Massachusetts Sues OCC Over Bank Insurance Ruling
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Massachusetts regulators have sued U.S. Comptroller of the Currency John D. Hawke over his agencys move to preempt a state law governing the sale of insurance by banks.
"This action is based on the right of Massachusetts and every other state to not have an unelected federal bureaucracy overturn provisions designed to protect consumers," said Massachusetts Governor Jane Swift in announcing the suit.
Swift asked state Attorney General Thomas Reilly to file suit in the U.S. Court of Appeals for the First Circuit in Boston on behalf of Julianne M. Bowler, Commissioner of Insurance, and Thomas J. Curry, Commissioner of Banks.
The suit stems from a March 18 ruling by the Office of the Comptroller of the Currency preempting three Massachusetts statutes regulating insurance sales by banks. That ruling had been requested by the Massachusetts Bank Insurance Association, a division of the Massachusetts Bankers Association, Boston.
The laws, passed in 1998, prohibit unlicensed bank personnel from referring customers to licensed agents unless a customer specifically asks about insurance, bans compensation for unlicensed employees for making such referrals and prohibits banks from attempting to sell insurance to home-loan customers until after a mortgage is approved.
The OCC says the laws are preempted by the Gramm-Leach-Bliley Act because "they frustrate the authority of national banks to engage in insurance activities."
