U.S. Court Rules Texas May Not Block Sales of Annuities by National Banks

By de Senerpont Domis, Olaf | American Banker, August 15, 1997 | Go to article overview
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U.S. Court Rules Texas May Not Block Sales of Annuities by National Banks


de Senerpont Domis, Olaf, American Banker


A U.S. district court in Texas has ruled that state laws may not restrict national bank annuity sales.

"This is a very important affirmation of the authority of national banks," said Julie L. Williams, chief counsel of the Office of the Comptroller of the Currency.

The case, filed in the U.S. District Court for the Western District of Texas, pitted the Texas Bankers Association and the OCC against the state Insurance Department. The plaintiffs sued the Insurance Department for barring Texas banks from selling annuities anywhere except in small towns.

The department issued the rule last year as guidance until the state Legislature hammered out a permanent regulatory framework. A new insurance law, which mirrors the temporary rule, was enacted in May. Last week's district court decision overturned that law, allowing national banks to sell annuities anywhere in the state. Texas Banking Commissioner Catherine A. Ghiglieri said her office would grant the same opportunity to state banks.

In the Aug. 7 decision, Judge James R. Nowlin wrote that annuities are not insurance products, therefore state insurance rules do not apply to national banks' sales of the product.

Although the McCarran-Ferguson Act generally bans federal law from overriding state laws that "regulate the business of insurance," Judge Nowlin said the Texas law is preempted because it is an outright ban on bank annuities sales.

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