Senator Eliot Shapleigh - El Paso, Texas

The Pentagon introduced proposed regulations yesterday aimed at preventing marketing practices that have exposed military personnel, especially recruits and junior officers, to high-pressure or deceptive sales pitches for insurance and other financial products.

The proposed rules are the Defense Department's first official response to concerns raised in Congress last fall after reports in The New York Times documented abusive sales practices and unsuitable financial products on several military bases, including Fort Benning in Georgia and Camp Pendleton in California. Congress is considering legislation, introduced with bipartisan support, to address problems raised in the reports.

The proposed Pentagon rules mirror several aspects of that proposed legislation, most notably by requiring the Defense Department to establish and maintain a master list of all disciplinary actions taken against sales agents at any military base, and to make that list available to legal personnel at all bases. A similar arrangement is called for in the pending legislation.

And like the proposed law, the new rules would establish closer ties between military bases and civilian financial regulators, including state insurance commissioners.

But the proposed rules would also require a seven-day counseling period before service members in the three lowest ranks could buy insurance and would require bases to make "disinterested third-party counseling" available to service members who seek help in making insurance or credit decisions.

The new regulations would clarify existing rules that have been inconsistently enforced, including a long-standing ban on agents possessing the official forms that allow for premiums to be deducted automatically from military paychecks. The rules would also flatly forbid insurance agents from deceptively marketing their policies as investments and tighten the rules governing agents selling on bases overseas.

The American Council of Life Insurers expressed strong support for the Pentagon proposal, although a spokesman said the group wants to study the rules on overseas sales more closely.

An aide to Senator Hillary Rodham Clinton, the New York Democrat and one of the sponsors of the pending legislation on military financial marketing, said the senator thought the rules were "a positive step" but that "more needs to be done to halt the abusive financial practices that target our men and women in uniform."

The Defense Department will hold a meeting on the proposed rules on May 6 at the Central Library in Arlington, Va.

Public comments must be received by June 20, and may be sent to Col. Michael A. Pachuta or James M. Ellis in the Office of the Under Secretary of Defense for Personnel and Readiness, 241 South 18th Street, Crystal Square No. 4, Suite 302, Arlington, Va., 22202. Comments may also be filed to Michael.Pachuta@osd.mil or James.Ellis@osd.mil.

(The full text of the Pentagon's proposed rules can be found Here.

Details on the meeting Click Here.)