0001|                           HOUSE BILL 1322
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0002|     43rd legislature - STATE OF NEW MEXICO - first session, 1997
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0003|                            INTRODUCED BY
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0004|                             MURRAY RYAN
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0005|     
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0006|                                   
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0007|     
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0008|                                   
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0009|     
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0010|                                AN ACT
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0011|     RELATING TO LENDING INSTITUTIONS; EXPANDING THE AUTHORITY OF
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0012|     LENDING INSTITUTIONS TO SELL CERTAIN INSURANCE AND ANNUITIES;
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0013|     REPEALING AND ENACTING A CERTAIN SECTION OF THE NMSA 1978.
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0014|     
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0015|     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0016|          Section 1.  Section 59A-12-10 NMSA 1978 (being Laws 1984,
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0017|     Chapter 127, Section 211, as amended) is repealed and a new
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0018|     Section 59A-12-10 NMSA 1978 is enacted to read:
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0019|          "59A-12-10.  [<u>NEW MATERIAL</u>]  LICENSING OF LENDING
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0020|     INSTITUTION--DEFINITIONS AND EXCEPTIONS.--
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0021|               A.  As used in this section:
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0022|                    (1)  "lending institution" means: 
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0023|                         (a)  a bank holding company, as defined
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0024|     in 12 USCA Section 1841; 
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0025|                         (b)  a bank, savings bank, savings and
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0001|     loan association, trust company that accepts deposits and makes
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0002|     loans or any depository institution as defined in 12 USCA
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0003|     Section 1813(c)(1) that accepts deposits and makes loans in New
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0004|     Mexico;
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0005|                         (c)  a credit union organized under
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0006|     federal or state law;
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0007|                         (d)  a subsidiary of the entities
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0008|     described in Subparagraphs (a) through (c) of this paragraph;
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0009|     and 
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0010|                         (e)  a person whose primary business is
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0011|     accepting deposits and making loans in New Mexico.  To the
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0012|     extent that an affiliate of a lending institution that is not a
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0013|     subsidiary of the lending institution conducts insurance sales
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0014|     activities on behalf of or on the premises of the lending
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0015|     institution, the affiliate is a lending institution for the
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0016|     purposes of those activities.  "Lending institution" does not
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0017|     include an insurance company;      
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0018|                    (2)  "holding company", "subsidiary" and
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0019|     "affiliate" mean those terms as defined in regulations adopted
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0020|     by the superintendent, except "bank holding company" means that
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0021|     term as defined in Section 2 of the federal Bank Holding
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0022|     Company Act of 1956; and
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0023|                    (3)  "public utility" means a private employer
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0024|     subject to the jurisdiction of the New Mexico public utility
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0025|     commission or the state corporation commission, or its
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0001|     successor entity, that is engaged in the business of providing
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0002|     telecommunications, electric, gas, water or stream heat
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0003|     services to the public.
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0004|               B.  A lending institution may be licensed to sell:
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0005|                    (1)  any insurance except title insurance in
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0006|     accordance with the Insurance Code and to the extent authorized
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0007|     by federal and state lending institution regulators; and
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0008|                    (2)  annuities to the extent authorized by law
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0009|     and federal and state lending institution regulators, but
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0010|     nothing in this paragraph shall affect the rights and
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0011|     obligations of nationally chartered lending institutions.
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0012|               C.  A public utility or its holding company,
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0013|     subsidiary or affiliate shall not be licensed to sell insurance
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0014|     or act as a broker for insurance in New Mexico.
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0015|               D.  As used in Subsections E through Y of this
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0016|     section, "insurance" means all products defined or regulated as
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0017|     insurance under the Insurance Code except:
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0018|                    (1)  credit life, credit accident and health,
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0019|     credit involuntary unemployment, credit casualty and credit
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0020|     property insurance;
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0021|                    (2)  insurance placed by a lending institution
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0022|     on the collateral pledged as security for a loan when the
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0023|     debtor breaches the contractual obligation to provide that
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0024|     insurance; and
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0025|                    (3)  private mortgage insurance and financial
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0001|     guarantee insurance.
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0002|               E.  A lending institution shall not require as a
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0003|     condition precedent to the extension of credit, or any
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0004|     subsequent renewal thereof, or the procurement of other bank
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0005|     services that the customer purchase insurance through a
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0006|     particular insurer, agent or broker.
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0007|               F.  A lending institution shall not extend credit,
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0008|     lease or sell property or furnish any other service or fix or
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0009|     vary the consideration for any of the foregoing on the
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0010|     condition or requirement that the customer obtain insurance
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0011|     from that lending institution or from a particular insurer,
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0012|     agent or broker.
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0013|               G.  A lending institution shall not impose a
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0014|     requirement on an insurance agent or broker who is not
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0015|     associated with the lending institution that is not imposed on
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0016|     an insurance agent or broker who is associated with that
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0017|     institution or, unless otherwise authorized by applicable
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0018|     federal or state law, require a debtor, insurer, broker or
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0019|     agent to pay a separate charge in connection with the handling
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0020|     of insurance that is required under a contract.
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0021|               H.  A lending institution that sells insurance on
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0022|     its premises shall:
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0023|                    (1)  conspicuously post a notice that is
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0024|     clearly visible to anyone who may purchase insurance that
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0025|     insurance is not a deposit account insured by a federal deposit
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0001|     insuring agency;
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0002|                    (2)  orally inform a prospective purchaser of
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0003|     insurance that insurance is not a deposit account insured by a
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0004|     federal deposit insuring agency; and
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0005|                    (3)  provide a written disclosure to the
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0006|     customer containing the following statements before the sale of
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0007|     insurance is complete:
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0008|                         (a)  insurance is not a lending
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0009|     institution deposit account and is not insured by its federal
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0010|     deposit insuring agency;
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0011|                         (b)  insurance is not an obligation of or
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0012|     guaranteed by the lending institution;
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0013|                         (c)  the customer is not required to
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0014|     obtain insurance from a particular lending institution, agent
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0015|     or broker; and
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0016|                         (d)  where applicable, insurance involves
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0017|     investment risk, including potential loss of principal.
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0018|               I.  The promotion and sale of insurance by a lending
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0019|     institution shall be effectuated in such a manner so as to
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0020|     avoid confusion between federally insured deposit products
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0021|     offered by a lending institution and the nonfederally insured
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0022|     insurance sold.  Insurance advertisements and other promotional
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0023|     material shall be accurate and not misleading or deceptive. 
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0024|     Insurance advertising and other promotional materials regarding
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0025|     insurance shall include disclosures that contain language that
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0001|     is the same or substantially similar to the following:
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0002|                    (1)  insurance is not a lending institution
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0003|     deposit and is not insured by its federal deposit insuring
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0004|     agency;
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0005|                    (2)  insurance is not an obligation of or
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0006|     guaranteed by the lending institution; and
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0007|                    (3)  where applicable, insurance involves
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0008|     investment risk, including potential loss of principal.
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0009|               J.  Insurance operations may be conducted by the
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0010|     lending institution, its holding company, an affiliate or
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0011|     subsidiary of either or through a separate corporate entity or
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0012|     partnership.
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0013|               K.  A lending institution shall not use nonpublic
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0014|     information for the purpose of selling or soliciting the
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0015|     purchase of insurance or provide nonpublic customer information
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0016|     to a third party for the purpose of another's sale or
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0017|     solicitation of the purchase of insurance without written
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0018|     authorization from the customer.  As used in this subsection,
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0019|     "nonpublic customer information" means information regarding a
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0020|     person that has been derived from a record of a financial
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0021|     institution.  "Nonpublic customer information" does not include
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0022|     customer names and addresses and telephone numbers or
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0023|     information about an individual that could be obtained from an
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0024|     unaffiliated credit bureau that is subject to the Fair Credit
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0025|     Reporting Act by a third party that is not entering into a
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0001|     credit relationship with the individual but has a legitimate
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0002|     need for the information in connection with a business
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0003|     transaction with the individual, except that "nonpublic
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0004|     customer information" includes information concerning insurance
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0005|     premiums, the terms and conditions of insurance coverage,
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0006|     insurance expirations, insurance claims and insurance history
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0007|     of an individual.
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0008|               L.  A lending institution selling insurance in New
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0009|     Mexico shall establish at least one in-state lending office.
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0010|               M.  Records relating to the insurance transactions
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0011|     of a lending institution, including files relating to and
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0012|     reflecting customer complaints, shall be kept separate and
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0013|     apart from all records relating to the banking transactions of
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0014|     the lending institution.  Records pertaining to insurance
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0015|     activities of the lending institution or copies of those
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0016|     records shall be kept in the principal in-state office in the
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0017|     state of the financial institution and shall be subject to the
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0018|     inspection and audit by the insurance department.  If the
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0019|     department determines to inspect and audit the records relating
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0020|     to the insurance activities of a lending institution, that
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0021|     institution shall make available to the department, at a
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0022|     location of the lending institution in the state, knowledgeable
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0023|     personnel to assist in the interpretation of the lending
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0024|     institution's records.
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0025|               N.  A lending institution, or officer, director or
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0001|     employee acting on behalf of the institution, who qualifies for
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0002|     issuance of an agent or broker's license pursuant to the
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0003|     Insurance Code may be issued an agent or broker license
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0004|     authorizing the sale of insurance.
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0005|               O.  A lending institution shall not pay a commission
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0006|     or other valuable consideration to a person for services of an
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0007|     insurance agent unless the person performing the service held a
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0008|     valid insurance agent license for the class of insurance for
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0009|     which the service was rendered or performed at the time the
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0010|     service was performed.  No person, other than a person properly
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0011|     licensed in accordance with the Insurance Code, shall accept
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0012|     any commission or valuable consideration for those services.
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0013|               P.  A lending institution shall not offer an
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0014|     inducement to a customer to purchase insurance from the
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0015|     institution other than as plainly expressed in the insurance
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0016|     policy.  Investment programs, memberships or other programs
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0017|     designed or represented to waive, reduce, pay, produce or
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0018|     provide funds to pay all or part of the cost on insurance are
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0019|     an illegal inducement.
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0020|               Q.  A lending institution may not in the same
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0021|     transaction solicit the purchase of insurance from a customer
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0022|     who has applied for a loan from the institution before the time
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0023|     the customer has received a written commitment from the lending
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0024|     institution with respect to that loan, or, in the event that no
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0025|     written commitment has been or will be issued in connection
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0001|     with the loan, a lending institution shall not solicit the
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0002|     purchase of insurance before the time the customer receives
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0003|     notification of approval of the loan by the lending
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0004|     institution, and the institution creates a written record of
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0005|     the loan approval.
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0006|               R.  Solicitation for the purchase of insurance by
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0007|     the lending institution shall be conducted only by persons
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0008|     whose responsibilities do not include loan transactions or
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0009|     other transactions involving the extension of credit, except
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0010|     that at a lending institution location having three or fewer
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0011|     persons with lending authority, solicitation for the sale of
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0012|     insurance may be conducted by a person with responsibilities
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0013|     for loan transactions involving the extension of credit so long
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0014|     as the person primarily responsible for making the specific
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0015|     loan or extension of credit is not the same person engaged in
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0016|     the solicitation for the purchase or sale of insurance for that
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0017|     same transaction.
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0018|               S.  If insurance is required as a condition of
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0019|     obtaining a loan, the credit and insurance transactions shall
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0020|     be completed independently and through separate documents.
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0021|               T.  A loan for premiums on required insurance shall
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0022|     not be included in the primary credit without the written
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0023|     consent of the customer.
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0024|               U.  A person who engages in loan transactions at any
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0025|     office of, or on behalf of, a lending institution or any other
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0001|     agent, employee, director or officer of the institution may
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0002|     refer a customer who seeks to purchase, or seeks an opinion or
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0003|     advice on any insurance product, to a person, or may give the
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0004|     phone number of a person who sells or provides opinions or
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0005|     advice on such products only if the customer expressly requests
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0006|     the referral; the person who engages in loan transactions does
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0007|     not solicit the customer request; and the person who engages in
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0008|     the loan transaction does not receive any compensation for the
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0009|     referral.
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0010|               V.  The place of solicitation or sale of insurance
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0011|     by a lending institution to the extent practicable shall be:
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0012|                    (1)  physically located to be distinct from the
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0013|     banking activities of the institution; and 
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0014|                    (2)  clearly and conspicuously signed to be
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0015|     easily distinguishable by the public as separate and distinct
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0016|     from the banking activities of the institution.
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0017|               W.  Signs and other informational material
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0018|     concerning the availability of insurance products from the
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0019|     lending institution or third party soliciting the purchase of
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0020|     or selling insurance on the premises of the lending institution
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0021|     shall not be displayed to the extent practicable in an area
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0022|     where application for loans or other extensions of credit are
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0023|     being taken or closed. 
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0024|               X.  Nothing in this section grants an institution,
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0025|     including its holding company, subsidiary or affiliate, except
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0001|     those enumerated in this section, the power to sell insurance
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0002|     that was not allowed prior to July 1, 1997.
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0003|               Y.  Nothing in this section precludes the
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0004|     superintendent from adopting reasonable rules and regulations
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0005|     for the purposes of the administration of the provisions of
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0006|     this section, including rules and regulations for written
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0007|     disclosures."
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0008|          Section 2.  SEVERABILITY.--If any part or application of
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0009|     this act is held invalid, the remainder or its application to
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0010|     other situations or persons shall not be affected.
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0011|          Section 3.  EFFECTIVE DATE.--The effective date of the
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0012|     provisions of this act is July 1, 1997.
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0013|                              
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