Full opinion text
THORNBERRY, Circuit Judge: In Cochran v. Paco, Inc., 606 F.2d 460 (5 Cir. 1978), we held today that the lending activities of a premium finance company do not constitute the “business of insurance” and that the McCarran-Ferguson Act (“McCarran Act”), 15 U.S.C. §§ 1011 et seq., does not preclude application of the disclosure requirements of the Truth in Lending Act (“TIL”), 15 U.S.C. §§ 1601 et seq., to the transaction. The instant ease, the second in today’s trilogy, presents a related question: whether the McCarran Act bars TIL’s application when an insurance company provides premium financing in connection with the sale of an insurance policy. The district court held that the McCarran Act was a good defense to plaintiff’s TIL action and granted summary judgment for the defendant insurance company. We reverse. I. FACTUAL BACKGROUND Sylvia Perry was a college student in Alabama when a salesman from Fidelity Union Life Insurance Co. sold her a life insurance policy in June, 1974. To obtain the policy, which had annual premiums of $295, she made a $10 down payment and executed a promissory note to Fidelity for the remainder of the first year’s premium. Fidelity provided Perry a form entitled “Disclosure Statement and Acceptance of Policy,” which stated that she would be paying $134 in interest over the five-year life of the note. Perry made no further payments on the note, which was ultimately assigned to a bank. On June 24, 1975, Perry, on behalf of herself and all persons similarly situated, filed this suit, alleging that she had entered into contractual relations with Fidelity in the nature of a consumer credit transaction and that Fidelity’s disclosure forms violated TIL and Regulation Z, 12 C.F.R. § 226.1 et seq. She sought the statutory penalty for herself and the class, costs, and attorneys’ fees. Following discovery, Fidelity successfully moved for summary judgment on the ground that the McCarran Act barred application of TIL to the Perry transaction. The district court, in an unreported opinion, held that (i) the disclosure of credit information of a premium financing arrangement is part of the business of insurance; (ii) the State of Alabama has exercised its power to regulate the premium financing aspect of the business of insurance; and (iii) application of TIL to this particular transaction would require a construction of TIL that would invalidate, impair or supersede Alabama law enacted for the purpose of regulating the business of insurance. This appeal followed. II. DISCUSSION Our opinion in Cochran v. Paco, Inc., supra, establishes the analytical framework for determining the applicability of the McCarran Act. Since we held in Cochran that TIL does not specifically relate to the business of insurance, 606 F.2d at 464, we turn immediately to the next inquiry, that is, whether Fidelity’s premium financing activities, carried out in connection with its sale of an insurance policy, constitute the “business of insurance.” We hold that it does not and that the McCarran Act is no bar to the application of TIL. Accordingly, we need not determine whether Alabama has “any law enacted . for the purpose of regulating” the financing activities or whether TIL would “invalidate, impair, or supersede” such state law. Cochran, supra, 606 F.2d at 467 n.15. There is no doubt that the sale of an insurance policy is squarely within the “business of insurance.” Securities & Exchange Comm’n v. National Securities, Inc., 393 U.S. 453, 460, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969). However, the financing of such a sale is a different activity. As we said in Cochran, premium financing “has little — if any — effect on an insurance company’s ability to pay claims or on the nature of [its] policies” and “has only a peripheral connection with the business of insurance,” 606 F.2d at 466-467. We do not think that the nature of premium financing changes, in chameleon-like fashion, simply because an insurance company rather than a loan or finance company authors the promissory note. Not all insurance company activities constitute the business of insurance, and the McCarran Act does not insulate every operation of every insurance company from federal regulation. Cochran, supra, at 465 n.13. It would be anomalous to hold that Fidelity’s premium financing activities are the “business of insurance” but that the identical activities of the finance company in Cochran are not. The appropriate focus is thus the nature of the activity itself, not the type of business that is conducting it. In making available premium financing, an insurance company is acting not as an insurer but as a creditor, and the financing activity is purely ancillary to the insurance relationship between the insurance company and the policyholder. Premium financing has virtually nothing to do with a company’s reliability as an insurer, a factor that stands at the center of the insurer-insured relationship. National Securities, supra. When an insurance company offers premium financing as an inducement for persons to purchase policies, it plays two distinct roles in its relationship with the purchaser. On the one hand, the company is an insurer, the purchaser an insured; but on the other hand, the company is a creditor, the purchaser a debtor. The former relationship constitutes the “business of insurance,” while the latter does not. We do not doubt that an insurance company can, by offering a premium financing package, facilitate the sale of insurance policies. But that alone cannot elevate the activity to the “business of insurance,” for one can hardly claim that the extension of credit is an integral part of the insurance business. As we have said in the antitrust context, business activities of insurance companies not peculiar to the insurance industry are outside the scope of the “business of insurance.” Royal Drug Co. v. Group Life & Health Ins. Co., 556 F.2d 1375, 1386 (5 Cir. 1977); see also Battle v. Liberty Nat’l Life Ins. Co., 493 F.2d 39, 50 (5 Cir. 1974), cert. denied, 419 U.S. 1110, 95 5. Ct. 784, 42 L.Ed.2d 807 (1975). Accordingly, we hold that premium financing by an insurance company does not constitute the “business of insurance” within the meaning of the McCarran Act and that the McCarran Act is thus no bar to the application of TIL’s disclosure requirements. The judgment of the district court is reversed and the case remanded for further proceedings consistent with this opinion. REVERSED and REMANDED. . The third case is Cody v. Community Loan Corp., 606 F.2d 499 (5 Cir. 1978). . This statement provides, in pertinent part: (4) Cash Downpayment_____________$ 10.00 (5) Unpaid Balance of Cash Price_____$285.58 (6) Unpaid Balance ________(Same as Item 5) (7) Amount Financed_______(Same as Item 5) (8) Total FINANCE CHARGE (interest) ___________________________$134.03 (9) Deferred Payment Price (3 + 8)___$429.61 (10) Total of Payments (5 + 8) _______$419.61 The Total of Payments is payable in a single payment due 6-13-79, except if the above Policy terminates, the Note may be declared immediately due and payable. (12) Date of Note___________________6-13-74 (13) Finance Charge Accrues From____6-13-74 Record at 46. Had Perry paid later premiums, she would have received a cash payment at the end of the fifth year (the policy’s fifth anniversary endowment) that would have covered a substantial portion of the first year’s premium. . Perry alleged the following violations of TIL: (1) failure to disclose the finance charge as an accurate annual percentage rate computed in accordance with the provisions of 15 U.S.C. §§ 1606, 1638(a)(7), and 12 C.F.R. §§ 226.5(b), 226.8(b)(2); (2) failure to furnish a completed, duplicate copy of the disclosure statement containing all the required disclosures prior to the consummation of the consumer credit transaction as required by § 226.8(a); (3) failure to disclose the “total down payment” as required by § 226.8(c)(2); (4) use of the term “cash price of policy (annual premium)” instead of “cash price,” as required by §§ 226.6(a), 226.8(c)(1); and (5) use of the term “total finance charge (interest)” instead of “finance charge,” as required by §§ 226.6(a), 226.8(c)(7). Record at 3. After discovery, Perry admitted that if the finance charge was correctly reported, the annual percentage rate was accurately computed. However, she sought to amend the complaint to allege that the finance charge was too low and the cash price too high. The record is silent as to whether this amendment was allowed. . 15 U.S.C. § 1640(a). Count II of the complaint presented a state law claim. At the pretrial conference the parties agreed to submit the case on the sole issue of the McCarran Act defense, on which Fidelity prevailed, and the state law claim is thus not before us. . The Board of Governors of the Federal Reserve System filed in this appeal the same amicus curiae brief submitted in support of appellant’s position in Cochran v. Paco, Inc., supra. . We recognize that other courts, in other contexts, have held that an insurance company’s inducing persons to become policyholders is part of the business of insurance. E. g., Dexter v. Equitable Life Assurance Soc'y, 527 F.2d 233 (2 Cir. 1975) (antitrust action challenging Equitable’s requirement that plaintiff purchase life insurance as precondition to granting mortgage loans); Addrisi v. Equitable Life Assurance Soc’y, 503 F.2d 725 (9 Cir. 1974), cert. denied, 421 U.S. 922, 95 S.Ct. 1590, 43 L.Ed.2d 790 (1975) (same). However, in these cases the inducement was actually a requirement, and forcing prospective policyholders to buy insurance cannot be equated with making the purchase “easier” by offering premium financing. Moreover, if this “inducement” rationale were applied in the financing context, the activities of any lender who engages in premium financing would constitute the “business of insurance.” We have rejected such a result in Cochran v. Paco, Inc., supra, and application of the “inducement” theory in the instant case would make the McCarran Act’s applicability turn on who is engaged in premium financing rather than on the nature of that activity.
JOHN R. BROWN, Chief Judge, dissenting: This appeal presents the esoteric question whether § 2(b) of the McCarran-Ferguson Act (the McCarran Act), 15 U.S.C.A. § 1012(b), bars the application of the disclosure requirements of the Truth-in-Lending Act, 15 U.S.C.A. §§ 1601 et seq. (TIL) when an insurance company provides premium financing in connection with the sale of an insurance policy in Alabama, and the form used in disclosing the credit terms to the policyholder has been submitted to and approved by the Department of Insurance as required by Alabama law. I agree with the District Court that the McCarran Act is a good defense to the action and dissent from the contrary holding of the Court. I. Prologue Building on Cochran v. Paco’s holding, in which I concurred that a non-insurance company premium financing enterprise is not engaged in “the business of insurance,” the Court makes a mighty leap to conclude that when the premium financing is extended directly by the selling insurance company, this is likewise not the “business of insurance.” Its principal thesis is that (i) premium financing — by whomsoever advanced — does not concern or affect the “relationship between insurer and insured, the type of policy which could be issued, its reliability, [interpretation] and enforcement,” SEC v. National Securities, Inc., 1969, 393 U.S. 453, 460, 89 S.Ct. 564, 569, 21 L.Ed.2d 668, 676 (quoted in Cochran, ante, 606 F.2d at 465), and (ii) in extending premium financing “an insurance company is acting not as an insurer but as a creditor” so that (iii) “the financing activity is purely ancillary to the insurance relationship between the” insurer and policy holder. There are a number of faults with this approach, some of which warrant the later detailed discussion. At the outset, I firmly believe that that which insurance companies regularly and customarily do in the solicitation and sale of policies of insurance is, and is to be considered as, a part of the “business of insurance.” And yet here there is not a single stitch of record evidence that premium financing is or is not a regular, accepted part of the insurance business. On the contrary, all that we have is the Court’s statement that this activity is merely ancillary — a fact drawn presumably from the wisdom Article III and life tenure generate. In the next place, the very activity under scrutiny is so much a part of the business of insurance that it is precisely regulated by the Alabama Superintendent of Insurance pursuant to the Department’s authority to regulate and superintend insurance companies, not lenders of credit. And these regulations specifically relating to the sale of life insurance to college students reflect an awareness by Alabama insurance authorities that sales practices — including extension of liberal premium financing — go to the very heart and integrity of the selling insurer. For example, the regulations condemn the practice of inducing the college student applicant to drop or replace existing insurance (see note 22, infra, item 11) and recommend that a financed program should not be sold to an undergraduate on a basis where premiums would come due prior to the anticipated date of graduation by the insured (see note 22, infra, item 10). The guidelines are enacted in the “ * * * hope * * * of offering additional safeguards for the protection of this segment of the insurance buying public.” (Note 22, infra, introduction). Whatever this Court might think, it is plain that Alabama believes that the method of selling insurance, including the insurer’s extension of premium financing, goes to “the type of policy which could be issued [and] its reliability.” SEC v. National Securities, Inc., supra, 1969, 393 U.S. at 460, 89 S.Ct. at 568. And the Court’s effort to camouflage the problem by declaring that it “ * * * would be anomalous to hold that [the insurers’] premium financing activities are the ‘business of insurance’ but that the identical activities of the finance company in Cochran are not,” is not only bad law. It is worse economics. The principal difference is that with a premium financing company the insurer bears none of the risk of late or non-payment. It is paid in full, subject only to possible rebate of unearned premiums if the financier has and exercises a right of cancellation in the event of default by the policyholder-borrower. And this distinction is not obliterated by the insurer’s discounting of the premium note to, say, a third party bank. The assignee would normally have recourse against the insurer-assignor. So the risk — and the consequent diminution of the insurer’s assets — remains on the insurer. Finally, it is an artificial oversimplification to speak in terms, not of insurer and insured, but of debtor and creditor. Life insurance is customarily sold with installment premiums — semiannually, quarterly, monthly, or the like. And yet under regulations of the state insurance authorities, the terms of the policy, or both, a grace period, usually of thirty days is afforded. Clearly that is extension of credit, but it is equally clear that this goes to the very heart of the relationship between insurer and insured and to the continued integrity of the policy. Next, on failure to pay premiums, it is common for the policy, pursuant to local state regulation, to provide for paid up insurance of a specified amount or extended insurance for the policy limit for a specified period of time. This is, albeit sophisticated, credit reflecting a debtor-creditor relationship but indeed much more, a relationship between insurer and insured. Similarly, again pursuant to state regulation, life insurance policies generally provide for policy loans to the extent of the paid up or cash loan surrender value. Once such a loan is procured there is, to be sure, the debtor-creditor relationship, but it arises out of the continuing insurer-insured relationship. It must come as quite a surprise to the nation’s multi-billion dollar insurance enterprises to learn that premium financing is not an integral part of the “business of insurance” but is a mere incidental appendage of the debtor-creditor relationship. This, in my judgment, ignores the legislative history and purposes of the McCarran Act. The activities here are thus exempt from TIL as the District Court properly held. I therefore respectfully dissent. II. The Legislative History Of The McCarran Act In Paul v. Virginia, 1869, 75 U.S. (8 Wall.) 168, 183, 19 L.Ed. 357, the Supreme Court held that the issuance of an insurance policy was not a transaction of commerce. For the three-quarters of a century following Paul, it was assumed that the regulation of insurance transactions rested exclusively with the states. However, United States v. South-Eastern Underwriters Assn., 1944, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, gave lie to that assumption, the Court holding that insurance transactions stretching across state lines were subject to federal regulation under the Commerce Clause and that federal antitrust laws applied to them. Both Houses of Congress, characterizing South-Eastern as “precedent-smashing,” H.R.Rep.No.143, 79th Cong., 2d Sess. (1945), reprinted in 1945 U.S.Code Cong.Serv. 670, 671; S.Rep.No.20, 79th Cong., 1st Sess. 2 (1945), reacted quickly and legislative reversal of South-Eastern was accomplished by the McCarran Act. (See discussion of the McCarran Act in Cochran v. Paco, ante, 606 F.2d at 462-463.) The House Report which accompanied the bill demonstrates Congress’ intent to return matters to the status quo ante: It is not the intention of Congress in the enactment of this legislation to clothe the States with any power to regulate or tax the business of insurance beyond that which they had been held to possess prior to the decision of the United States Supreme Court in the Southeastern Underwriters Association case. . H.R.Rep.No.143, supra, 1945 Code Cong. Serv. at 671; see SEC v. National Securities, Inc., 1969, 393 U.S. 453, 459, 89 S.Ct. 564, 568, 21 L.Ed.2d 668, 676. The proviso of § 2(b) served as an invitation to the states to legislate in the antitrust field during the moratorium period. Thus, it is clear that Congress returned to the states the plenary power to regulate the business of insurance which they had previously enjoyed. Congressional “silence” (see § 1012(a) quoted in Cochran, ante, 606 F.2d at 462) meant that states were free to occupy the insurance business field subject to controlling Supreme Court decisions prior to South-Eastern. See H.R.Rep.No. 143, supra, at 671-72. On the other hand, when Congress desired to invoke its Commerce Clause powers to occupy any part of the field then or in the future, it would expressly say so. Stated another way, Congress wanted to ensure that no future federal legislation enacted under the Commerce Clause, not specifically relating to insurance, would be construed an an implied repeal of the McCarran Act which sanctioned continued state regulation. Moreover, I also glean from the legislative history of the McCarran Act that the states were free to regulate as they saw fit. For example, the following statement appears in S.Rep.No.1112, 78th Cong., 2d Sess., 5 (1944): If the States are to be permitted to regulate, they should be permitted to regulate as they each see fit. The committee believes that in considering the nature of the business of insurance, its closeness to policyholders in the several States, the established systems of regulation and control by the States, and the experience and attitude of State insurance commissioners, regulation by the States should not be circumscribed by the establishment of any control over their power of regulation or the exercise by them of that power. See also H.R.Rep.No.873, 78th Cong., 1st Sess., 9 (1943): Insurance is also fundamentally local in character, and therefore best regulated by the States. ... All insurance policies are entered into in one State or another and that State in which they are entered into may through State regulation meet all problems presented. If regulation be undertaken by the Federal Government this must inevitably result in a general pattern which is not applicable in meeting the requirements of the different States as they should be met and as those States now meet them. The fundamental fact is that under the law as it exists today each State has ample power to regulate as it may see fit. How it regulates is a matter for it to determine. . State regulation has promoted efficiency and satisfaction in the insuranee business, and . . . such a result has been accomplished with a steady decrease in insurance rates throughout the country. . . . [T]here is no reason why the States should not continue to meet developments by the exercise of that power. Subsequent decisions have recognized that, at the time of the Act’s passage, Congress was well aware that the states’ regulatory schemes differed widely and that uniformity of regulation was not a McCarran Act purpose except in respects expressly provided for then and down the road. See, e. g., Prudential Ins. Co. v. Benjamin, 1946, 328 U.S. 408, 430-31, 66 S.Ct. 1142, 90 L.Ed. 1342, 1360-61; Dexter v. Equitable Life Assurance Soc., 2 Cir., 1975, 527 F.2d 233, 236; Ohio AFL — CIO v. Insurance Rating Board, 1971, 6 Cir., 451 F.2d 1178, 1183, cert. denied, 409 U.S. 917, 93 S.Ct. 215, 34 L.Ed.2d 180. See Appendix, excerpts [3]-[6] . In 1945, Congress stilled its power, and Courts have subsequently eschewed power to decide which state regulatory scheme is best or whether the state scheme represents the wisest and most effective type of regulation. See Appendix, excerpts [1], [2], [5], [7] , [11], [12], [14], [16]-[20], [22], [24]; Commander Leasing Co. v. Transamerica Title Ins. Co., 10 Cir., 1973, 477 F.2d 77, 84; Allstate Ins. Co. v. Lanier, 4 Cir., 1966, 361 F.2d 870, 873, cert. denied, 385 U.S. 930, 87 S.Ct. 290, 17 L.Ed.2d 212; Mcllhenny v. American Title Ins. Co., E.D.Pa., 1976, 418 F.Supp. 364, 370; Fleming v. Travelers Indemnity Co., D.Mass., 1971, 324 F.Supp. 1404, 1406; Holly Springs Funeral Home v. United Funeral Serv., Inc., N.D.Miss., 1969, 303 F.Supp. 128, 135. Following the instruction of the Supreme Court, we must . start with a reluctance to disturb the state regulatory schemes that are in actual effect, either by displacing them or by superimposing federal requirements on transactions that are tailored to meet state requirements. When the States speak in the field of ‘insurance,’ they speak with the authority of a long tradition. SEC v. Variable Annuity Co., 1959, 359 U.S. 65, 68, 79 S.Ct. 618, 620, 3 L.Ed.2d 640, 643. III. Specifics Against this background, and in light of McCarran Act jurisprudence, I proceed on the basis of this Court’s analysis in Cochran v. Paco, ante, 606 F.2d at 464 to determine (i) whether TIL “specifically relates” to the business of insurance, (ii) if not, whether premium financing constitutes the “business of insurance,” and (iii) if so, whether Alabama has enacted regulatory laws (iv) which would be “invalidated, impaired or superseded” by TIL. A. “Specifically Relates” I agree with the Court’s resolution in Cochran, ante, 606 F.2d at 464, of the initial question: TIL does not “specifically relate to the business of insurance” within the meaning of § 2(b) of the McCarran Act, 15 U.S.C.A. § 1012(b). Nowhere in TIL is there the equivalent of § 4 of the McCarran Act, 15 U.S.C.A. § 1014, which specifically relates TIL’s provisions to the business of insurance. Nor is there any other indication in TIL that we should construe that statute as an implied repeal of the McCarran Act. B. “Business of Insurance” It is with regard to the second issue that I most strongly disagree with the majority. In the companion case, Cochran v. Paco, we held that, according to National Securities, “the key factor is the relationship between the insurer and the insured,” ante, 606 F.2d at 466. Cochran involved no such relationship since the defendant was not an insurance company, but an independent premium finance company. Therefore, I believe we reached the correct result by there holding the McCarran Act inapplicable. But I cannot agree that the National Securities rule compels the same result in the instant case where the insurer-insured relationship does exist. The District Court concluded that “the availability of premium financing is a part of the sale of an insurance policy, and the disclosure of the terms and conditions of such an arrangement directly pertains to “the relationship between the insurer and the policyholder.” (Unpublished opinion at 6.) I must agree. Although the Court does not expressly embrace American Family Life Assurance Co. v. Planned Marketing Assoc., E.D.Va., 1974, 389 F.Supp. 1141, it indirectly relies on this decision to attack the District Court holding in the instant case, ante, 606 F.2d at 470. American stated that business activities not peculiar to the insurance industry were subject to federal law. Thus, the Court today holds that credit disclosure is “not peculiar” to the insurance industry and TIL should apply. We believe the Court conveniently ignores what the “not peculiar” language of American actually meant. The activities which were stated to be “peculiar” to the industry were precisely those set forth in National Securities: Acts peculiar to the insurance industry would include such things as the relationship between the insurer and the insured, the language and content of an insurance policy, the financial reliability of an insurance company and other similar matters involved in the insurance industry. 389 F.Supp. at 1145. American thus did no more than coin a shorthand phrase for the National Securities standard. To adopt the interpretation of “not peculiar” which Perry urges would mean, for example, that ratemaking and advertising — activities certainly not “peculiar” to the insurance industry in any sense of the word — fall outside the scope of the McCarran Act. And the Supreme Court has expressly stated in National Securities that these activities constitute the business of insurance (see quote from National Securities in Cochran, ante, 606 F.2d at 465. I have found no cases directly on point, but there are some which provide guidance. In Gerlach v. Allstate Ins. Co., S.D.Fla., 1972, 338 F.Supp. 642 (discussed in Cochran, ante, 606 F.2d at 466), it was stated in dictum: Florida law, as part of the Florida Insurance Code, regulates insurance premium finance companies and premium financing . . ., and specifically sets forth . what disclosures are required in a premium financing agreement. Thus, although Allstate’s transaction is not premium financing, this Florida regulatory legislation on the same subject as Truth in Lending, namely, disclosure, would have precluded applicability of Truth in Lending in insurance premium consumer credit transactions in Florida. Id. at 650. While I join the Court in impliedly declining to adopt this sweeping language, I do believe that when an insurance company offers premium financing as part of the inducement to purchase a policy of insurance, that inducement is as integrally related to the sale of the policy as is, say, advertising, and such activity necessarily falls within the business of insurance. It would be anomalous to hold that advertising practices hawking to the world at large the advantages of insurance fall within McCarran and a loan of money — an inducement to purchase made directly to the policyholder by the insurance company — does not. Other courts, in different contexts to be sure, have used the “inducement” reasoning to apply McCarran. Before turning to two other cases which I find helpful on this issue, I emphasize again, as discussed in Cochran, ante, 606 F.2d at 464, that there is no reason not to apply standards developed in antitrust cases in interpreting the terms of the McCarran Act. “Regulating” for antitrust purposes does not mean something different than “regulating” for purposes other than antitrust. It is well to remember what the Supreme Court said in National Securities. “Statutes aimed at protecting or regulating this relationship [between the insurance company and the policyholder], directly or indirectly, are laws regulating the ‘business of insurance.’ ” 393 U.S. at 460, 89 S.Ct. at 569, 21 L.Ed.2d at 676 (emphasis added). To be sure, National Securities focused on what comprised the insurance business, but there is not a hint in that or any Supreme Court case of which we are aware — and Perry cites none — that the fine distinction asserted is warranted. In Dexter v. Equitable Life Assurance Soc., 2 Cir., 1975, 527 F.2d 233, 235, the plaintiff brought an antitrust action against Equitable for requiring him to purchase life insurance as a precondition to granting mortgage loans. Following Addrisi v. Equitable Life Assurance Soc., 9 Cir., 1974, 503 F.2d 725, cert. denied, 1975, 420 U.S. 929, 95 S.Ct. 1129, 43 L.Ed.2d 400, the Second Circuit held that the challenged tying arrangement was part of the business of insurance under National Securities’ insured-insurer relationship standard. The Second Circuit stated: An insurance company’s methods of inducing people to become policyholders pertain to the company-policyholder relationship, and thus constitute an integral part of ‘the business of insurance.’ Id. at 235. The Court would distinguish these cases by saying that the purchase of insurance “was actually a requirement, and forcing prospective policyholders to buy insurance cannot be equated with making the purchase ‘easier’ by offering premium financing.” Ante, 606 F.2d at 471, note 6. While premium financing may make the purchase of insurance “easier” for some, I am sure there are many others for whom such financing is quite necessary in order to acquire insurance coverage. In any event, premium financing is certainly as much an inducement for the purchase of insurance as advertising, which is covered by the McCarran Act exemption. In sum, I find these cases parallel the facts before us and do give us guidance. In effect, the Court adopts Perry’s attempt to avoid the hard cold fact that this transaction was between the insurer and the policyholder by pointing out that Fidelity negotiated the promissory note to a bank. She argues that the effect of the note created a separate debtor-creditor relationship between Perry and a different entity. Thus, she asserts, Fidelity “has created an arrangement with a third party which, although possibl[y] related to the 'business of insurance’, is nevertheless ‘so remotely related’ as to remain subject to not inconsistent requirements of Federal laws like the Truth-In-Lending Act, and outside the protection of the narrow McCarran Act exemption.” I fail to see what possible bearing the subsequent negotiation of Perry’s promissory note could have on the original transaction between Perry and Fidelity insofar as the McCarran Act is concerned. Perry was and remained the policyholder and Fidelity was and remained the insurer. The later negotiation may have created a new and separate debtor-creditor relationship between Perry and the bank, but that new relationship did not alter or supplant in any respect the original, ongoing Perry-Fidelity consanguinity. Finally, the Court holds in effect that the loan was not vitally connected with the insurance policy; in other words, Perry could have paid cash and avoided financing altogether. The theory is that financing of the premiums is unrelated to the policy, its reliability, interpretation or enforcement. No authority is cited to support this theory which I believe defies both precedent and logic. First, the Supreme Court teaches that the litmus test is not a “vital connection” between the activity and the policy; it is the connection between the insurance company and the policyholder and what transpires between them — the “ ‘insurance’ relationship,” with which Congress was concerned. National Securities, 393 U.S. at 460, 89 S.Ct. at 568-69, 21 L.Ed.2d at 676. Second, I cannot see any less vital connection between that insurance relationship and premium financing on the one hand, and advertising, for example, on the other. Obviously the precise metes and bounds of the term “business of insurance” are far from clear and we need not set them here. But where, as in the present case, the core relationship exists, we are well within McCarran, no matter how broadly or narrowly its exemption is construed. C. “Regulating” - Although the Court did not address this issue, I must face it under Cochran’s analytical approach as succeeding steps to achieve affirmance, not reversal. In 1957, Alabama — expressly responding to the Congressional invitation extended by the specific moratorium in the McCarran Act —passed the Insurance Trade Practices Law, Title 28A, § 227 et seg., Code of Alabama. Section 228 specifically forbids “any trade practice which is defined in this chapter as, or determined pursuant to this chapter to be, . . .an unfair or deceptive act or practice in the business of insurance.” (Emphasis added.) The Insurance Commissioner is given various administrative and supervisory powers to enforce the Act’s prohibitions. Significantly, those powers extend not only to specific practices banned by the Act, but to unfair practices not defined. Ala.Code tit. 28A, § 247(1) provides in pertinent part: Whenever the commissioner has reason to believe that any person engaged in the business of insurance is engaging in this state in . any act or practice in the conduct of such business which is not defined in this trade practices law, that such . . . act or practice is unfair or deceptive and that a proceeding by him in respect thereto, would be to the interest of the public, he may issue and serve such person a statement of the charges in that respect and a notice of hearing thereon . . . . Furthermore, insurance forms must be submitted to the Commissioner and none can be used without his approval. Forms which are misleading are subject to disapproval or withdrawal of prior approval. Section 28 authorizes the Commissioner to promulgate regulations for the effectuation of the form approval system and other provisions of the Act. The District Court found first, that pursuant to this authority, the Commissioner had issued guidelines specifically related to the practice of offering life insurance to college students under a premium financing arrangement. Second, the Fidelity-Perry form at issue had been both submitted to and approved by the Commissioner. Third, the Court, applying the definition — a state regulates the business of insurance when it has generally authorized or permitted certain standards of conduct — concluded that Alabama regulates the business of insurance within the meaning of § 2(b) of the McCarran Act. Since the Court takes no position on this, I am forced to consider the argument put forward by Perry. She challenges this holding by comparing the meager requirements of the Alabama guidelines to the detailed requirements of TIL. She does not argue that Alabama fails to regulate the business of insurance at all, but that the State does not regulate it in a manner that will fulfill the purpose of TIL: to afford a meaningful comparison of credit terms. Perry essentially contends that form approval is meaningless in the absence of the specific credit disclosure requirements of TIL and posits the possibility that Fidelity could have submitted an entirely different form containing none of the disclosures and still have received approval within the existing regulations. There are several answers to this contention. First, we have a form on which certain disclosures were made (see note 2 of Court’s opinion, ante). The State approved that form — not a hypothetical one containing fewer or less detailed disclosures. And if we are going to posit possibilities, for all we know the Insurance Commissioner could have determined that the Fidelity form was quite sufficient to make understandable “the provisions and obligations of the financial indebtedness that [s]he ha[d] incurred” (Guidelines, ¶ 6(b)) and that more detailed disclosures á la TIL were unnecessary. See generally Davis, Protecting Consumers from Overdisclosure and Gobbledygook: An Emperical Look at the Simplification of Consumer Credit Contracts, 63 Va. L.Rev. 841 (1977); Comment, 19 Buffalo L.Rev. 656, 670 (1970). A comparison of the form here and the TIL violations alleged (notes 2 and 3 of Court’s opinion, ante) demonstrates that very technical violations are involved. Under these circumstances, the Alabama Insurance Commissioner could have viewed Fidelity’s disclosures as fair and not deceptive. But we need not play the speculation game. As discussed in Part II, the law is clear that the particular scheme Alabama adopts for regulating the business of insurance is not a matter for the Courts to pass upon so long as it is regulating that business within the meaning § 2(b) as judicially interpreted. Thus, we come to the definition of “regulating” which was applied below — a state regulates the business of insurance when it has generally authorized or permitted certain standards of conduct. This test was first announced in California League of Independent Producers v. Aetna Casualty & Surety Co., N.D.Cal., 1959, 175 F.Supp. 857, 860. Despite the fact that it has been widely followed with only slight variation elsewhere — and in the Fifth Circuit — Perry insists that this standard applies in antitrust cases and is not “necessarily relevant in determining whether or not the McCarran Act acts as a bar” to TIL. By adopting the decision of the District Court for the Northern District of Alabama in Crawford v. American Title Ins. Co., 1975, 518 F.2d 217, 218, this Circuit established the applicable standard for us to follow: The McCarran Act renders the federal [act] inapplicable when state legislation generally proscribes, permits or otherwise regulates the conduct in question and authorizes enforcement through a scheme of administrative supervision. There is no doubt that Alabama has regulated the Fidelity conduct challenged here to a plainly sufficient degree to pass this test. The Alabama statute generally proscribes any act which the Commissioner deems to be unfair and deceptive and has clearly authorized enforcement through a scheme of administrative supervision. Regulations have been issued specifically with regard to the sale of life insurance policies to college students under premium financing arrangements. The Fidelity forms have been submitted and approved. In this connection, other courts have placed weight on state supervision of insurance company contracts and forms in determining whether the state was “regulating” the business of insurance for McCarran purposes. Travelers Ins. Co. v. Blue Cross, 3 Cir., 1973, 481 F.2d 80, 83, cert. denied, 414 U.S. 1093, 94 S.Ct. 724, 38 L.Ed.2d 550; Pierucci v. Continental Casualty Co., W.D.Pa., 1976, 418 F.Supp. 704, 709. As detailed above, the Commissioner is empowered to remedy deceptive or unfair practices, not only through withdrawal of approval or disapproval of forms but by court action as well. Perry basically urges us to hold that unless Alabama adopts the same requirements for insurance companies that TIL places on others, it is not “regulating” the business of insurance. But it is not for us to say in what precise manner that State should determine whether Fidelity’s credit disclosure practices vis-à-vis its policyholders are unfair or deceptive. Alabama has undertaken supervision of the sale of life insurance policies to college students such as the one sold to Perry and has set the standards which it believes are necessary to protect Alabama insureds. McCarran’s “regulating” requirement is thus satisfied. D. “Invalidate, Impair, Or Supersede” Again, I must take an issue not addressed by the Court. The District Court held that the application of TIL “to disclosure forms and statements which have been submitted to and approved by the Commissioner of Insurance . . . would allow the Federal Act to supersede state regulation of this aspect of the business of insurance, and invalidate those state regulations which might be inconsistent with the Federal Act, e. g., paragraphs 2, 5, and 6 of the guidelines. . . .” In attacking this holding, Perry strenuously urges that imposition of TIL requirements here would not result in a conflict between the state and federal laws. I construe this argument to mean essentially that supplementary TIL requirements can be imposed without invalidating, impairing, or superseding Alabama law. Apart from the fact that the same could be said about almost any law, I do not believe that “invalidate, impair, or supersede” means the mere absence of conflict. That term includes the displacement of, or the superimposition of federal requirements on, transactions that are tailored to meet state requirements. Variable Annuities, supra, 359 U.S. at 68, 79 S.Ct. at 620, 3 L.Ed.2d at 643. For example, under the Alabama guidelines, ¶ 2 (note 22, supra), the insurance company is required to disclose “the amount of any down payment made to the agent at the time of the sale.” Fidelity’s form (note 2 of the Court’s opinion ante) listed “Cash Downpayment.” Perry’s complaint alleged the failure to disclose in addition the “total downpayment” as required by § 226.8(c)(2) of Regulation Z. While I would concede that there would be no “conflict” in imposing § 226.8(c)(2)’s “total downpayment” disclosure rule here, I do not agree that such imposition would not invalidate, impair, or supersede the Alabama guidelines. I believe that the imposition of any additional requirements— whether conflicting or nonconflicting— would impair or supersede Alabama’s laws and regulations because that supplementation would take from the State the power to regulate exactly as it sees fit. And it would in turn repeal the McCarran Act by implication in a situation where Congress has not expressed its will to do so. I would be unwilling to judicially legislate additional, nonconflicting or conflicting TIL requirements onto Alabama’s present specific regulation of the sale of life insurance policies under premium financing arrangements. To do so would render McCarran meaningless and impose “barrier[s] to the regulation ... of [the insurance] business by the several' States” in direct contravention of Section 1 of the Act, 15 U.S.C.A. § 1011. If Perry believes that insurance companies who sell policies under premium financing arrangements should be subjected to the requirements of TIL, her proper resort is to Congress. Finally, Perry argues that by enacting § 111 of TIL, 15 U.S.C.A. § 1610, Congress intended an accommodation of state and federal law. While undoubtedly true, this contention completely overlooks the Congressional promise contained in McCarran that it would speak out if a federal act passed under the Commerce Clause was to apply to the business of insurance. In a similar vein, Perry urges that Alabama has not taken advantage of the total exemption afforded in 15 U.S.C.A. § 1633. This position also ignores the clear intendment of the McCarran Act. I agree with the Seventh Circuit’s rejection of the same contention raised in Lowe v. Aarco-American, Inc., 7 Cir., 1976, 536 F.2d 1160. If Alabama chooses to enact a law similar to TIL in order to qualify for credit transaction exemptions, it can do so. It can also regulate this aspect of the business of insurance in a manner which it thinks most suitable to protect Alabama policyholders. One has nothing to do with the other. I would emphasize one thing. I have expressed my opinion here on a very narrow question. What the result might have been if Alabama did not require form approval or if the Insurance Commissioner had not issued guidelines specifically relating to the sale of life insurance policies to college students is a case which I do not address. However, on the facts as they do exist, I would affirm the holding of the District Court that the McCarran Act does preclude application of TIL. APPENDIX Excerpts From 91 Congressional Record January 25, 1945 (Senate) At 479: Mr. MURDOCK. I invite the Senator’s attention to paragraph (b) of section 2 of the bill, reading as follows: (b) No act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such act specifically so provides. That part of the bill is applicable, is it not, to Federal statutes now in existence? Mr. FERGUSON. That is the purpose of the section. Mr. MURDOCK. It is also applicable, is it not, to any Federal statutes which may be enacted in the future? Mr. FERGUSON. Yes; provided the statutes do not specifically relate to insurance. Mr. MURDOCK. If the Senator will pardon me, I agree with him that the language affects only statutes the subject of which is insurance. Mr. FERGUSON. Or specifically relating to insurance. Mr. MURDOCK. Yes. But certainly that part of the bill to which I have referred would allow repeal by State legislatures of the Sherman Act so far as it relates to insurance unless the Congress of the United States should amend the Sherman Act so as to provide specifically either the repeal, invalidation, or impairment of such a State law. Mr. FERGUSON. I appreciate the Senator has used the word “repeal.” The bill would not go so far as to repeal the Sherman Act except as there would be a temporary repeal until the dates mentioned in the so-called moratorium section. At 480-81: Mr. O’MAHONEY. Does the Senator from Michigan desire that the bill, if it shall be passed by this body, shall be interpreted anywhere as an intention of Congress to permit monopoly to be established in the insurance industry? Mr. FERGUSON. No; by no means does the bill anticipate that any act would or should be passed which would create monopoly. Mr. O’MAHONEY. Then, does the Senator believe that the bill as it now stands permits that interpretation? Mr. FERGUSON. It would permit it. I understood the Senator from Wyoming to be familiar with the language on page 2, which was read by the able Senator from Utah, and I think the bill is broad enough to allow a State to pass a law allowing any agreement or contract other than those inhibited in paragraph (b) of section 4. But it is not the purpose of the bill at all to foster monopoly, or to anticipate that any act will be passed permitting or even encouraging monopoly. A State law relating to taxation, a law relating to regulation, for instance, the fixing of rates, or the fixing of the terms of a contract of insurance, which might under some definitions of monopoly be monopolistic, would be permitted under the pending bill; but if the State law undertook to authorize a boycott, a coercion, or an intimidation, or an agreement to do any one of those three things, then it would be clearly void because Congress would have already spoken, and once Congress speaks on interstate commerce, no State can speak contrary to the congressional declaration. Mr. MURDOCK. The bill does not say what the Senator has indicated. What the bill says is that every act of Congress in existence now or which may be enacted in the future dealing with the question of insurance or the regulation of insurance shall not be construed — and that is pretty strong language — “to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such act specifically so provides.” So we would do what? We would say to the State legislatures, “You can pass any law you desire with reference to insurance and the regulation thereof which does not involve agreements or acts of boycott, coercion, or intimidation, unless the Congress at some future date specifically repeals or invalidates your State law.” I wonder if the Congress of the United States wants to do that. Mr. FERGUSON. The bill does not go as far as that. * * * * * * Mr. MURDOCK. My understanding of what the Senate Judiciary Committee wanted to do and what I hoped it would do was that we would by the enactment of a bill of this kind call the attention of the respective States of the Union to the fact that the Supreme Court of the United States had held that the business of insurance is commerce, and knowing that certain hardships were inevitable because of past practice and procedure, it was my intention, and I thought the intention of the Committee on the Judiciary, to say to the States, “For a certain period, long enough for you to take action, you will be allowed to make adjustments of your State laws to harmonize with the decision of the Supreme Court of the United States.” But under the bill we would not do that. In my opinion, we would do exactly what the Senator from Wyoming implies we would do — that is, invite the respective State legislatures to pass acts which would permit agreements which would otherwise be in violation of the Sherman Act. Mr. FERGUSON. Mr. President, I think an explanation of paragraph (b) of section 2 should be made at this time. The purpose of that provision is very clear, that Congress did not want at the present time to take upon itself the responsibility of interfering with the taxation of insurance or the regulation of insurance by the States. We were able to single out and to indicate that we had in mind three acts of which we wanted to make exceptions, because they did not relate to insurance. I read from the bill: Sec. 3. Nothing contained in the act of September 26, 1914, known as the Federal Trade Commission Act, as amended, or the act of June 19, 1936, known as the Robinson-Patman Antidiscrimination Act, shall apply to the business of insurance or to acts in the conduct of that business. Now on page 3, and we find section 5: Sec. 5. Nothing contained in this act shall be construed to affect in any manner the application to the business of insurance of the act of July 5, 1935, as amended, known as the National Labor Relations Act, or the act of June 25,1938, as amended, known as the Fair Labor Standards Act of 1938. Mr. MURDOCK. Will the Senator yield? Mr. FERGUSON. Permit me a further word of explanation. Mr. MURDOCK. Very well. Mr. FERGUSON. If there is on the books of the United States a legislative act which relates to interstate commerce, if the act does not specifically relate to insurance, it would not apply at the present time. Having passed the bill now before the Senate, if Congress should tomorrow pass a law relating to interstate commerce, and should not specifically apply the law to the business of insurance, it would not be an implied repeal of this bill, and this bill would not be affected, because the Congress had not, under subdivision (b), said that the new law specifi- cally applied to insurance. I think that makes the bill very clear. At 481: Mr. RADCLIFFE. I hesitate to differ with the Senator from Utah [Mr. Murdock], but I want to call his attention to a fact which is, of course, very obvious, that the difficulties of working out the insurance readjustment following the decision of the Supreme Court are colossal. I do not believe anyone who does not come very closely in contact with the insurance business can realize that the decision by the Supreme Court to which reference has been made is one of the most far-reaching ever rendered by that Court. It means that an enormous business which, with the unqualified approval of the Federal Government, has operated for many years in a certain way, must now meet the new and fundamental conditions involved necessarily in any passage from State to Federal regulation. That does not involve merely one but a thousand-and-one different problems to be handled, many of them around the first of the present calendar year. At 481-82: Mr. RADCLIFFE. Mr. President, I called the President’s attention to the gravity of the situation and asked for a moratorium. His response was favorable, • as it was later in answer to my letter of December 20. Of course, no one knows what legislation any State might try to pass. It might try to pass any sort of legislation, but it is extremely unlikely that any State, knowing that at the end of several years the moratorium provided for in this bill will come to an end, would try to run amok and pass any such law as the Senator from Utah suggests. In subsection (b) there are several purposes contemplated. The insurance commissioners and many of the insurance companies have been in very great doubt as to-how they could operate at this time with respect to matters of collection of premiums, general regulations, the issuing of licenses, and many other aspects of the business. Therefore, it seems very desirable that somewhere in this measure there should be a statement that the right of the States to regulate and to collect taxes should not be terminated or should not be repealed by implication. Otherwise, I think the States may find themselves from time to time in a very serious situation in trying to function. Unless it is clearly stated somewhere that there is not a repeal by implication, such omission is likely to throw restraint upon or put serious hindrance in the way of the States functioning properly. In giving a moratorium to a business and to State governments harassed greatly by the effect of the decision of the Supreme Court, let us not do so begrudgingly or in a halfway fashion which might prove to be gravely insufficient to meet situations which we cannot today foresee. At 482-83: Mr. FERGUSON. I should like to answer the question of the Senator from Maryland first. The language of section 2 answers the question: The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business. That is the insurance business. So the bill specifically provides that the State laws shall apply to taxation and regulation of insurance. * * * * * * Mr. MURDOCK. I wanted to make exactly the statement to the distinguished Senator from Maryland that the Senator from Michigan has made, and that is that nothing could be more emphatic or plainer than subsection (a) of section 2: The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business. When we go that far Congress expresses itself emphatically that the regulation of the insurance business should be under State law. But when we take the next step in subsection (b) it is an invitation, m my opinion, to do the very thing that I, and I hope the Senator from Maryland, want to prohibit. $ $ * $ * # Mr. RADCLIFFE. I agree with the Senator from Utah that the statement in subsection (a) of section 2 is quite definite and clear. But it has seemed to those who have been working upon this bill that there was some need or at least advisability that there should not be any repeal by implication. The statement beginning on page 1 is a general statement setting forth the purposes. Since there seems to be doubt in the minds of certain people that there might be repeal by implication or that a general statement might have some crimping effect, it would not be at all unusual if a saving clause were put in the bill. It may not be necessary, but in the spirit of caution I think it might be desirable, especially knowing the very serious problems which have been confronting the insurance companies and the various States to leave them free to meet conditions some of which cannot now be foreseen. We want the companies to understand clearly and we desire the States to realize definitely that the States can go ahead and issue permits, collect taxes, and do the various other things which are necessary to be done. For that reason I think that full and unmistakable emphasis upon that right is essential. It is unnecessary and unwise to create any doubt as to the right of the States to go ahead and function freely in handling insurance. Mr. FERGUSON. Mr. President, I agree that it should be very clear that the States can regulate and can tax insurance in all its phases. Section 2, in my humble judgment, is a very clear provision providing for such taxation and such regulation. The language of the bill makes clear the purpose of the legislation, that the taxation problem will be taken care of, and that there will be no excuse for paying under protest or not paying at all. * * * # * * Mr. FERGUSON. * * * * * * Today the various States have laws relating to insurance. It would be a physical impossibility to examine, in a short time, all those State laws and their ramifications. One State law provides that the insurance companies may fix rates subject to the approval of the insurance commissioner. Others provide that rates may be fixed if the Commission does not repeal them. * * * * * * Mr. O’MAHONEY. Does not subsection (a) of section 2 take complete account of that fact, and grant complete protection to existing State laws? Mr. FERGUSON. I agree that, as to existing State laws, subsection (a) of Section 2 does so provide. Mr. O’MAHONEY. Let me read it: The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business. That is complete. Mr. FERGUSON. I think that is correct. Mr. O’MAHONEY. There is no reason for misunderstanding on the part of any State official or any insurance company or any policyholder with respect to the meaning of that subsection as it applies to existing law. Mr. FERGUSON. As it applies to existing law, that is correct. However, subsection (b) provides for something further. It provides that no Federal legislation relating to interstate commerce shall by implication repeal any existing State law unless such act of Congress specifically so provides. Mr. O’MAHONEY. The Senator puts his finger upon the precise center of this dispute, or misunderstanding. Let me say to the Senator that, recognizing the complexity of this problem, and the desirability of maintaining State regulation and State taxation, members of the Judiciary Committee who were opposed to the proposal to grant a blanket exemption from the antitrust laws desired to go as far as was humanly possible in the direction of giving the States a clear-cut opportunity to adjust State laws in accordance with Supreme Court decisions and the antitrust laws. It is no secret that Senate bill 12, introduced by the Senator from New Mexico [Mr. Hatch] and myself, and Senate bill 340, the bill which was reported by the committee, are modifications of a measure which was originally drafted by the legislative committee of the National Association of Insurance Commissioners. So there was an effort to work with those groups. In drafting those two bills we sought to spell out each particular law which might apply to insurance. We referred specifically to the Federal Trade Commission Act, the Robinson-Patman Act, the National Labor Relations Act, and the Fair Labor Standards Act. In other words, a good-faith attempt was made to specify every single law which had an application, or might have an application, to insurance. Section 2(b) was drafted and written into the bill which I introduced, in the belief, not that it would be interpreted as an additional exemption from the antitrust laws, but that it would be a sort of catch-all provision to take into consideration other acts of Congress which might affect the insurance industry, bu