article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Depository Institution Consumer Protection Act of 1997''. SEC. 2. CONSUMER PROTECTION REGULATIONS REQUIRED. (a) In General.--The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding at the end the following new section: ``SEC. 45. CONSUMER PROTECTION REGULATIONS. ``(a) Regulations Required.-- ``(1) In general.--Each Federal banking agency shall prescribe and publish in final form not later than six months after the date of enactment of this section of consumer protection regulations which-- ``(A) apply to sales, solicitations, advertising or offers of any nondeposit product by any retail depository institution, any affiliate or subsidiary of a retail depository institution, or any person who is engaged in such activities at an office of the institution or on behalf of the institution; and ``(B) meet the requirements of this section and provide such additional protections for consumers to whom such sales, solicitations, advertising or offers are directed as the agency determines to be appropriate. ``(2) Consultation and joint regulations.--The Federal banking agencies shall consult with each other and the SEC regarding the regulations required to be prescribed pursuant to paragraph (1) and to the greatest extent practicable shall prescribe such regulations jointly. ``(3) Nondeposit product defined.--For purposes of this section, the term `nondeposit product'-- ``(A) means any investment and insurance product which is not an insured deposit; ``(B) includes shares issued by a registered investment company; and ``(C) does not include-- ``(i) any loan or any other extension of credit by an insured depository institution; ``(ii) any letter of credit; or ``(iii) any other instrument or insurance or investment product specifically excluded from the definition of such term by regulations prescribed jointly by the Federal banking agencies, to the extent necessary to carry out the purpose of this Act. ``(b) Sales Practices.--The regulations prescribed pursuant to subsection (a) shall include the following provisions relating to sales practices in connection with the sale of nondeposit products: ``(1) Anticoercion rules.-- ``(A) In general.--Anticoercion rules prohibiting depository institutions from making any extension of credit conditional upon: ``(i) the purchase of a nondeposit product from the same retail depository institutions, or an affiliate, subsidiary or agent of that retail depository institution; or ``(ii) an agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, a nondeposit product from an unaffiliated entity. ``(B) Product marketing.--Specific rules prohibiting depository institutions, or their affiliates, subsidiaries or agents from marketing nondeposit products to consumers while applications for extensions of credit from the depository institution are pending, unless such marketing is done by mail, separate and distinct from any processing, discussion or provision of information regarding the application for an extension of credit. ``(2) Suitability of product.-- ``(A) In general.--Standards to ensure that a nondeposit product sold to a consumer is suitable and appropriate for the consumer based on financial information disclosed by the consumer. ``(B) Rules of fair practice.--In prescribing the standards under subparagraph (A) with respect to the sale of investments, the Federal banking agencies shall take into account the Rules of Fair Practice of the National Association of Securities Dealers. ``(c) Disclosures and Advertising.--The regulations prescribed pursuant to subsection (a) shall include the following provisions relating to disclosures and advertising in connection with the sale of nondeposit products: ``(1)(A) Disclosures.--Requirements that the following disclosures be made orally and in writing before the completion of the sale and, additionally, in the case of subparagraph (iv), at the time of application for an extension of credit: ``(i) Uninsured status.--The product is not insured by the Federal Deposit Insurance Corporation or the United States Government. ``(ii) Insurance product.--In the case of an insurance policy which is sold by the retail depository institution, affiliate, subsidiary or other person as agent, the product is not guaranteed by the retail depository institution. ``(iii) Investment risk.--In the case of an investment product, there is an investment risk associated with the product, including possible loss of principal. ``(iv) Coercion.--The approval, by the retail depository institution, of an extension of credit may not be conditioned on: ``(I) the purchase of a nondeposit product which is sold by the retail depository institution, affiliate, or other person as agent; or ``(II) an agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, a nondeposit product from an unaffiliated entity. ``(B) Adjustments for alternative methods of purchase.--In prescribing the requirements under subparagraph (A), necessary adjustments shall be made for purchase in person, by telephone or by electronic media to provide for the most appropriate and complete form of disclosure. ``(C) Consumer acknowledgement.--A requirement that a retail depository institution shall require any person selling a nondeposit product at any office of, or on behalf of, the institution to obtain, at the time of the initial purchase by the consumer of such product, a separate statement, signed and dated by the consumer, which contains the declaration that the purchaser has received the disclosure required under this subsection with respect to such product. Notwithstanding any rule of evidence, written acknowledgement of receipt of any disclosures by a person to whom such information is required to be given does no more than create a rebuttable presumption of delivery thereof. ``(2) Prohibition on misrepresentations.--A prohibition on any practice, or any advertising, at any office of, or on behalf of, the retail depository institution which could mislead any person or otherwise cause a reasonable person to reach an erroneous belief with respect to-- ``(i) the uninsured nature of any nondeposit product sold, or offered for sale by the institution or any affiliate or agent of the institution; or ``(ii) the investment risk associated with any such product. ``(d) Separation of Banking and Nonbanking Activities.--The regulations prescribed pursuant to subsection (a) shall include such provisions as the Federal banking agencies consider appropriate to ensure that the acceptance of deposits or the extension of credit by a depository institution, are kept physically segregated from nondeposit product activity. These provisions should include at a minimum the following provisions: ``(1) Separate setting.--A clear delineation of the setting in which, and the circumstances under which, transactions involving nondeposit products may be effected, and referrals made, to ensure that such activity is conducted in a location physically segregated from the area where retail deposits are accepted, extensions of credit are granted or insured products are sold by or on behalf of a depository institution. ``(2) Certain persons prohibited from selling nondeposit products.--Standards prohibiting any person who accepts deposits from the public at any office of, or on behalf of, an insured depository institution from selling or offering to sell, or offering an opinion or investment advice on, any nondeposit product. ``(3) Referral.--Notwithstanding paragraph (2), the regulations shall include standards requiring that a person who accepts deposits from the public at any office of, or on behalf of, an insured depository institution may refer a customer who seeks to purchase, or seeks an opinion or investment advice on, any nondeposit product to a person who sells or provides opinions or investment advice on such product only if-- ``(A) the consumer explicitly requests such referral; and ``(B) the person who accepts deposits-- ``(i) does not solicit such request; ``(ii) discloses to the consumer that such product is not insured by the institution, the Federal Deposit Insurance Corporation, or the United States Government, or the institution; and ``(iii) does not receive any compensation for the referral. ``(4) Qualification requirements and training.--Standards prohibiting any depository institution from permitting any person to sell or offer for sale, or provide an opinion or investment advice about, any nondeposit product in any part of any office of the institution, or on behalf of the institution, unless such person-- ``(A) is registered with the Securities and Exchange Commission as a broker or dealer, as a representative of a broker or dealer, or as an investment adviser; or ``(B) meets qualification and training requirements which the Federal banking agencies jointly determine are equivalent to the training and qualification requirements applicable to a person who is registered with the Commission as a broker or dealer, as a representative of a broker or dealer, or as an investment adviser, as the case may be; or ``(C) in the case of insurance sales, is qualified in accordance with regulations promulgated by the Federal banking regulators or in accordance with state law, as appropriate. ``(5) Compensation programs.--Standards to ensure that compensation programs are not structured in such a way as to provide incentives for the referral or sales of nondeposit products that are not suitable or appropriate for the consumer. ``(e) Consumer Enforcement Mechanism.--The Federal banking regulators shall jointly establish a consumer enforcement mechanism for receiving and resolving within nine months of receipt of a written complaint non-frivolous consumer complaints involving an alleged violation of regulations issued under this section which shall: ``(1) involve an impartial decisionmaker; ``(2) allow consumers to recover from an institution that violates the regulations established under this section; ``(3) provide a written statement of the basis for any decision and a public record of the proceedings. ``(f) Use of Names of Depository Institutions.--No insured depository institution, and no affiliate of any insured depository institution, may use or permit any other person to use the name, title, or logo of such institution or any word or design which is the same as, or substantially similar to, the name, title, or logo of such institution in connection with any nondeposit product-- ``(1) which is offered for sale by the institution or affiliate or by any other person at any office, of, or on behalf of, the institution; or ``(2) with respect to which the institution, affiliate, or other person provides an opinion or advice. ``(g) Requirements Relating to Confidential Consumer Financial Information.--No retail depository institution shall disclose to any affiliate or subsidiary of that institution that is not a retail depository institution, and no affiliate of that company that is not an insured depository institution shall disclose to any other affiliate that is an insured depository institution or a subsidiary thereof, any information regarding transactions or experiences between a consumer and the depository institution affiliate or subsidiary in a position to disclose this information unless the consumer-- ``(1) has received clear and conspicuous disclosure that such information may be communicated among such persons; and ``(2) has had an opportunity, before such information is initially communicated, to direct that such information not be communicated among such persons. The provisions of the Fair Credit Reporting Act shall otherwise with regard to the sharing of information among affiliates; except that section 615(b)(2) of such Act shall apply without regard to section 615(b)(2)(C)(ii). ``(h) No Effect On Other Authority.-- ``(1) In general.--No provision of this section shall be construed as limiting or otherwise affecting-- ``(A) any authority of the Securities and Exchange Commission, any self-regulatory organization, the Municipal Securities Rulemaking Board, or the Secretary of the Treasury under any Federal securities law; ``(B) any authority of any State insurance commissioner or other State authority under any State insurance law; or ``(C) the applicability of any Federal securities law or State insurance law, or any regulation prescribed by the Commission, any self-regulatory organization, the Municipal Securities Rulemaking Board, the Secretary of the Treasury, or any State insurance commissioner or other State authority pursuant to any such law, to any person. ``(2) Definitions.--For purposes of this subsection, the following definitions shall apply: ``(A) Federal securities law.--The term `Federal securities law' has the meaning given to the term `securities laws' in section 3(a)(47) of the Securities Exchange Act of 1934. ``(B) Self-regulatory organization.--The term `self-regulatory organization' has the meaning given to such term in section 3(a)(26) of the Securities Exchange Act of 1934.''.
summary: Depository Institution Consumer Protection Act of 1997 - Amends the Federal Deposit Insurance Act to require each Federal banking agency to prescribe consumer protection regulations pertaining to the sales, solicitations, advertising, or offers of a nondeposit product by a retail depository institution (including its affiliates, subsidiaries, and persons engaged in such activities at an institution office, or on its behalf). Encompasses within the ambit of such regulations: (1) anticoercion sales and product marketing rules; (2) product suitability; (3) mandatory disclosure of the non-insured and non-guaranteed status of a nondeposit product, including investment risks; (4) prohibition of misrepresentation; (5) physical segregation of banking and nonbanking activities; (6) sales personnel qualification requirements and training; and (7) the structuring of compensation programs with respect to nondeposit product referral or sales incentives. Directs Federal banking regulators to jointly establish a consumer enforcement mechanism for expeditious consumer complaint resolution. Proscribes the use of a deposit institution name or logo in connection with a nondeposit product serviced by such institution. Sets forth safeguards relating to confidential consumer financial information.