Current through Register Vol. 49, No. 6, March 15, 2024
PURPOSE: The practice in state-chartered banks where
persons or entities other than the bank receive compensation for the sale of
credit life or credit accident and health insurance can be an unsafe and
unsound banking practice in that it tends to erode the fiduciary relationship
between that person or entity and the bank, encourages the making of loans
which are imprudent and may lead to undue pressuring of borrowers to purchase
insurance. This rule assures that the bank receives the benefit from the sale
of credit life or credit accident and health insurance to loan
customers.
(1) Definitions.
(A) Bank means a state-chartered bank or
trust company.
(B) Interest shall
include:
1. Ownership through a spouse or
minor child(ren);
2. Ownership
through a broker, nominee or agent; or
3. Ownership through a corporation,
partnership, association, joint venture or proprietorship controlled by a
director, officer, employee or principal shareholder of the bank.
(C) Principal shareholder means
any share holder who, directly or indirectly, owns or controls an interest of
more than five percent (5%) in the bank's outstanding shares.
(D) The terms officer, director, employee and
principal shareholder shall include the spouse and minor child(ren) of that
officer, director, employee or principal shareholder.
(2) Distribution of Credit Life and Credit
Accident and Health Insurance Income.
(A)
Except as provided in subsection (2)(B) of this rule, no bank employee,
officer, director or principal shareholder may retain or receive commissions or
other income from the sale of credit life or credit accident and health
insurance in connection with any loan made by the bank, nor receive or retain
any bonus, salary, premium or other compensation contingent upon sales of
credit life or credit accident and health insurance. This income must be paid
directly to the bank or trust company, to a trust of which the beneficiaries
are entitled to share the proceeds in exact proportion to their ownership of
the bank or trust company, to a holding company which owns all of the stock of
the bank of trust company except for directors' qualifying shares or to an
affiliate of that bank which is also wholly owned by the bank's holding
company.
(B) Notwithstanding the
prohibition contained in subsection (2)(A), bank employees and officers may
participate in a bonus or incentive plan under which payments based on credit
life insurance sales are made in cash or in kind out of the bank's funds not
more frequently than quarterly and in an amount not exceeding in any one (1)
year, five percent (5%) of the recipient's annual salary. Alternatively,
bonuses paid to any one (1) individual during the year for credit life sales
may not exceed five percent (5%) of the average salary of all loan officers
participating in the plan and may not be paid more frequently than quarterly.
All compensation under this rule shall be by board resolution which shall
contain sufficient detail to permit a determination that the limits of this
rule have not been exceeded. Copies of this resolution(s) shall be maintained
separately for review by the Division of Finance.
(3) Responsibilities of Directors. The
selection of an insurance company and the agreements between the company and
the bank shall be approved by an appropriate resolution of the bank's board of
directors.
*Original authority: 361.105, RSMo
1967.
