Database decisions could play a big role in determining how new financial institution affiliate marketing provisions apply to specific marketing campaigns.

Officials at the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration come to that conclusion today in a discussion of the final version of the Fair Credit Reporting Affiliate Marketing Regulations.

The final rules and a preamble appear today in the Federal Register.

Several long sections refer to insurance marketing campaigns.

The rules, based on proposed regulations released in July 2004, are set to take effect Jan. 1, 2008.

The rules describe when banks and other financial institutions can and cannot share customers’ financial information with affiliates, along with the opportunities institutions must give customers to opt out of marketing campaigns.

The rules are more flexible for financial services companies or other “persons” with “pre-existing business relationships” with consumers than they are for other persons.

Officials note that they responded to comments from insurers by making it clear in the final rules that the “licensed agent” of a “person” that has a pre-existing business relationship with a consumer also has a pre-existing business relationship with the consumer.

If, for example, a consumer buys an ABC auto insurance policy through a licensed agent, “the licensed agent may use eligibility information about the consumer to market ABC life and homeowner’s insurance policies to the consumer for the duration of the pre-existing business relationship without offering the consumer the opportunity to opt out of that use,” officials write in the preamble.

The officials described another example involving an insurance company that asks an affiliated bank to send insurance company marketing materials to a list of consumers who meet the insurance company’s eligibility criteria.

The insurance company then would contact the consumers only if the consumers responded to the marketing materials.

Consumer groups have argued that “constructive sharing contravenes the intent of Congress and amounts to a loophole that should be fixed,” officials write.

State attorney generals have agreed with the consumer groups, officials write.

“After considering the constructive sharing issue, the [financial institution regulatory] agencies conclude that the statute only covers situations where a person uses eligibility information that it received from an affiliate to make a solicitation to the consumer about its products or services,” officials write.

“In a ‘constructive sharing’ scenario like that described above, a pre-existing business relationship is established between the consumer and the insurance company when the consumer contacts the insurance company to inquire about or apply for insurance products as a result of the consumer’s receipt of the insurance marketing materials,” officials write.

“Because the insurance company does not use shared eligibility information to make solicitations to the consumer before it establishes a pre-existing business relationship with the consumer, the [Fair and Accurate Credit Transactions Act] statute does not apply,” officials write.

If, on the other hand, an insurance company puts consumer eligibility information in a database that all affiliates can access, and a financial institution has the insurer send marketing materials to certain customers, that marketing campaign would not fall within the pre-existing business relationship exception, officials write.

“Instead, the depository institution makes the solicitation because it used eligibility information received from an affiliate to select the consumer to receive a solicitation about its products or services and, as a result, the consumer is provided a solicitation,” officials write.

To try to clarify the scope of the pre-existing relationship exception, the agencies have added examples involving marketing campaigns and consumers who call up asking for directions or other basic information.

“If a consumer calls an affiliate solely to obtain retail hours and directions or solely to opt out, the [pre-existing relationship] exception is not triggered because the communication does not relate to the affiliate’s products or services and making a solicitation about products or services to the consumer in those circumstances would not be a reasonable response to that communication,” officials write.

“The agencies recognize, however, that if the conversation shifts to a discussion of products or services that the consumer may need, solicitations may be responsive depending upon the facts and circumstances,” officials write.

“Likewise, if a consumer who has opted out of an affiliate’s use of eligibility information to make solicitations calls the affiliate for information about a particular product or service, for example, life insurance, solicitations regarding life insurance could be made in response to that call, but solicitations regarding other products or services would not be responsive,” officials write.

A copy of the final rule is available