CUNA Comment Letter

Personal Commercial Solicitation on DoD Installations

August 22, 2003

VIA E-MAIL: Michael.pachuta@osd.mil

Colonel Michael A. Pachuta
DUSD (MC&FP)
1745 Jefferson Davis Highway
Suite 302
Arlington, VA 22202

Dear Colonel Pachuta:

The Credit Union National Association appreciates this opportunity to comment on the proposed revision by Department of Defense of its existing policy governing personal commercial solicitation of insurance sales and securities on DoD installations. The DoD is in the process of rewriting its Directive (DoDD) Number 1344.7, "Personal Commercial Solicitation on DoD Installations." DoDD 1344.7 provides policy and procedural guidance concerning: life insurance products and securities offered and sold to DoD personnel; supervision of on-base commercial activities; prohibited practices; denial and revocation of permission to solicit on-base; advertising policies; and financial education programs. CUNA, a national trade association, represents more than 90 percent of the nation’s 10,000 state and federal credit unions.

Summary of CUNA’s Position

General Comments

Credit unions serving military installations strive to provide their members the best possible financial advice and services available. It is essential that they have flexibility in providing needed financial education as well as products and services on military installations. Clearly defined rights of such institutions in DoDD1344.7 will enhance that flexibility.

Credit unions do a superb job of providing financial education to their members and are committed to continue doing so. Activities from unscrupulous companies that ostensibly provide financial education on installations but in actuality end up being a solicitation for life insurance on securities sales are undesirable. We support the language concerning the educational programs section (Section 6.7), which is to be revised with the language in the Undersecretary of Defense for Personnel and Readiness Memorandum of April 2002 regarding Educational Programs on Personal Financial Affairs. That section as revised would continue to permit credit unions and banks to provide educational programs. The revised section would provide for more stringent requirements for educators from non-governmental, non-commercial organizations that are expert in personal financial affairs. And importantly, it would continue the prohibition on "commercial agents, including representatives of loan, finance, insurance or investment companies" being used to disseminate information and educational programs for members of the military. That section, along with DoDD 1000.11, "Financial Institutions on DOD Installations" and Chapter 34 of DoD 7000.14-R, "DoD Financial Management Regulation (FMR), provide sufficient guidance for financial institution educational programs.

A new provision should be added to DoDD 1344.7 explicitly allowing financial institutions the option of offering life insurance, securities and other financial services directly and/or through subsidiaries or credit union service organizations (CUSOs). The National Credit Union Administration (NCUA) has issued updated regulations in the past 2 years that have expanded the powers of federal credit unions and the permissible activities of CUSOs (12 C.F.R. Parts 721 and 712). The revised Directive should allow credit unions to conduct activities on-base that are permitted by law or regulation outside the base. Given that financial institutions have been through a rigorous selection process and are subject to a strict monitoring process under DoDD 1000.11, they should be exempt from the requirements of DoDD 1344.7, subparagraphs 6.1.1.3 and 6.2.3. regarding conducting personal commercial solicitation and insurance business by appointment with the individual concerned. Even if these changes were made, all financial products and services offered by financial institutions would still have to be approved by the installation commander in the Operating Agreement (DoDFMR paragraph 340409). If DoD felt that further safeguards were necessary, the agency could revise DoDD 1344.7 to include a provision holding financial institutions responsible/liable for the products and services offered through their CUSOs/subsidiaries. The revised Directive should provide guidance to curtail (but not completely prohibit) the ability of multi-service financial services companies to cross-market services and products that are also offered by credit unions. We believe a complete prohibition on the ability of multi-service financial services companies to cross-market such services and products would be unrealistic at this time.

On a separate matter, we understand DoD may be reconsidering its policy allowing no more than one banking institution and one credit union to operate on a DoD installation (DoDD 1000.11 subparagraph 4.1.1 and the DoDFMR). CUNA would welcome the opportunity to work with DoD as it reviews this policy.

In conclusion, we think our recommendations will permit credit unions (and banks) to provide financial education as well as products and services to their members on military installations around the world more efficiently and effectively in a safe and sound manner. Thank you for the opportunity to share our comments. If you have any further questions, please contact Mary Dunn (mdunn@cuna.com) or Catherine Orr (corr@cuna.com) at our e-mail addresses or at (202) 638-5777.

Sincerely,

Mary Mitchell Dunn
Associate General Counsel

Catherine A. Orr
Senior Regulatory Counsel