CUNA Regulatory Comment Call
May 5, 2005
Personal Commercial Solicitation on DoD Installations
- The Department of Defense (DoD) has issued a proposal regarding revision of its existing policy governing personal commercial solicitation of insurance sales and securities on DoD installations. The policy is set forth in Directive (DoDD) Number 1344.7. Specifically, 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. The proposed rule is based on feedback that the DoD received in 2003 in response to solicitation of comments on whether changes to the existing rule were necessary as well as testimony received during a public hearing on the rewriting of the DoDD. The proposed rule also incorporates DoD policy letters issued since the DoDD was last published in 1986.
- CUNA continues to work with the Defense Credit Union Council to help ensure the existing regulation is not changed in a way that harms the ability of on-base credit unions or credit union service organizations to provide financial services on the military installation.
- Comments are due to DoD by June 20, 2005. Please submit your comments to CUNA by June
3, 2005. Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to
Associate General Counsel Mary Dunn at firstname.lastname@example.org or
to Senior Regulatory Counsel Catherine Orr at email@example.com;
or mail them to Mary and Catherine in c/o CUNAs Regulatory Advocacy Department, 601 Pennsylvania
Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You can obtain a copy of the
A copy of the Directive may be found here.
DESCRIPTION OF PROPOSAL
- Under Section 50.11 (g) Educational Programs, the DoDD incorporates an earlier DOD policy letter (April 29, 2002 DoD Memorandum re. Education Programs on Personal Financial Affairs, which may be obtained here. stating that the military departments are responsible for developing and disseminating information and providing educational programs for military personnel on their personal financial affairs. Personal financial affairs include such subjects as insurance, government benefits, savings, and budgeting.
- Representatives of authorized on-base credit unions (and banks) may be used to develop and disseminate information and provide educational programs for military personnel. And, as CUNA has urged, the proposal 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.
Credit unions (and banks) operating on DoD installations are required to provide
financial counseling services as integral part of their financial services offerings. (This
provision reinforces regulations concerning financial institutions on DoD installations and
procedures governing banks, credit unions and other financial institutions on DoD
installations, 32 C.F.R. parts 230 and 231.) Representatives of authorized on-base credit
unions (and banks) and materials provided by those credits unions (and banks) may be used to
satisfy the financial counseling requirement, as long as the following conditions are met:
- If the on-base credit union (or bank) has any affiliation with a company that sells or markets insurance or other financial products, the installation commander shall consider the companys history of complying with the DoDDs provisions regarding personal commercial solicitation procedures prior to requesting the on-base credit union (or bank) to provide financial education.
- All prospective educators must agree to use appropriate disclaimers in their presentations and on their educational materials, which clearly indicate that they do not endorse or favor any commercial supplier, product or service or promote the services of a specific financial institution.
- The following commercial solicitation practices are prohibited on all DoD
- Soliciting in a mass'' or captive audience of any personnel, civilian or military, to include recruits, trainees, and transient personnel.
- Making appointments with or soliciting military and DoD civilian personnel who are in an ``on-duty'' status.
- Soliciting without appointment in areas utilized for the housing or processing of transient personnel, in barracks areas used as quarters, in unit areas, in family quarters areas, and in areas provided by installation commanders for interviews by appointment.
- Using official military identification cards or DoD vehicle decals by active duty, retired or reserve members of the Military Services to gain access to DoD installations for the purpose of soliciting. When entering the installation for the purpose of solicitation, solicitors with military identification cards and/or DoD vehicle decals must present documentation issued by the installation authorizing solicitation.
- Procuring, attempting to procure, supplying, or attempting to supply listings of DoD personnel for purposes of commercial solicitation, except for releases made in accordance with DoD Directive 5400.7.
- Offering unfair, improper, or deceptive inducements to purchase or trade.
- Using promotional incentives to facilitate transactions or to eliminate competition.
- Using manipulative, deceptive, or fraudulent devices, schemes, or artifices, including misleading advertising and sales literature. All financial products, which contain insurance features, must clearly explain the insurance features of those products.
- Using oral or written representations to suggest or give the appearance that the Department of Defense sponsors or endorses any particular company, its agents, or the goods, services, and commodities it sells.
- DoD personnel making personal commercial solicitations or sales to DoD personnel who are junior in rank or grade except as authorized in DoD Directive 5500.7.
- Entering into any unauthorized or restricted area.
- Using any portion of installation facilities, including quarters, as a showroom or store for the sale of goods or services, except as specifically authorized by DoD Directives 1330.9 and 1330.17 and DoD Instructions 1015.10 and 1000.15. This does not apply to normal home enterprises that comply with applicable State and local laws and installation rules.
- Soliciting door to door.
- Unauthorized advertising of addresses or telephone numbers of commercial sales activities conducted on the installation, or the use of military rank and/or titles for the purpose of personal commercial solicitation.
- Contacting DoD personnel by calling a government telephone, faxing to a government fax machine or by sending e-mail to a government computer, unless a pre-existing relationship exists between the parties.
Advertising and Commercial Sponsorship
- DoD expects voluntary observance of the highest business ethics by commercial enterprises soliciting DoD personnel through advertisements in unofficial military publications in describing goods, services, commodities, and the terms of the sale (including guarantees, warranties, and the like). For example, the revised proposal specifically states that the advertising of credit terms shall conform to the provisions of the Federal Reserve Boards Regulation Z, which implements the Truth in Lending Act (TILA).
- Solicitors may provide commercial sponsorship to DoD MWR (Morale, Welfare and Recreation) programs or events in accordance with DoD Instruction 1015.10. However, sponsorship may not be used as a means to obtain personal contact information for any participant at these events without written permission from the individual participant. In addition, commercial sponsors may not use sponsorship to advertise products and/or services not specifically agreed to in the sponsorship agreement.
- The installation Commander may permit organizations to display sales literature in designated locations subject to command policies. Distribution of competitive literature or forms by off-base banks and/ or credit unions is prohibited on installations where an authorized on-base bank and/or credit union exists. This provision incorporates an earlier DoD policy letter.
Life Insurance Products and Securities
- Life insurance products offered and sold to DoD personnel must meet the following
- Companies must provide DoD personnel a separate written description for each product or service they intend to market to DoD personnel on DoD installations.
- Insurance products, other than certificates or other evidence of insurance issued by a
self-insured association, offered and sold worldwide to personnel on DoD installations,
- Comply with the insurance laws of the State or country in which the installation is located and the DoD.
- Contain no restrictions by reason of military service or military occupational specialty of the insured, unless such restrictions are clearly indicated on the face of the contract.
- Plainly indicate any extra premium charges imposed by reason of military service or military occupational specialty.
- Contain no variation in the amount of death benefit or premium based upon the length of time the contract has been in force, unless all such variations are clearly described in the contract.
- An appropriate reference stamped on the first page of the contract shall draw the attention of the policyholder to any restrictions by reason of military service or military occupational specialty, extra premium charges and any variations in the amount of death benefit or premium based upon the length of time the contract has been in force.
- Variable life insurance products may be offered provided they meet the criteria of the appropriate insurance regulatory agency and the Securities and Exchange Commission (SEC).
- Insurance products shall not be sold disguised as investments. If there is a savings component to an insurance product, the agent shall provide the customer written documentation, which clearly explains how much of the premium goes to the savings component per year broken down over the life of the policy. This document must also show the total amount per year allocated to insurance premiums. The customer must be provided a copy of this document that is signed by the insurance agent.
- Securities offered and sold to DoD personnel must meet the following criteria:
- All securities must be registered with the SEC.
- All sales of securities must comply with the appropriate SEC regulations.
- All securities representatives must apply to the commander of the installation on which they desire to solicit the sale of securities for permission to solicit.
- Where the accredited insurer's policy permits, an overseas accredited life insurance agent if duly qualified to engage in security activities either as a registered representative of the National Association of Securities Dealers or as an associate of a broker or dealer registered with the SEC may offer life insurance and securities for sale simultaneously. In cases of commingled sales, the allotment of pay for the purchase of securities cannot be made to the insurer.
Personal Commercial Solicitation Evaluation Form
- The proposal contain a Personal Commercial Solicitation Evaluation form, which will be used to document the Service members experience with the sales representative who provides the Service member with the form. Information on the form will be made available to DoD officials responsible for oversight of personal commercial solicitation practices. Completion of the form is entirely voluntary on the part of the Service member.
- For credit unions, this form would be used in the event a credit union participates in a on-base financial services fair, the CUSO affiliated with the credit union sends an insurance representative to that fair, and the representative makes an appointment with a Service member.
QUESTIONS REGARDING THE PROPOSAL
- Do you feel that the revised Directive now provides sufficient guidance for on-base
financial education programs?
Yes ______ No ______
- Do you think the revised Directive should provide guidance to curtail the ability of
multi-service financial service companies to cross-market services and products that are also
offered by credit unions?
Yes ______ No ______
- Do you think the revised Directives prerequisites to selling life insurance products
and securities on-base are appropriate?
Yes ______ No ______
- Do you think that 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)?
Yes ______ No ______
- Other comments?
Eric Richard General Counsel (202) 508-6742 firstname.lastname@example.org |
Mary Mitchell Dunn SVP & Associate General Counsel (202) 508-6736 email@example.com
Jeffrey Bloch Assistant General Counsel (202) 508-6732 firstname.lastname@example.org
Lilly Thomas Assistant General Counsel (202) 508-6733 email@example.com
Catherine Orr Senior Regulatory Counsel (202) 508-6743 firstname.lastname@example.org