Legislation could alter consumer protections

On March 2, 2011, in News 2011, by Mark Norris

Senate, House bills raise questions

By Ken Whitehouse, NashvillePost.com
March 2, 2011

New legislation before the Tennessee General Assembly is raising questions about the future of consumer protection for victims of financial crimes.

Two bills in particular are Senate Bill 1522 and House Bill 1189.

The Senate bill, titled “Tennessee Civil Justice Act of 2011,” is part of Gov. Bill Haslam’s tort reform legislative package. It includes a provision that would remove securities dealers from the jurisdiction of the Tennessee Consumer Protection Act and prohibit private citizens from suing their brokers under the TCPA, where a successful legal action can gain three times the damage incurred — a change that would mean financial fraud victims, such as victims of Brentwood Ponzi schemer Michael Park, could not sue but only appeal the Tennessee Department of Commerce and Insurance for redress. There, an administrative investigation could be launched and civil penalties imposed.

The legislation’s sponsor, Republican Senate Majority Leader Mark Norris of Collierville, said he wasn’t prepared to comment on the particulars of the legislation at this time. He told NashvillePost.com that he is still reviewing the bill as it is part of Haslam’s legislative packet and that he and legislative committees would work to ensure that Tennessee consumers have appropriate recourse available against fraudulent securities brokers.

(Historically, the caucus leader of governor’s party carries the legislation of that sitting governor. When former Gov. Phil Bredesen was in office, Sen. Jim Kyle (D-Memphis) was responsible of shepherding his legislation through the State Senate.)

The House bill in question, as introduced, declares the statutory remedies and sanctions that apply to certain acts by an insurer, person, or entity licensed, permitted, or authorized by the division of insurance under title 56 of Tennessee law. The bill would amend Title 56 to — according to Tennessee Citizen Action Executive Director Mary Mancini — “chip away at the strength of the Tennessee Consumer Protection Act” by saying insurance policyholders are no longer considered consumers.

“It would prevent policyholders from filing suit against insurers who refuse to pay claims or an unlicensed agent who stole from them,” Mancini said. “Our concern is that this bill, by taking all insurance cases out from under the jurisdiction of the TCPA, is just the beginning of the state legislature chipping away at the TCPA, a law that is specifically in place to protect the hardworking people of Tennessee.”

Mancini pointed to the case of Franklin-based National Foundation of America, which went under in 2007. Before the venture was declared insolvent, the company and its founders, Richard and Susan Olive, had received control of more than $31 million in assets from customers in exchange for issuing at least 327 illegal annuities, according to allegations in a lawsuit filed in Davidson County Chancery Court.

The Tennessee Department of Commerce and Insurance was able to work with banks and insurance producers in returning nearly 78% of the lost funds in that case, or $15.4 million, to Tennessee victims, according to IFwebnews.com. The company and its leaders were indicted in 2010 by Tennessee Attorney General’s Office and Williamson County District Attorney’s Office.


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