Realtime Investor Protection Act

Mr. Speaker, I move to suspend the rules and pass the Senate bill (S. 418) to protect members of the Armed Forces from unscrupulous practices regarding sales of insurance, financial, and investment products.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on this legislation and insert extraneous material thereon.

Mr. Speaker, I yield myself such time as I may consume but first would like to recognize the distinguished chairman of the Financial Services Committee, Mr. Oxley of Ohio.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I want to commend the work of the gentleman from Georgia on this important issue which affects so many of our men and women in uniform.

I rise today in support of S. 418, the Military Personnel Financial Services Protection Act. First, let me thank Senators Enzi and Clinton for sponsoring the Senate companion to my bill, H.R. 458, which passed the House last year by a vote of 405-2.

This important legislation will protect our troops from certain insurance and investment products, and in particular, the contractual plan.

Contractual plans have virtually disappeared from the civilian market due to excessive sales charges, but sales persist among servicemembers and their families, who are often new to managing finances and unaware that there are alternative or more cost-effective opportunities out there. The hallmark of the deceptively expensive plans are front-loaded commission fees of up to 50 percent. S. 418 prohibits the sales of these predatory investment products.

Unfortunately, there are some bad actors still out there in the insurance and securities industry that have been taking advantage of military personnel by marketing these questionable products.

Mr. Speaker, I understand firsthand the sales tactics used by these companies on our soldiers. As a young officer in the Army, a group of salesmen showed up on my post and convinced me and my fellow soldiers to purchase a contractual plan. I fell for the sales pitch for this contractual plan because the company made it appear as though they were part of the Armed Forces family, and the salesman, a respected military veteran, was somebody I thought I could trust because of his record in the military. That trust was betrayed simply because of our ignorance.

What we discovered as time went by was that there were tremendous other options out there; and that many, many service personnel were losing tens of thousands of dollars that could have gone directly into investment products that were available in the commercial world.

I invested what was a lot of money to me at the time, not because I was a financial expert, I was a combat arms officer, but because a retired servicemember was working as a salesman and was pushing a product with the referral of other veterans. It was not until I got out of the Army and into the business world that I discovered how uncompetitive these products were when compared to other investment opportunities. However, it was too late. My wife and I lost nearly half our life savings on this so-called investment.

S. 418 also addresses the sale of life insurance to servicemembers. The bill requires life insurance companies to provide written disclosures that, among other disclosures, state that subsidized life insurance is available through the Servicemembers' Group Life Insurance Program and fully disclose the terms of the agreement and any savings feature of the product. The disclosure must be in plain and readily understandable language and in a normal type font.

Additionally, I would like to state I am disappointed that the Senate removed the qualifying words ``in person'' from the requirements provision of section 10 on disclosures regarding life insurance products. I have concerns that this could prevent certain well- respected life insurance companies from

continuing to do business the way they have for many years, which enables the issuing of insurance in a timely manner to servicemembers who are often about to be deployed or go into combat.

I plan to continue monitoring the status of this issue, and I will pursue legislative options in the future should my concern manifest itself.

Regulation of these types of insurance and investment products on military bases has clearly been inadequate to this point. The situation required congressional action to address the situation and protect our servicemembers.

I applaud my colleagues in the Senate for moving forward with S. 418, and I appreciate the leadership of the House for bringing it to the floor for a vote.

I would encourage the Department of Defense to continue with its efforts to improve financial literacy of our troops. I cannot emphasize strongly enough how I agree with my colleague from Georgia on the importance of teaching our young soldiers, sailors, airmen and marines about the opportunities that they have and the benefits they can accrue from taking wise counsel and go for sure and certain return on their investment while they are serving this Nation.

However, we as a Congress cannot allow these abusive sales practices to continue. We must not ask the men and women of our armed services to make sacrifices for our security without doing all we can to protect their financial futures. They are laying their lives on the line and putting their families under tremendous stresses and pressures right now. The last thing we must permit to take place is predatory sales practices upon these soldiers while they are getting ready to deploy and weigh these serious life decisions without proper information. Working together, we will solve this problem.

Thank you again to Senators Enzi and Clinton for sponsoring the Senate version of my bill, H.R. 458, and to Chairman Baker and Chairman Oxley for their diligent examination of this issue in the House Financial Services Committee.

I also want to emphasize that this has truly been a bipartisan effort working together on a compromise that never weakened the provisions but actually made a stronger bill in the long run, particularly with the House version that came out last year.

I thank the ranking member, Mr. Frank, and Chairman Oxley for their leadership and the example they set for every committee in the House of Representatives on working together in a bipartisan manner to craft legislation that benefits the American people.

The gentleman from Georgia (Mr. Scott), the gentleman from New York (Mr. Israel), the gentleman from Kansas (Mr. Ryun), the gentleman from Pennyslvania (Mr. Fitzpatrick), and the gentlewoman from Florida (Ms. Ginny Brown-Waite) have all been integral to this dialogue to offer key provisions and key counsel to strengthen this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

I want to echo some comments that were made by Mr. Pomeroy. Our title II language of the original House bill directly addressed the predatory lending issue, and we were disappointed, many of us, that that language was removed from the Senate version. However, I believe that there will be good news in the defense authorization. We have worked very tirelessly over the past couple of weeks, and I am serving as a conferee on the joint House/Senate committee, and I believe that we are going to have some very strong language to begin to address this issue, to control the fees and the percentage rates and ultimately to dissuade our young soldiers, sailors, and airmen from participating in these processes that take advantage of them financially.

One thing that I would like to point out is an aspect of my own story and the nature of this behind the bill. I remember experiencing the invitation to the steak dinner at a meeting hall where many soldiers came out to hear a presentation about how much money they could possibly make by joining these programs, and the importance of insurance and how that was going to help, and how one salesperson asked my wife if she would feel safe on the amount of insurance that she had from the servicemen's group life program at that time. She even won a $50 lucky drawing during that. And it wasn't until several years later that we realized that we had based our trust on a false premise and had purchased a product that we didn't need.

One of the great things in America is the equalizing capability of the American people, that every person has a say with votes, that we can pursue goals and opportunities, and as the old saying goes, ``What goes around comes around.'' I remember sitting as a new Member in the House of Representative when the then CEO of that very company was sitting across from my desk

wanting us to not bring H.R. 458, the Military Personnel Financial Services Protection Act, to the floor. And having lived that, and knowing the concern of the other Members on the committee, we are very pleased to take this first step as we are addressing many steps in protecting our servicemembers and also enhancing their financial literacy.

With that, I want to commend both sides for having worked together. I thank the gentleman from Georgia especially for his long-time interest in this. And I want to say a special note to outgoing Financial Services Committee Chairman Mike Oxley. I believe that he has set a stellar example of leadership in his tenure. He has been a mentor to me and other members of the committee. What he has shown is that we can work in a spirit of comity and comedy, that we can have fun as we deal with very, very serious issues. He always kept the vision, the end goal, in sight that we were working toward to keep things in perspective so that when the pressures of the time or the fatigue of the long days might move emotions in a different direction, he was always there to keep us pointed towards that end goal as we run that race to have good financial services legislation like this bill that we have today.

Mr. Speaker, I yield back the balance of my time

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I yield myself such time as I may consume.

First, let me extend my deep appreciation and thanks to our distinguished chairman, Chairman Oxley of Ohio. As many of us know, Chairman Oxley will be leaving us and I want to take this opportunity to recognize what an outstanding chairman you have been to our Committee on Financial Services. It has been a pleasure serving with you, and you have been an outstanding chairman.

It is also a pleasure to stand here as I represent our ranking member, the gentleman from Massachusetts (Mr. Frank), who has provided outstanding leadership on our Financial Services Committee, and has led the way for this to be a strong bipartisan effort, to Mr. Davis of Kentucky. Certainly it is a pleasure to work with you on this measure.

I think this is a very important bill because of the timeliness of it, especially with so many of our military men and women in harm's way overseas, especially in Iraq and Afghanistan, that we put forward a measure designed to help protect their financial security.

Senate 418, the Military Personnel Financial Services Protection Act, the measure before us today, will address some serious problems of predatory lending and financial abuse targeted at our military men and women.

In 2004, the New York Times ran a series of very good stories which detailed misleading sales practices of financial products to members of the military. A few unscrupulous agents had made misleading pitches to captive audiences by posing as counselors on veterans benefits, and they solicited soldiers while on duty.

This issue is important to me, as it is to all of us in this Congress, but especially to me and those of us from Georgia, because so many of these reported scams occurred at Fort Benning in my State of Georgia.

So I joined with my colleagues on the Financial Services Committee and we held hearings to investigate these predatory and abusive lending practices, and then we went to work on finding legislative remedies.

This legislation that we worked on is very similar to Senate 418. Our legislation was passed by a large majority in the House, but was not brought up for action on the Senate floor until recently. What we have before us as Senate 418 represents the final bipartisan and bicameral product in addressing these important issues. This is indeed the work of the House and the Senate.

What S. 418 will do, it will ban all future sales of periodic payment plans. It will require greater regulation of insurance sales on military bases. It will require the Department of Defense to create a registry of agents who are prohibited from selling financial policies on bases, and it will expand investor access to registration information for brokers, for dealers and advisers.

I would like to give just a little more detail about a few of the protections afforded our military personnel in this measure. Senate 418 will give State insurance regulators jurisdiction over insurance sales on Federal facilities and bases within the United States as well as abroad. Many of the abuses that occurred on bases continued because of confusion about regulatory jurisdiction, and especially at overseas bases. This bill resolves that. This provision clears up that concern.

Also my colleague, the gentleman from New York (Mr. Israel), authored a provision contained in section 13 of this measure. This provision requires the Secretary of Defense to notify the appropriate State regulators when an insurance agent or financial adviser is added or deleted from a registry of agents or advisers banned from military bases. This provision will prevent unscrupulous sales agents from moving to other jurisdictions to avoid detection.

Further, insurance companies could not sell or solicit policies to military personnel on a base without first providing clear written notice that federally subsidized life insurance is available through the Federal Government, and that the sale of the private plan is not sanctioned or recommended by the government.

To ensure our servicemembers are capable of addressing their financial needs, we must first provide them with adequate compensation. At the same time, we must help our soldiers exercise financial responsibility. It is necessary that military personnel have financial literacy, something that I have worked very hard on since my first day arriving in Congress. These individuals can face financial questions from Internet-based sales, from sales off base, and from being faced with decisions in the civilian world. As we know, predatory sales practices are not limited to the base.

Our military folks have enough to worry about. They constantly live in a life-and-death situation. They certainly do not need these added financial insecurity pressures that are placed upon them by predatory lenders and financial abusers.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 4 minutes to the distinguished gentleman who has long championed the military, and on this issue has been at the forefront in providing great leadership on this issue, protecting our military from financial abuses, and that is the gentleman from North Dakota (Mr. Pomeroy).

Mr. Speaker, I yield myself such time as I may consume.

I just want to extend my feelings of great appreciation to Mr. Davis from Kentucky, the distinguished gentleman, who has truly provided the leadership on this bill. And you could tell from his eloquent statements earlier of his own experience in this issue that really clearly points to why we need this bill.

And I thank you, and it has been a pleasure working with you on this, Mr. Davis.

I again want to echo when he said about the chairman. I am very fortunate on this committee to have two mentors, Democrat and Republican. And as a Democrat, I am not ashamed to say one of my mentors is a Republican, and that is Oxley. Chairman Oxley. I call him ``Oxley.'' On top of everything else, he is a great baseball man. And, of course, with Ranking Member Frank, it gives a great balance to the bipartisanship on that committee, which I think enables us to deal with ticklish matters like this very appropriately.

As far as the payday situation is concerned, we will visit that another day. There is no question about that. We want to make sure that we get the good apples out of the way of the bad apples and move forward. But this bill here clearly gives us a very important statement. And it is with this statement that we are saying to these predators, keep your grubby hands off of our soldiers. We have got 18- and 19-year-old kids who are just getting out of high school, many of them, and there these predators are, waiting on them at a time when they are faced with such life-and-death issues as going into harm's way, all of those pressures. It is not right. It is not fair. And this is why we are moving on this very important legislation, so that we can protect our fighting men and women against unscrupulous investment sales.

I urge the House to move to pass this important bipartisan measure today.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I rise in support of S. 418, the Military Personnel Financial Services Protection Act, which protects the men and women serving in our Nation's military from deceptive financial practices and unsuitable financial products.

I want to pay a particular tribute to the sponsor of the House legislation that came through the Financial Services Committee. This bill that we have before us is almost identical to the bill that passed out of our committee. Mr. Davis, a veteran and West Point graduate, led the way in protecting our military men and women on this issue early last year. Early last year he secured a bipartisan voice vote in committee and a resounding 405-2 bipartisan victory in the House.

Congratulations also go to former Congressman Max Burns of Georgia who led the charge protecting our military personnel in the 108th Congress.

We are pleased with giving the Senate credit for their bill number if we get to enact the protections for our military as envisioned by Mr. Davis and Max Burns.

Mr. Speaker, since the tragic day of September 11, 2001, our country has been at war with terrorism around the world. In the prosecution of that war, our armed services have performed heroically. Many have made the ultimate sacrifice for the cause of freedom, and all have worried about the safety and security of their loved ones as they leave to serve our country.

Unfortunately, there are a few bad actors in the financial services industry who have been taking financial advantage of our soldiers. These unscrupulous companies and their sales teams infiltrate our military installations and use aggressive, misleading, and often illegal sales tactics to sell high-cost products of dubious value that are unsuitable for any investor, and are particularly unsuitable for most military personnel.

The Pentagon has issued directives intended to prevent these abuses. But with the ongoing confusion over regulatory jurisdiction, the lack of communication among government agencies, and the lack of sufficient investor protection standards for certain financial products, it is clear that our military personnel can never be adequately protected unless Congress enacts this bill.

The Davis bill bans bad financial products and coercive sales practices on military bases, including obscure and high-cost ``contractual plans.'' It clarifies the regulatory jurisdiction on military installations within the U.S. and abroad, adds appropriate consumer protections and disclosures for financial products sold on military bases, and ensures proper reporting systems between our military and the financial regulators to catch bad actors before they can do more harm.

It also makes the process of selecting a financial adviser more transparent for all investors by providing online access to background information on broker-dealers, including disciplinary actions. This last provision was taken from legislation introduced by the gentleman from Arizona (Mr. Shadegg) that passed the House in April 2005.

The overwhelmingly bipartisan support for this bill within Congress and the military is the result of strong leadership by the gentleman from Kentucky (Mr. Davis) as well as former Member Max Burns, as well as the chairman of the Subcommittee on Capital Markets, Mr. Baker, who led our committee's investigation into abusive practices and bad products, Congressman Jim Ryun and Congressman Steve Israel. Mr. Ryun and Mr. Israel worked closely together on the reporting requirements of this bill, and the gentlewoman from Florida (Ms. Ginny Brown-Waite) for ensuring appropriate SEC review of broker-dealer sales practices on military installations.

Their hard work and passion for protecting our military personnel is well reflected on this legislation. I urge my colleagues in the full House to vote ``yes'' on S. 418.

Mr. Speaker, I rise in strong support of H.R. 1077, the Realtime Investor Protection Act.

As has already been indicated, this legislation will require the National Association of Securities Dealers to make its databases of complaints against broker-dealers publicly available on a secure Internet site and is relatively straightforward.

Let me explain, however, this is indeed a serious problem. I personally know of individuals whose entire wealth has been wiped out by fraud which could have been detected had these investors taken the time to research the broker-dealer they were dealing with in an appropriate manner.

As has been explained, the current law requires the NASD to maintain BrokerCheck. BrokerCheck is a system through which investors can research their broker-dealer before entrusting with them their hard- earned savings. But in light of Congress' increased focus on retirement security, I believe we should encourage Americans to, in fact, take advantage of BrokerCheck, and even go beyond that and to conduct their own research before making any investment decision.

BrokerCheck, as has been indicated by my colleague on the other side, provides these individuals with this information through a free check that can be accessed either over the Internet or by telephone. But because it is accessed over the Internet and by telephone, and requires that an inquiry be submitted and then a response prepared and that response sent back, the delay in getting this information can be anywhere between 10 minutes and as much as 2 days. This legislation goes at that problem and allows instantaneous access to this kind of information.

Through the current system and through the enhanced system this legislation will authorize, BrokerCheck will gather and make available online on an instantaneous basis, and an investor can discover, whether or not their broker has a criminal record, has been subjected to a regulatory action by the Securities and Exchange Commission, and whether or not their

broker has had consumer complaints filed against them.

While the current system is a good idea, as I indicated, it has not kept pace with technology. Today investors can only access the information by placing a request through the NASD's toll-free phone number or Website, and then must wait for a response. This legislation will update the system by requiring the NASD to make this information available through a secure Website on the Internet so investors can search for this information instantaneously.

NASD statistics bear out the need to utilize the Internet for this purpose. Let me give just a few statistics. Over 4.4 million requests for information were submitted to the BrokerCheck program in 2004, and 99 percent of these were submitted on the Internet through e-mail. Only 1 percent were by telephone. Clearly investors have figured out that the Internet is the proper mechanism for submitting this kind of inquiry and checking out their broker-dealer before they invest. But by having it require now a response from the NASD, rather than having the check be instantaneous, we are exposing investors to that 10-minute to 2-day delay during which they cannot access this information.

By making information accessible online, as H.R. 1077 does, it will be easier for individuals to research their broker-dealer and provide themselves with the information they need before they make an investment decision. I hope my colleagues share my interest in encouraging individuals to become more informed investors, and I urge a yes vote by all of my colleagues on the Realtime Investor Protection Act.

I appreciate the comments of the gentleman on the other side in support of the legislation, the comments of the gentlewoman from New York (Mrs. Kelly), and the support of the Committee on Financial Services.

Mr. Speaker, I thank my friend for yielding.

In a prior life I used to be a State insurance commissioner, and I want to tell you how completely disgusted I am that there are still companies and agents that would prey upon the young men and women that are serving our country, in many instances young soldiers preparing for deployment to Iraq. Seizing this incredibly sensitive and exposed period in their lives, they use every trick in the book to load them up with coverages that are inappropriately priced, may well be ill-matched to the financial needs of the soldier, and they do it all for one lousy reason, personal profiteering, profiteering on those who would literally put their lives on the line to protect our freedoms. That is about as low as you can get.

And I very much appreciate the debate that we have had here. Congressman Davis, you related your own story about how, as a young soldier, you had some respected veteran peddling a product from a company that just fills the sales materials with flags and banners. This is just so wrong.

Frankly, I am disappointed that the State insurance commissioners have allowed this to go as far as they have. Maybe there was some confusion about what their regulatory enforcements could be relative to proximity to Air Force or Army bases. I don't understand. I believe more could have been done at the State regulatory level, and I hope this represents a good swift kick in the behind to any enforcement official looking at predatory lending practices.

This is a clear bipartisan statement from Congress that we don't countenance this at all, and we want to crack heads on anybody engaged in this kind of activity.

I also want us to note there is more to do. Both sides of the aisle have so well expressed our need for financial literacy. Let me just give you exhibit A in terms of why we need it so badly. Right outside the base gates, payday loans, predatory lending shops, not addressed in this bill, unfortunately, and still a matter we need to look at because soldiers, often young, trying to make it on pretty skinny checks, fall prey to these predatory lending practices of the payday lenders.

And I want to send a signal to this industry: We see what you are doing. We hate it, and we are going to try to figure out how we address those payday loan practices, the predatory lending practices. Surely any reputable lender, any major bank that would engage in a surcharge lending practice for the subprime market of military bases is wrong. We will not accept this surcharge on the subprime market of young soldiers, and we intend to expose and we intend to further and fully discuss these practices. So if you don't want to see your names in the paper relative to ripping off our soldiers, quit those payday loan practices. We are coming after you next. Agents, insurance companies, we are getting you with this legislation, but the subprime market is coming next. Don't make any mistake about it.

I thank the sponsors of this legislation.