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Floor Statement
"Military Personnel Financial Service Protection Act"
Senator Mike Enzi
October 6, 2004

Mr ENZI. Mr. President, I rise today with my colleague from New York to introduce legislation to stop the sale of questionable financial products through hard sales tactics to our military personnel and their families. Over the course of recent months, it has become increasingly clear that the lack of clear lines in the oversight of insurance and securities sales on military bases has allowed certain individuals to push high cost financial products on unknowing military personnel. This practice must be stopped now. Our soldiers and their families deserve much better than that especially since they are putting themselves on the front line day after day for 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. Unfortunately, a small group of individuals target these products almost entirely to military families.

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 sales of insurance products on military bases is 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 rectify that problem. It will state clearly that state insurance regulators have jurisdiction of the sale of insurance products on military bases.

In addition, the bill will urge state insurance regulators to work with the Department of Defense to develop life insurance product standards and disclosures. The Department of Defense also 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 to issue 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 1960's.

We believe that this legislation is but the first step in helping our military families. Last year, I worked with Senators Shelby, Sarbanes, Akaka and Stabenow to develop financial literacy initiatives for the federal government and for students. My colleague from New York and I will be working next year to strengthen the financial literacy programs for military personnel. By providing military families with the tools to analyze and compare financial products, we will give them an advantage over sales agents who attempt to sell high cost financial and insurance products ill-suited to military life.

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 families. This bill is targeted at the few who abuse the system and prey upon our military in times when our country needs them the most.

Last night, a similar bi-partisan bill passed the House of Representatives by an overwhelming vote of 396-2. 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.