Consumer group, independent insurance agents form alliance

Journal Record, The (Oklahoma City), Jun 12, 1997 by Marcy Gordon Associated Press

WASHINGTON -- As a key lawmaker molds legislation to let banks, brokerages and insurers get into each other's businesses, a consumer group and independent insurance agents have forged an unusual alliance to demand consumer protection.

The push for a banking overhaul bill entered a crucial phase Monday as Rep. Jim Leach, R-Iowa, chairman of the House Banking Committee, began to decide on the shape of the measure to end Depression-era restrictions. The bill incorporates a Clinton administration proposal.

Some lawmakers are concerned that legislative prospects could be dimming for what would be the most significant rewriting of the nation's financial laws in 60 years. But the Consumers Union and the Independent Insurance Agents of America -- whose members compete with banks -- are concerned that changes would be made and consumers wouldn't be properly educated. The groups released a survey showing that people are confused about whether insurance sold by banks is federally guaranteed. "Consumers are easy prey for misleading and predatory practices by banks," said Mary Griffin, an attorney for Consumers Union, which publishes Consumer Reports magazine. "Until consumer protections dealing with bank sales activities are enacted, Congress should not give banks more powers in the area of insurance and investments." Griffin was joined at a news conference by Robert Rusbuldt, vice president for federal affairs of the Independent Insurance Agents. Rusbuldt called the administration's proposal "a disaster for consumers ... (that) would leave the buyer bewildered." Rusbuldt said, however, he did not believe the groups' opposition was enough "to take down the bill." Paul Elliott, a spokesman for Treasury Secretary Robert Rubin -- the administration's point man on the proposal -- said Rubin and his staff needed more time to review the issues raised by the two groups. The major insurance companies have not taken a position on the consumer protection issue. Patricia Cinelli, a spokeswoman for the American Bankers Association, had no comment on the matter. The group's chief lobbyist was quoted as saying last week that the industry's fervor for the overhaul legislation has waned because regulators already have been allowing banks to get into other financial businesses. The lobbyist, Edward Yingling, later said that was a "misleading impression" of his group's position. Griffin and Rusbuldt released a survey of 1,000 people nationwide, commissioned by the insurance agents' group, showing that: * Consumers are confused about whether insurance, mutual funds, annuities and other financial products sold by banks are backed by the federal government, as deposits are. Only 27 percent of those surveyed knew that such products are not federally guaranteed. Rubin has said the administration's proposal includes a requirement that consumers be told in plain terms whether or not financial products are federally insured. * Consumers are vulnerable to pressure to buy insurance, notably credit life insurance, when they apply for loans. Of the respondents, 58.5 percent said they believed that buying insurance from a bank would very likely or somewhat likely improve their chances of getting a loan approved by that bank. * Fifty-five percent of respondents said they were very concerned or somewhat concerned about banks violating the privacy of the personal financial information they provide. The two groups said they were seeking consumer protections in the bill such as anti-coercion rules to prevent banks from using their role as lenders to force consumers to buy their financial products. They also include privacy protections and disclosure and advertising safeguards to inform consumers when financial products are not federally guaranteed. David Runkel, a spokesman for the House Banking Committee, said, "There will be some consumer protections" in the measure that Leach will put forward for a drafting session by lawmakers next week. The survey, conducted by International Communications Research of Media, Pa., was based on telephone interviews last month of 500 men and 500 women aged 18 and older, at a variety of income levels. The margin of error was plus or minus 3 percentage points.