Washington, D.C. – U.S. Senator Mike Enzi, R-Wyo., introduced legislation Thursday designed to give unknowing military personnel some defense against individuals pushing high cost financial products with low death benefits.
"Our men and women serving in the military are expertly trained in the use of the world's most advanced weaponry and military tactics to defend against threats to our country," said Enzi. "They shouldn't have to defend against high-pressure sales people pushing expensive, unsound financial and life insurance plans."
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.
"Our soldiers put their lives on the line to protect this country and they deserve the best treatment. No insurance company should use military personnel and their families as easy profit for unscrupulous policies,"said Enzi.
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
Senators Hillary Clinton, D-N.Y., Chuck Hagel, R-Neb. and Charles Schumer, D-N.Y are co-sponsors of Enzi's bill. A companion bill, H.R. 458, was introduced in the House.
Mr. Enzi. Mr. President, I rise today with my colleague from New York to introduce the Military Personnel Financial Services Protection Act of 2005. This bill is needed to protect our military personnel and their families from unscrupulous financial products. Over the past year, it has become increasingly clear to many that the lack of oversight in this area has allowed certain individuals to push high cost financial products on unknowing military personnel. This practice must be stopped. Our soldiers and their families deserve much better, especially during a time when so many of them are serving at home and overseas to protect our freedom.
The bill that we introduce today will halt completely the sale of a mutual fund-like product that charges a 50 percent sales commission against the first year of contributions by a military family. Currently, there are hundreds of mutual fund products available on the market that charge less than six percent . The excessive sales charges of these contractually based financial products make them susceptible to abusive and misleading sales practices.
In addition, certain life insurance products are being offered to our service members disguised and marketed as investment products. These products provide very low death benefits while charging very high premiums, especially in the first few years. Many of these products are unsuitable for the insurance and investment needs of military families.
One of the major problems with the sale of insurance products on military bases is the confusion of whether state insurance regulators or military base commanders are responsible for the oversight of sales agents. Typically, military base commanders will bar certain sales agents from a military base only to have the sales agents show up at other military facilities. Since there is no record of the bar, state insurance regulators have been unable to have adequate oversight of the individuals. The bill that we introduce today will solve that problem. It will state clearly that state insurance regulators have jurisdiction of the sale of insurance products on military bases.
The bill will also urge state insurance regulators to work with the Department of Defense to develop life insurance product standards and disclosures. The Department of Defense will keep a list of individuals who are barred or banned from military bases due to abuse or unscrupulous sales tactics and to share that list with Federal and State insurance, securities and other relevant regulators.
Finally, the bill that we are introducing today will protect our 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 type of financial instrument has been criticized by securities regulators since the late 1960s.
It should be noted that there are many upstanding financial and insurance companies that sell very worthwhile investment and insurance products to military families. They should be applauded for the fine job that they do in helping our military members and their families. This bill is targeted at the few who abuse the system and prey upon our military.
Congress is fully aware of the dangers faced by our military personnel in keeping our country safe from harm. Likewise, we must do all that we can to arm our soldiers when they face the dangers of planning for their financial futures.
Mr. President, I urge my colleagues to take up this bill immediately so that we can help our men and women in the military and their families.