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90_HB0222
New Act
205 ILCS 5/48.2 from Ch. 17, par. 360.1
215 ILCS 5/499.1 from Ch. 73, par. 1065.46-1
Creates the Insurance Sales Act. Provides for the
regulation of insurance sales by financial institutions by
the Department of Insurance. Requires financial institutions
to establish a separate subsidiary to act as an insurance
registered firm. Prohibits financial institutions from
linking banking products with insurance products.
Establishes disclosure requirements. Prohibits financial
institutions from discriminating against non-affiliated
insurance producers. Requires compliance beginning 180 days
after the effective date. Effective 180 days after becoming
law.
LRB9000838JSgcA
LRB9000838JSgcA
1 AN ACT concerning insurance sales by financial
2 institutions and registered firms.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 1. Short title. This Act may be may be cited as
6 the Insurance Sales Act.
7 Section 5. Purpose. For the purpose of regulating the
8 business of insurance in Illinois, protecting the interests
9 of insurance policyholders in this State, and increasing the
10 availability of insurance and insurance products to citizens
11 of this State, the following provisions are required to
12 regulate the sale of insurance.
13 Section 10. Definitions.
14 "Director" means the Director of Insurance.
15 "Financial institution" means a bank holding company, as
16 defined in the Bank Holding Company Act of 1956, as amended,
17 12 U.S.C. 1841, a state bank or national bank, as those terms
18 are defined in the Illinois Banking Act, or any subsidiary of
19 a state bank or national bank; a foreign banking corporation,
20 as that term is defined in the Foreign Banking Act, or any
21 subsidiary of a foreign banking corporation. The term
22 "financial institution" does not include an insurance
23 company.
24 "Insurance" means all products defined or regulated as
25 insurance under the Illinois Insurance Code except: (i)
26 credit life, credit accident and health, credit involuntary
27 unemployment, credit casualty and credit property insurance,
28 extended service contracts of policies; (ii) insurance placed
29 by a financial institution on collateral pledged as security
30 for a loan when the debtor breaches the contractual
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1 obligation to provide that insurance; and (iii) private
2 mortgage insurance and financial guarantee insurance.
3 "Insurance company" means a company that possesses a
4 certificate of authority to transact insurance business in
5 Illinois.
6 "Insurance producer" and "registered firm" have the
7 meanings given in Article XXXI of the Illinois Insurance
8 Code.
9 Section 15. Separate subsidiary or division for
10 insurance sales. A financial institution shall not qualify
11 for registration as a registered firm under Section 499.1 of
12 the Illinois Insurance Code unless: (1) it establishes a
13 separate subsidiary that acts as the registered firm, or (2)
14 if prior to the effective date of this Act, it was otherwise
15 permitted by law to sell insurance directly through the
16 financial institution, it establishes a separate division
17 within the financial institution to conduct the business of
18 the registered firm. The subsidiary or division acting as a
19 registered firm shall maintain separate records for
20 insurance-related activities and transactions in a separate
21 and distinct location from the records of the financial
22 institution.
23 Section 20. Licensure and Registration.
24 (a) A financial institution transacting insurance
25 business in this State as an insurance agency shall register
26 with the Director pursuant to Section 499.1 of the Illinois
27 Insurance Code and shall be subject to the laws, rules, and
28 regulations of this State for insurance agencies registered
29 pursuant to Section 499.1 of that Code. For the purposes of
30 this Section, a "financial institution" means the subsidiary
31 of a financial institution when the financial institution is
32 transacting insurance business in this State only through
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1 the subsidiary. For the purposes of Section 499.1 of the
2 Illinois Insurance Code, a financial institution shall be
3 deemed to be a corporation.
4 (b) Solicitation for the purchase or sale of any
5 insurance product by any financial institution or registered
6 firm shall be conducted only by persons who have complied
7 with all applicable State insurance licensing laws and
8 regulations and who have been issued and maintain an
9 insurance producer's license.
10 Section 25. Insurance and financial institution
11 products.
12 (a) No financial institution, affiliate, or subsidiary
13 thereof may offer any banking products or services, or fix
14 or vary the conditions of such offer, on a condition or
15 requirement that the customer obtain insurance from any
16 particular registered firm or insurance producer, the
17 financial institution, or from any subsidiary or affiliate
18 thereof.
19 (b) No financial institution, affiliate, subsidiary, or
20 employee thereof shall directly or indirectly require or
21 imply that a customer or prospective customer of the
22 financial institution purchase an insurance product from
23 that financial institution, its affiliate, any subsidiary
24 thereof, or any particular registered firm or insurance
25 producer as a condition of, or in connection with, the
26 lending of money or extension of credit, the establishment or
27 maintenance of a trust account, the establishment or
28 maintenance of a checking or savings account, or the
29 providing of services related to any financial institution
30 activities.
31 Section 30. Anti-rebating. No insurance product shall
32 be offered in a package with any extension of credit,
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1 financing, investment, depository account, or other products
2 or services in which a discount on some or all of those
3 products is prohibited as a rebate, by Section 151 of the
4 Illinois Insurance Code, is offered.
5 Section 35. Restriction of sales pressure. An officer
6 or employee of the financial institution or registered firm
7 shall not directly or indirectly delay or impede the
8 completion of a loan transaction or other transactions
9 involving the extension of credit for the purpose of
10 influencing a customer's selection of any insurance.
11 Section 40. Misrepresentation of guarantees. It shall
12 be unlawful for any financial institution or registered firm
13 sponsoring, selling, or soliciting the purchase of annuities
14 to represent or imply in any manner whatsoever that such
15 insurance is insured, guaranteed, or approved by the United
16 States, by an agency or officer thereof including the Federal
17 Deposit Insurance corporation, or by the State of Illinois
18 or any agency or officer thereof.
19 Section 45. Disclosure.
20 (a) A financial institution, or subsidiary or affiliate
21 thereof, shall prominently disclose in writing, in clear and
22 concise language, to its customers, including in any
23 advertisement or promotional material, that insurance
24 offered, recommended, sponsored, or sold:
25 (1) is not a deposit;
26 (2) is not insured by the Federal Deposit Insurance
27 Corporation;
28 (3) is not guaranteed by the financial institution
29 or an affiliated insured depository institution; and
30 (4) where appropriate, involves investment risk,
31 including potential loss or principal.
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1 (5) that insurance required by a financial
2 institution as a condition for obtaining or maintaining a
3 loan or extension of credit may be purchased from an
4 insurance producer of the customer's choice.
5 (b) The initial disclosure required in subsection (a)
6 shall also include a prominent disclosure of the appropriate
7 State governmental agencies to which a consumer should
8 complain if problems are experienced in relation to the sale
9 or solicitation of an insurance product. This disclosure
10 shall include the name, address, telephone number, and fax
11 number of the Department of Insurance.
12 Section 50. Solicitation prior to loan commitment.
13 (a) No financial institution or registered firm may,
14 directly or indirectly, solicit the purchase of any insurance
15 from a customer who has applied for a loan or extension of
16 credit from that entity before such time as the customer has
17 received a written commitment from the financial institution
18 or registered firm with respect to the loan or extension of
19 credit or, in the event that no written commitment has or
20 will be issued in connection with the loan or extension of
21 credit, before such time as the customer receives
22 notification of approval of the loan or extension of credit
23 by the financial institution or registered firm and that
24 entity maintains a written record of the loan or extension of
25 credit approval.
26 (b) This Section does not prohibit a financial
27 institution or its employees from responding to inquiries
28 made by the person, from contacting the person in the course
29 of direct or mass marketing to a group of persons in a manner
30 that bears no relation to the person's loan application or
31 credit decision, or from informing the person that certain
32 required insurance must be maintained as a condition of
33 obtaining the loan or extension of credit.
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1 Section 55. Insurance related to loan. If insurance is
2 required as a condition of obtaining a loan, the credit and
3 insurance transactions shall be completed independently and
4 through separate documents. A loan for premiums on required
5 insurance shall not be included in the primary credit without
6 the written notice to the customer.
7 Section 65. Separation of sales forces.
8 (a) Solicitation for the purchase or sale of insurance
9 by a financial institution shall be conducted only by
10 persons whose responsibilities or activities do not include
11 or involve loan transactions or other transactions involving
12 the extension of credit.
13 (b) Persons whose activities include or involve loan
14 transactions or other transactions involving the extension
15 of credit may not offer advice or render opinions regarding
16 an insurance product, but may refer a customer who seeks
17 information about insurance or wishes to purchase an
18 insurance product to a licensee or to a registered firm under
19 Section 20.
20 (c) Subsections (a) and (b) of this Section shall not
21 apply to a financial institution whose assets do not exceed
22 $50,000,000.
23 Section 70. Discrimination against non-affiliated
24 agents. No financial institution may:
25 (1) require as a condition of providing any product or
26 service or renewal of any contract for providing such product
27 or service to any customer, that the customer acquire,
28 finance, or negotiate any policy or contract of insurance
29 through a particular insurer, insurance producer, or
30 registered firm;
31 (2) in connection with a loan or extension of credit
32 that requires a borrower to obtain insurance, reject an
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1 insurance policy solely because the policy has been issued or
2 underwritten by any person who is not associated with the
3 financial institution;
4 (3) impose any discriminatory requirement on any
5 insurance producer who is not associated with the financial
6 institution that is not imposed on any insurance producer who
7 is associated with the financial institution; or
8 (4) unless otherwise authorized by any applicable
9 federal or State law, require any debtor, insurer, or
10 insurance producer to pay a separate charge in connection
11 with the handling of insurance that is required under a
12 contract.
13 Section 75. Physical location of insurance activities.
14 The place of solicitation or sale of insurance by any
15 financial institution shall be:
16 (1) physically distinct and substantially separated
17 from the lending activities of the institution; and
18 (2) clearly and conspicuously signed so as to be
19 readily distinguishable by the public as separate and
20 distinct from the banking activities of the institution.
21 Section 80. Signage. Signs and other information
22 material concerning the availability of insurance products
23 from the financial institution shall not be displayed in the
24 same area where applications for loans or other extensions
25 of credit are being taken or closed and shall include the
26 disclosures contained in item (5) of subsection (a) of
27 Section 45 of this Act.
28 Section 85. Misleading advertising. No financial
29 institution or registered firm may employ any advertisement
30 that would mislead or otherwise cause a reasonable person to
31 believe mistakenly that the State of Illinois or the federal
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1 government is responsible for the insurance sales activities
2 of an affiliate of the financial institution or stands behind
3 the affiliate's credit or that the institution, the State of
4 Illinois, or the federal government guarantees any returns on
5 insurance products or is a source of payment of any insurance
6 obligation of or sold by the affiliate.
7 Section 90. Confidential customer information.
8 (a) As used in this Section, unless the context requires
9 otherwise:
10 (1) "Customer" means a person with an investment,
11 security deposit, trust, or credit relationship with a
12 financial institution; and
13 (2) "Nonpublic customer information" means
14 information regarding a person that has been derived
15 from a record of a financial institution. "Nonpublic
16 customer information" does not include information about
17 an individual that could be obtained from a credit
18 bureau that is subject to the Fair Credit Reporting Act,
19 as amended, 15 U.S.C. 1681, by a third party that is not
20 entering into a credit relationship with the individual
21 but has a legitimate need for the information in
22 connection with a business transaction involving the
23 individual, except that, in all circumstances, "nonpublic
24 customer information" shall include, but not be limited
25 to, information concerning the expiration date of the
26 insurance policy, the name of the insurance company that
27 issued the insurance policy, the premiums, the terms and
28 conditions of the policy, the scheduled coverages, the
29 limits and deductibles contained in the policy, the cash
30 or surrender values, the insurance and claims history of
31 an individual, and any information contained on the
32 declaration sheet of the policy.
33 (b) No financial institution shall use any nonpublic
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1 customer information for the purpose of selling or
2 soliciting the purchase of insurance or provide the nonpublic
3 customer information to a third party for the purpose of
4 another's sale or solicitation of the purchase of insurance.
5 (c) No financial institution may require as a condition
6 for the performance of a service or furnishing of a product
7 to the customer, the consent to the use of nonpublic customer
8 information.
9 (d) This Section does not prohibit a financial
10 institution from releasing nonpublic customer information in
11 its possession to any person if the customer authorizes the
12 release of that information. The release shall be in
13 writing, dated, and signed by the customer.
14 (e) Nothing in subsection (a), (b), or (c) prohibits a
15 financial institution from selling, transferring, or
16 providing only the names and addresses of its customers to
17 any third party.
18 Section 95. Rules. The Director may promulgate rules to
19 effectuate the purposes of this Act.
20 Section 100. Penalties.
21 (a) A person, financial institution, or registered firm
22 that violates any of the provisions of this Act, or fails to
23 perform any of the duties imposed by this Act, or who
24 violates any administrative rule promulgated pursuant to the
25 Act, shall be liable for a civil penalty not to exceed $1,000
26 for each violation and, in addition, may be permanently or
27 temporarily enjoined from any further prohibited conduct.
28 (b) Each day of prohibited activities under Section 15,
29 20, 25, 30, 35, 40, 45, 50, 55, 65, 70, 75, 80, 85, or 90 of
30 this Act constitutes a separate violation for purposes of
31 relief and the imposition of civil penalties.
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1 Section 105. Enforcement.
2 (a) A person violating the provisions of this Act shall
3 be subject to any and all enforcement procedures either
4 currently employed or subsequently promulgated by the
5 Department of Insurance including, but not limited to, the
6 issuance of a Cease and Desist Order requiring the person to
7 cease all insurance sales and solicitation activities or the
8 imposition of any other administrative penalty the Department
9 deems appropriate.
10 (b) As a result of a financial institution's or
11 registered firm's violation of this Act, the Director may
12 bring an action against the institution for violations of
13 this Act in any Illinois State court of competent
14 jurisdiction, for equitable relief or monetary damages, or
15 both.
16 A court hearing a cause of action may grant any relief it
17 deems appropriate including monetary damages, together with
18 court costs and reasonable attorney fees incurred to a
19 plaintiff who prevails by judgment or settlement.
20 (c) The Department of Insurance may implement procedures
21 to conduct testing of financial institution or registered
22 firm practices with regard to insurance activities, policies,
23 or practices using testers who, without intention to purchase
24 such products, pose as prospective purchasers of such
25 products for the purpose of collecting evidence of violation
26 of this Act and the rules prescribed under this Act.
27 Section 110. Severability. The provisions of this Act
28 and the changes made to existing statutory law by this Act
29 are severable under Section 1.31 of the Statute on Statutes.
30 Section 190. The Illinois Banking Act is amended by
31 changing Section 48.2 as follows:
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1 (205 ILCS 5/48.2) (from Ch. 17, par. 360.1)
2 Sec. 48.2. Prohibition against certain activities.
3 (a) Any bank, subsidiary, affiliate, officer or employee
4 of such bank subject to this Act shall not:
5 (1) grant any loan on the prior condition, agreement or
6 understanding that the borrower contract with any specific
7 person or organization for the following:
8 (A) insurance services of an agent or broker;
9 (B) legal services rendered to the borrower;
10 (C) services of a real estate agent or broker; or
11 (D) real estate or property management services;
12 (2) require that insurance services, legal services,
13 real estate services or property management services be
14 placed with any subsidiary, affiliate, officer or employee of
15 any bank.
16 (b) Any bank or subsidiary, affiliate, employee,
17 officer, banking house, branch bank, branch office,
18 additional office, or agency of such bank shall comply with
19 the Insurance Sales Act Section 499.1 of the "Illinois
20 Insurance Code".
21 (c) Any officer or employee of a bank or its affiliates
22 or subsidiaries who violates this Section is guilty of a
23 business offense, and upon conviction shall be fined not more
24 than $1,000. This Section does not create a private cause of
25 action for civil damages.
26 (d) In any contract or loan which is secured by a
27 mortgage, deed of trust, or conveyance in the nature of a
28 mortgage, on residential real estate, the interest which is
29 computed, calculated, charged, or collected pursuant to such
30 contract or loan, or pursuant to any regulation or rule
31 promulgated pursuant to this Act, may not be computed,
32 calculated, charged or collected for any period of time
33 occurring after the date on which the total indebtedness,
34 with the exception of late payment penalties, is paid in
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1 full. For purposes of this subsection (d) of this Section
2 48.2, a prepayment shall mean the payment of the total
3 indebtedness, with the exception of late payment penalties if
4 incurred or charged, on any date before the date specified in
5 the contract or loan agreement on which the total
6 indebtedness shall be paid in full, or before the date on
7 which all payments, if timely made, shall have been made. In
8 the event of a prepayment of the indebtedness which is made
9 on a date after the date on which interest on the
10 indebtedness was last computed, calculated, charged, or
11 collected but before the next date on which interest on the
12 indebtedness was to be calculated, computed, charged, or
13 collected, the lender may calculate, charge and collect
14 interest on the indebtedness for the period which elapsed
15 between the date on which the prepayment is made and the date
16 on which interest on the indebtedness was last computed,
17 calculated, charged or collected at a rate equal to 1/360 of
18 the annual rate for each day which so elapsed, which rate
19 shall be applied to the indebtedness outstanding as of the
20 date of prepayment. The lender shall refund to the borrower
21 any interest charged or collected which exceeds that which
22 the lender may charge or collect pursuant to the preceding
23 sentence. The provisions of this amendatory Act of 1985
24 shall apply only to contracts or loans entered into on or
25 after January 1, 1986.
26 (e) Any bank, affiliate or subsidiary of such bank which
27 shall engage in making residential mortgage financing
28 transactions, shall with respect to each such transaction,
29 provide the following:
30 (1) if a contractual obligation is intended to a
31 borrower, a mortgage commitment which shall set forth the
32 material terms, conditions and contingencies of such
33 commitment;
34 (2) if the servicing of a residential mortgage shall be
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1 transferred from the original mortgagee, within 45 days of
2 such transfer, written notice sent by certified mail, return
3 receipt requested, to the mortgagor at the address of the
4 property, unless the mortgagor shall have directed
5 correspondence from the mortgagee shall be sent to another
6 address, which notice shall set forth: the name and address
7 of the transferee; the name, address and telephone number to
8 which inquiries by the residential mortgagor should be
9 addressed; and the name and address to which the next 3
10 monthly installments are to be submitted to the transferee
11 and the amount of each of such monthly installment; and
12 (3) if the servicing of a residential mortgage shall be
13 transferred again or if the information in paragraph (2)
14 above shall change, the notice with the corrected information
15 shall be provided within 45 days of such subsequent transfer
16 or change in information by the transferee of the servicing
17 of the mortgage at that time.
18 (Source: P.A. 85-1209; 85-1379.)
19 Section 195. The Illinois Insurance Code is amended by
20 changing Section 499.1 as follows:
21 (215 ILCS 5/499.1) (from Ch. 73, par. 1065.46-1)
22 Sec. 499.1. Registered firms.
23 (a) Any corporation or partnership transacting insurance
24 business as an insurance agency shall register with the
25 Director before transacting insurance business in this State.
26 Such registration shall remain in effect as long as the firm
27 pays the annual fee required by Section 509.1 of this Code by
28 the date due, unless the registration is revoked or suspended
29 pursuant to Section 505.1 of this Code.
30 (b) Each firm required to register before acting as a
31 registered firm pursuant to this Article shall appoint one or
32 more licensed insurance producers who are officers,
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1 directors, or partners in the firm to be responsible for the
2 firm's compliance with the insurance laws and Title 50 of the
3 Illinois Administrative Code. Such individual or individuals
4 shall submit to the Director a registration form and the fees
5 required by Section 509.1. The Director shall prescribe the
6 registration form and may require any documents reasonably
7 necessary to verify the information contained in the
8 registration form. Within 30 days of a change in officers,
9 directors, or partners who are appointed to be responsible
10 for the firm's compliance with the insurance laws and Title
11 50 of the Illinois Administrative Code, the firm shall report
12 the change to the Department.
13 (c) The registered firm shall inform the Director in
14 writing of a change in its business address within 30 days of
15 such change.
16 (d) Each registered firm shall disclose its members,
17 officers or directors who are authorized to act as insurance
18 producers, and report any changes in such personnel to the
19 Director within 30 days of such changes.
20 (e) (Blank). A registered firm may not be a national
21 bank located in a city, village or incorporated town with a
22 population exceeding 5,000 according to the last federal
23 census, a State bank or a trust company, or a subsidiary,
24 affiliate, officer or employee of any such national or State
25 bank or trust company contributing directly or indirectly to
26 the income of such bank or trust company any profit or fees
27 or part thereof derived from the solicitation, negotiation or
28 effecting of insurance.
29 (Source: P.A. 89-240, eff. 1-1-96.)
30 Section 99. Effective date. This Act takes effect 180
31 days after becoming law.