On May 6, 2014, the Consumer Financial Protection Bureau (“CFPB”) proposed a rule to modify the notice provisions of Regulation P, which implements the financial privacy provisions of the Gramm-Leach-Bliley Act (“GLBA”).

Regulation P requires financial institutions to deliver an annual privacy notice to customers, which is often accomplished through a direct mailing to the customer.  The proposed rule would allow a financial institution to meet this annual privacy notice delivery requirement, in certain circumstances, by continuously posting the privacy notice on its website in a clear and conspicuous manner (described as the “proposed alternative delivery method” in the proposed rule), and providing the customer with a clear and conspicuous annual disclosure that (i) the privacy notice has not changed, (ii) the notice is available on the institution’s website, and (iii) the customer may request a mailed copy of the notice by calling a toll-free number.

Under the proposal, only a financial institution that satisfies the following five conditions may use the proposed alternative delivery method:

  • First, the financial institution does not share the customer’s nonpublic personal information with nonaffiliated third parties in a manner that triggers GLBA opt-out rights.  Put another way, to qualify under this requirement a financial institution may only share information pursuant to the specific exceptions found in Regulation P under 12 C.F.R. §§ 1016.13 (sharing with service providers and pursuant to joint marketing agreements), 1016.14 (sharing for processing and servicing purposes), and 1016.15 (sharing pursuant to other exceptions, including sharing with the consent of the customer).
  • Second, the financial institution does not include on its annual privacy notice an opt-out notice under section 603(d)(2)(A)(iii) of the Fair Credit Reporting Act (the “FCRA”).  This opt out notice permits a consumer to direct that a financial institution not share certain information about the consumer with its affiliates.
  • Third, the financial institution’s annual privacy notice is not the only notice provided to satisfy the requirements of section 624 of the FCRA.  Section 624 of the FCRA requires a consumer whose information is shared with an affiliate to be given the opportunity to opt out of receiving marketing communications from the affiliate, except where the consumer had a pre-existing relationship with the affiliate.
  • Fourth, the information included in the privacy notice has not changed since the customer received the previous notice.  While the proposed rule makes clear that “stylistic” changes to a privacy notice will not alone constitute changes for purposes of this requirement, changes to certain disclosures will require delivery of the annual privacy notice through another available delivery method (such as direct mail).

(i) the categories of nonpublic personal information the financial institution collects or discloses (including disclosures related to former customers);

(ii) the categories of affiliates and nonaffiliated third parties to whom the financial institution discloses nonpublic personal information (including disclosures related to former customers) other than disclosures pursuant to 12 C.F.R. §§ 1016.14 and 1016.15;

(iii) the categories of nonpublic personal information disclosed to third parties pursuant to 12 C.F.R. § 1016.13, as well as categories of third parties with whom information is shared under this exception;

(iv) the financial institution’s policies and practices with respect to protecting the confidentiality and security of nonpublic personal information; and

(v) a description of nonaffiliated third parties with whom information is shared under 12 C.F.R. §§ 1016.14 and 1016.15.

  • Finally, the financial institution must use the model privacy form provided in Regulation P.  The proposed rule provides that adoption of the model form, without a change in the underlying privacy policies and practices, would not constitute a “revised” notice.

The CFPB’s proposal invites comment on a number of issues related to the proposed alternative delivery method, and contemplates a 30-day comment period for the submission of comments.

The CFPB’s proposal follows its announcement in July of 2013, covered here, that it was considering potential changes to the annual privacy notice requirements in Regulation P.