CFPB Proposes to Amend Annual Privacy Notice Requirement Under Regulation P

On July 1, the CFPB issued a proposed rule to amend Regulation P, which implements the Gramm-Leach-Bliley Act (GLBA) and requires, among other things, financial institutions to provide their customers with an annual notice that describes their privacy policies and procedures. The proposed amendment would implement a December 2015 statutory change in Section 75001 of the “Fixing America’s Surface Transportation Act” (FAST Act). Pursuant to the FAST Act, the GLBA was amended so that financial institutions meeting certain criteria no longer need to send annual privacy notices. The CFPB’s recently issued proposed rule would amend Regulation P to implement the GLBA amendment. The CFPB’s proposed rule would further amend Regulation P to (i) provide timing requirements for the delivery of annual privacy notices for a financial institution that may originally qualify for the annual notice exception but then later changes its policies or practices so that it no longer meets the exception criteria; (ii) remove the Regulation P provision that allows financial institutions to post privacy notices online because the CFPB “believes the alternative delivery method will no longer be used in light of the annual notice exception”; and (iii) make a technical correction to one of its definitions.

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Washington Proposes Amendments to Money Transmitters Rules

Recently, the Washington Department of Financial Institutions (DFI) announced that on March 29, 2016 it will hold a hearing regarding proposed amendments to the 2015 Uniform Money Services Act. New sections to the proposal include requiring that money services licensees establish and maintain (i) an effective cybersecurity program; (ii) a written customer information security program; and (iii) a written privacy policy that complies with Regulation P of the Gramm-Leach-Bliley Act.

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FAST Act to Provide Regulatory Relief to Community Banks

On December 4, President Obama signed into law H.R. 22, the “Fixing America’s Surface Transportation Act” (FAST Act). Although a transportation bill on its surface, the bill also contains various provisions that are intended to provide regulatory relief to community banks and improve the efficiency of state financial regulation. Significant provisions in the bill include: (i) establishing a process that allows parties, including banks and other stakeholders, to petition the CFPB for “rural” or “underserved” designations in certain areas for the purposes of the CFPB’s ability-to-repay rule; (ii) expanding the CFPB’s ability to exempt creditors serving rural or underserved areas from escrow requirements; (iii) granting greater flexibility to the CFPB in regards to treating a balloon loan as a qualified mortgage, if a community bank or creditor operating in a rural or underserved area extended the loan; (iv) increasing the threshold for 18-month exam cycles for well-capitalized banks from $500 million to $1 billion; and (v) authorizing the Nationwide Mortgage Licensing System – which state regulators use to license various nonbank financial services industries, such as money transmitters, payday lenders, and debt collectors – to process background checks for non-mortgage license applicants.

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CFPB Proposes Limited Relief From Annual Privacy Notice Delivery Requirements

On May 7, the CFPB issued a proposed rule that would provide financial institutions an alternative method for delivering annual privacy notices. The Gramm-Leach-Bliley Act (GLBA) and Regulation P require financial institutions to, among other things, provide annual privacy notices to customers—either in writing or electronically with consumer consent. Industry generally has criticized the current annual notice requirement as ineffective and burdensome, with most financial institutions providing the notices by U.S. postal mail. The proposed rule would allow financial institutions, under certain circumstances, to comply with the GLBA annual privacy notice delivery requirements by (i) continuously posting the notice in a clear and conspicuous manner on a page of their websites, without requiring a login or similar steps to access the notice; and (ii) mailing the notices promptly to customers who request them by phone.  Read more…

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CFTC Outlines GLB Act Privacy Best Practices

Recently, the CFTC’s Division of Swaps Oversight issued Staff Advisory No. 14-21, which recommends best practices for CFTC-regulated intermediaries to comply with applicable Gramm-Leach-Bliley (GLB) Act privacy requirements, consistent with the Division’s intention to focus more resources on GLB privacy compliance. The advisory states that its recommendations are generally consistent with guidelines and regulations issued by other federal financial regulators, and the majority of the specific best practices are supported with references to prior rules and guidance.  A number of the best practices cite the Interagency Guidelines Establishing Standards for Safeguarding Customer Information and Rescission of Year 2000 Standards for Safety and Soundness and a parallel FTC rule. Notably, several of the recommendations rely on a rule proposed by the SEC in 2008 but which has not yet been finalized. For example, the CFTC recommends based on that SEC proposal and the Interagency Guidelines that covered entities establish a breach investigation and notice process to alert potentially impacted individuals and to notify the CFTC. In addition, without referencing any other federal rule or guidance the Staff Advisory recommends that covered entities engage at least once every two years an independent party to test and monitor the safeguards’ controls, systems, policies and procedures, maintaining written records of the effectiveness of the controls.

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