Schumer Announces Banking Committee Unanimously Passes Bill To Protect Military Service Members From Predatory Sales Practic
FOR IMMEDIATE RELEASE CONTACT: Eric Schultz (Schumer)
June 14, 2006 (202) 224-7433
SCHUMER ANNOUNCES BANKING COMMITTEE UNANIMOUSLY PASSES BILL TO PROTECT MILITARY SERVICE MEMBERS FROM PREDATORY SALES PRACTICES AND BOGUS INSURANCE PLANS
Legislation Tightens Restrictions on Insurance Agents Investment Advisers, and Other Financial Service Providers to Prevent them from Pushing Disadvantageous Plans on Military Bases in the US and Abroad
Schumer, Original Sponsor of Bill, Secured Three Additional Provisions to Prevent Insurance Companies from Raiding Soldiers’ Savings Accounts and Require DOD, SEC and Others to Update Financial Rules
U.S. Senator Charles E. Schumer announced today that the Senate Banking Committee unanimously passed comprehensive legislation to protect military service personnel and veterans from abusive and predatory sales practices, investment advisers and insurance agents who push disadvantageous or misleading plans. The bipartisan bill would mandate clearer disclosure for brokers on military installations, create a database of investment advisors who operate on bases, and requires the Defense Department to establish standards with state regulators to provide protections for service members.
“The bottom line is we need to ensure that our military families’ finances are protected, plain and simple Schumer said. “Servicemen, women, and their families have an enormous burden to bear and they shouldn’t have to worry about a salesmen knocking on their door and selling them something that could empty their pockets. This legislation will give the federal government the tools it needs to crack down on these predators and scam artists.”
The Military Personnel Financial Services Protection Act (S. 418), originally sponsored by Schumer and Senators Michael Enzi (R-WY), Chuck Hagel (R-NE), Hillary Clinton (D-NY) protects military personnel and veterans who live on military bases in the United States and abroad from insurance agents and investment advisors who push harmful financial services. Specifically, the legislation bans the issuance and sale of periodic payment plan certificates – a product that has virtually disappeared from the civilian market since the 1980’s because of excessive sales charges.
The bill also requires strong disclosures regarding offers or sales of securities and insurance on military bases – these bad actors will no longer be able to act as though their products are recommended, sanctioned, or encouraged by the federal government. They will now have to clearly disclose that they are not. Furthermore, the agents wishing to sell insurance products must disclose the types of subsidized insurance available from the federal government, including the amount of coverage and the costs to service members. The bill will also encourage the State’s to join with the Department of Defense (DOD) to create standards to protect members of the Armed Services from predatory insurance sales practices on military installations.
The Securities and Exchange Commission and National Association of Insurance Commissioners would be required to create a comprehensive database of all investment advisors and insurance brokers that operate on military bases, particularly those that have been sited for inappropriate sales practices to ensure that the Department of Defense can monitor their activity on their respective bases.
Schumer personally secured three o additional provisions that were included in the final version of the bill. First, his language would combat the negative effects posed by “automatic premium payments” by requiring full disclosure to the military service member and dependents on any financial products that contain automatic premium payment clauses. These payment clauses allow insurance companies to pay off unpaid insurance premiums automatically from a service member’s savings account that is linked to their insurance without their authorization. Although these insurance plans with a savings component sometimes can yield high interest rates, it was found that most military personnel do not benefit because any savings accumulated on these products can then be used to pay the premiums on the insurance if service members ever decide they no longer want their policy and stop making payments and fails to request a refund of their savings.
Schumer’s second provision would improve oversight of the sale of financial products (securities and insurance) by calling for coordination between the Department of Defense, SEC, and state insurance regulators. The language requires that these departments and agencies meet at least twice a year to coordinate their activities to implement legislation and monitor enforcement.
Schumer also filed an Amendment to create a suitability standard for the sale of life insurance products on military bases. The Committee did not accept the amendment, but agreed to a compromise that would require the Department of Defense Inspector General to conduct a study on the suitability of insurance products being offered and sold to military consumers.
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