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Monday, March 31, 2014

The CFPB and the Business of Insurance: An Analysis of the Scope of CFPB's Authority Over Insurance Sales

By: ABIA Outside Counsels James Sivon, Barnett, Sivon & Natter, P.C. and Adam Maarec, McIntyre & Lemon, PLLC

Last year, the Bureau of Consumer Financial Protection (CFPB) issued an enforcement order against a bank and its service provider for allegedly misleading sales of insurance. That order was based on the CFPB’s power to prohibit unfair, deceptive, or abusive acts or practices (UDAAP).  This paper argues that, contrary to the CFPB’s position in that case, the Dodd‐Frank Wall Street Reform and Consumer Protection Act (the Dodd‐Frank Act) restricts the CFPB’s authority over the marketing and sale of insurance by banks and insurance companies. The paper also argues that CFPB’s UDAAP authority should not be read to reach the sale of optional insurance products, which are not required to obtain a financial product or service, by a bank or service provider. Finally, it concludes that the McCarran Ferguson Act should prevent the CFPB from superseding any state laws or regulations governing insurance activities.

The paper is divided into five parts. Part I is an executive summary. Part II explains the general statutory restrictions on CFPB’s authority over the business of insurance and persons regulated by a state insurance regulator. Part III identifies the exceptions to those restrictions. Part IV presents arguments against the application of CFPB’s authority to insurance marketing and sales by banks and their service providers, including insurance companies.  Part V is a conclusion.

Read the complete analysis.

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