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Thursday, June 18, 2015

GLBA and Affiliates

QUESTION
We would like to know how to handle nonpublic personal information where our affiliates are involved. Do we both have the same restrictions on disclosure?

ANSWER
A financial institution may disclose nonpublic personal information (NPI) to its affiliates, but the affiliates are subject to the same restrictions on reusing or re-disclosing the information as the originating financial institution. [15 USC § 6802(c)]

The Gramm-Leach-Bliley Act (GLBA) defines an “affiliate” as “any company that controls, is controlled by, or is under common control with another company.” [15 USC § 6809(6)]

Subject to certain exceptions, GLBA prohibits disclosure of a consumer’s NPI to non-affiliates unless the disclosing financial institution has given the consumer a privacy notice and an opt-out notice, along with a reasonable opportunity to opt out, and the consumer does not opt out of the information sharing with non-affiliates. [16 CFR § 313.10]

The exceptions where financial institutions may share NPI with certain non-affiliated third parties without having to comply with the privacy notice and opt-out requirements are:

1.     Administering or enforcing transactions authorized by the consumer;
2.     Effectuating transactions with the consent of the consumer;
3.     Protecting the confidentiality of the financial institution’s records;
4.     Providing information to rating agencies;
5.     Disclosing data to law enforcement agencies to the extent required;
6.     Providing information to consumer reporting agencies as delineated in FCRA; and
7.     Complying with all federal, state or local laws or regulations.
[15 USC § 6802(e); 16 CFR §§ 313.14, 313.15]

Mention also should be given to the condition where an exemption is allowed for the opt-out requirements, but not the notice requirements. This condition exists for entities that market the financial institution’s products and services, and products or services “offered pursuant to joint agreements between two or more financial institutions.”
[15 USC § 6802(b)(2); 16 CFR § 313.13]

Jonathan Foxx
President & Managing Director
Lenders Compliance Group