Financial Privacy

We have been interested in the notifications which we have been receiving concerning everyone’s privacy policy. Whether it be your bank, brokerage firm, life insurance company, health insurance company, or others, hardly a day goes by without the receipt of someone’s “privacy policy.” Our research discloses the following: The Financial Organization Act of 1999, also known as the “Gramm-Leach-Bliley Act,” included provisions to protect consumer’s personal financial information held by financial institutions. The Act defines “financial institutions” as companies that engage in a wide variety of “financial activities,” such as brokering or servicing loans, transferring or safeguarding money, preparing individual tax returns, and other activities that have been deemed “financial” by other regulations. The Financial Privacy Rule, which is a part of the Act, governs the collection and disclosure of consumer’s personal financial information by financial institutions and also applies to all companies, whether or not they are financial institutions, who receive such information. The type of information required to be protected includes all types of debt, such as credit card, home mortgage, auto, boat, life insurance, bank accounts, and brokerage accounts. The 1999 Act does not include medical or health insurance records. The regulation of these types of records can be found in the rules of the Health Insurance Portability and Accountability Act (“HIPPA”).

Accompanying the Financial Privacy Rule is the Safeguards Rule. This Rule requires all financial institutions to design, implement, and maintain safeguards to protect consumer information. The Safeguards Rule applies not only to financial institutions that collect information from consumers, but also to financial institutions — such as credit reporting agencies — that receive consumer information from other financial institutions. This Act is a part of the repeal of the Federal restrictions on banks affiliating with securities firms contained in what has long been known as the “Glass Steagle Act.”

All financial institutions are required to disclose their financial privacy policy with regard to the sharing of non-public personal information with both affiliates and third parties. What consumers have been receiving are the notices of the Privacy Policies from financial institutions, as required by the Act.

In contrast, the U.S. Patriot Act (more formally known as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001), passed immediately after September 11, 2001, authorized broad surveillance of financial transactions, claimed by some as contrary to the 1999 Act. Some commentators have suggested that the U.S. Patriot Act violates the Fourth Amendment constitutional rights of individuals. That debate continues.

If you believe that financial information relating to your personal or business affairs has been improperly disclosed, please call us. We can advise you as to whether you should take action and what might be the result in such a circumstance.

— Mike Beausang