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Press
Release Contact:
Tuesday, December 5, 2000
Frank Torres/David Butler
(202) 462-6262
Consumers
Union's Washington, DC Office
Consumers Union says rule provides good
safeguards for consumers,
but fails to provide grievance process in step with new financial
world
WASHINGTON, D.C. -- Federal banking regulators
have released a long-awaited rule to provide protections for
consumers related to the sale of insurance products by financial
institutions, including retail sales practices, solicitations,
advertisements and other offers of insurance products.
The rule was mandated by Congress under Section
305 of the Gramm-Leach-Bliley Act of 1999, which permitted banks,
insurance companies and securities firms to merge and to sell each
other's products.
Frank Torres, Legislative Counsel for Consumers
Union, said the rule provides some much-needed safeguards for
consumers in the fast-changing financial marketplace, but he faulted
the rule for not providing an adequate grievance process to handle
the problems that consumers may face in the new financial world.
"The rule provides several important
protections for consumers," said Torres. "It says consumers can't be
coerced into buying financial products they don't want in order to
get a product they need. The rule says that when a financial
institution tells the consumer about the details of a certain
product, the disclosure must be clear and understandable. It also
says there must be a physical separation between the place where
insurance business is conducted and the place where retail deposits
are accepted," he said.
"However, the rule does not provide consumers a
grievance process in step with the new marketplace. Congress
specifically required that the regulators establish a redress
mechanism to enable consumers to recover any financial loss should
this rule be violated. Instead of updating or expanding the way they
handle complaints, the regulators rely on the existing procedures.
Under this rule, the financial industry is allowed to modernize its
business operations, but the regulators choose not to modernize the
grievance process. Without an adequate system for consumers to air
complaints, these protections are virtually meaningless," Torres
said.
"If the grievance process we have today isn't
sufficient to handle the problems of tomorrow, Congress will have to
step in to correct the problem," Torres added.
Consumers Union, publisher of Consumer Reports magazine, is an independent, nonprofit testing and information-gathering organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers. Consumers Union is located online at www.consumersunion.org
