

      (1) credit life, credit accident and health, credit involuntary unemployment insurance, group credit insurance, group mortgage cancellation life insurance, or group mortgage accident and health insurance and annuities;

      (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.

      3. The solicitation, negotiation or effectuation of insurance by, or on the premises of, any financial institution shall be conducted only by a person or entity licensed as an insurance producer pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.).

      4. Solicitation for the purchase or sale of insurance by a financial institution shall be conducted only by persons whose responsibilities do not include loan transactions or other transactions involving the extension of credit; except that, in the case of a financial institution location having three or less persons with lending authority, solicitation for the sale of insurance may be conducted by a person with responsibilities for loan transactions or other transactions involving the extension of credit so long as the person primarily responsible for making the specific loan or extension of credit is not the same person engaged in the solicitation for the purchase or sale of insurance for that same transaction.

      5. No person shall require or imply that the purchase of insurance by a customer or prospective customer of a financial institution is required as a condition of, or is in any way related to, receiving any other product or service offered by the financial institution.

      6. a. Notwithstanding any other provision of this section to the contrary, no financial institution may directly or indirectly solicit the purchase of insurance from a customer who has applied for a loan or extension of credit from the institution ¹[within 30 days after] unless¹ the customer ¹[receives] has received¹ written commitment, with loan closing requirements outlining all procedures for the closing, from the financial institution with respect to the loan or extension of credit or, if no written commitment has or will be issued in connection with the loan or extension of credit, ¹[within 30 days]¹ after the customer ¹[receives] has received¹ notification of approval of the loan or extension of credit by the financial institution and the financial institution creates a written record of the approval of the loan or extension of credit.

      b. No financial institution shall offer any inducement, including but not limited to, multi-level marketing programs, investment programs, memberships, or other programs, designed or represented to waive, reduce, pay, produce or provide funds to pay all or any part of the cost of insurance to any customer to purchase insurance from the institution, other than as plainly expressed in the insurance policy.

      7. a. No person shall use confidential customer financial information for the purpose of selling or soliciting the purchase of insurance or provide this information to a third party for the purpose of another's sale or solicitation of the purchase of insurance, unless it is clearly and conspicuously disclosed that the information may be so used and the customer has provided prior written consent to the use for this purpose. Consent pursuant to 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.

      8. If the solicitation, negotiation or effectuation of any insurance policy is conducted on the premises of a financial institution, the area utilized by the licensed producer for that transaction shall be in a location physically distinct from other areas of the financial institution where retail deposits are taken and where the financial institution conducts its lending services. Signs or other means shall be used to distinguish such areas.

      9. a. Any financial institution insured by the Federal Deposit Insurance Corporation ("FDIC"), and any person soliciting the purchase of, or selling insurance on the premises of a financial institution insured by the FDIC, shall prominently disclose in writing, in clear and concise language, to customers, 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; and

      (2) is not insured by the Federal Deposit Insurance Corporation; and

      (3) is not guaranteed by any insured depository institution; and

      (4) where appropriate, involves investment risk, including potential loss of principal.

      b. Any person engaged in the making of loans or other extensions of credit and the sale of insurance shall prominently disclose in writing, in clear and concise language, to customers 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 that person. For purposes of this subsection b., 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 those disclosures, including the date of receipt and the customer's name, address, and account number, prior to any application for insurance sold by the person, which acknowledgment shall be in a separate document.

      10. The Commissioner of Banking and Insurance shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the provisions of this act.

      11. This act shall take effect immediately.

The "Insurance Sales Consumer Protection Act."