Washington, D.C. – U.S. Senator Mike Enzi, Chairman of the Senate Securities and Investment Subcommittee, introduced legislation Wednesday designed to give unknowing military personnel some defense against individuals pushing high cost financial products with low death benefits.
"There are many upstanding financial and insurance companies that sell very worthwhile investment and insurance products to military families and this bill is not geared toward these companies. It's designed for those few out there who are selling financial snake oil to military personnel," said Enzi. "These brave men and women who serve in our armed forces protect our freedom. With this legislation we can give them some protection from disingenuous sales tactics."
Some financial services companies have been disguising, marketing and selling high cost periodic payment plan certificates solely to military personnel on military bases. These plans are similar to mutual funds except that 50 percent of the first years payments go directly towards the commissions of the salesman. The average commission on similar securities products is less than six percent per sale in the first year. Some products are also marketed as investments but provide very low death benefits while charging very high premiums in the first years.
Enzi's bill, the Military Personnel Financial Services Protection Act, would:
• Provide for state insurance regulator jurisdiction over the sale of insurance products on military bases
• Require the Department of Defense to keep a list of individuals barred or banned from military bases because of abusive sales tactics
• Protect military families by preventing investment companies from issuing periodic payment plan certificates, the mutual fund-like investment product with extremely high first year costs
"This bill is targeted at the few companies who abuse the system," said Enzi. "This is a relatively new issue that is gaining momentum, but time is short with few legislative days left in the session. Our efforts now will give us a foot hold for next year."
Senators Hillary Clinton, D-N.Y., Chuck Hagel, R-Neb. and Charles Schumer, D-N.Y., joined Enzi in introducing the bill.
The House passed its version of Enzi's bill by a vote of 396-2 on Tuesday Oct. 5.