Friday, March 15, 2013

Legislation Exempting Financial Firms from Providing G-L-B Act Privacy Notifications if No Change Passes House with Overwhelming Bi-Partisan Support

Legislation amending the privacy provisions of the Gramm-Leach-Bliley Act to exempt financial institutions from providing an annual privacy notice if they have not changed their privacy policies in the last year passed the House by unanimous consent under suspension of the rules. Introduced by Rep. Blaine Luetkemeyer (R-MO), the Eliminate Privacy Notice Confusion Act, H.R. 749, is designed to reduce an unnecessary burden facing consumers and financial institutions alike. Identical legislation passed the House at the end of the 112th Congress on Dec. 12, 2012, but was never taken up in the Senate in the rush to conclude the 112th Congress. However, Rep. Luetkemeyer believes that the Senate will take up the legislation and pass it in the 113th Congress.

The amendments effected by H.R. 749 are to Section 503 of Gramm-Leach-Bliley, dealing with the disclosure of a financial institution’s privacy policy. Section 509 defines a financial institution to mean any institution the business of which is engaging in financial activities as described in Section 4(k) of the Bank Holding Company Act, which includes, in addition to banks, securities underwriting, dealing and market making, as well as providing financial, investment or economic advisory services and advising an investment company.

Under current law, financial institutions of all sizes are required to provide annual privacy notices explaining information sharing practices to all customers. Financial firms are required to give these notices each year even if their privacy policies have not changed in the slightest. According to Rep. Luetkemeyer, this creates not only waste for financial institutions, but confusion among consumers, as well as increased indirect cost to consumers. (Cong. Record, Dec. 3 2012, H6581). He also noted that the legislation will make the mailings more significant to the consumer because they would only come after a change in policy. The sponsor ojef H.R. 749 reiterated that the legislation will only remove the annual privacy notice requirement if a financial institution has not, in any way, changed its privacy policies or procedures. He assure that the legislation does not exempt any institution from an initial privacy notice, nor does it allow a loophole for a financial firm to avoid using an updated notice. (Cong. Record, Mar 13, 2013, H1338).

Rep.Shelley Moore Capito (R-WV), Chair of the Financial Institutions Subcommittee, noted that these annual mailings cost millions of dollars each year and do not provide consumers with new information if the financial institutions have not changed their practice. The legislation will require a financial institution to provide annual privacy notices only if they have changed privacy policies that affect the customer. This is an important, commonsense bill, said the Chair, that will provide further clarity to customers and consumers and eliminate an unnecessary regulatory burden for financial institutions. (Cong. Record, Dec. 3 2012, H6581).