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Home > News & Events > Inactive Financial Institution Letters




Inactive Financial Institution Letters

[Federal Register: June 1, 2000 (Volume 65, Number 106)]
[Rules and Regulations]               
[Page 35161-35236]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn00-30]                         


[[Page 35161]]

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Part II





Department of the Treasury





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Office of the Comptroller of the Currency



Office of Thrift Supervision



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Federal Reserve System

Federal Deposit Insurance Corporation





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12 CFR Parts 40, 216, 332, and 573



Privacy of Consumer Financial Information; Final Rule


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 40

[Docket No. 00-10]
RIN 1557-AB77

FEDERAL RESERVE SYSTEM

12 CFR Part 216

[Docket No. R-1058]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 332

RIN 3064-AC32

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 573

[Docket No. 2000-45]
RIN 1550-AB36

 
Privacy of Consumer Financial Information

AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury; 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision 
(OTS), Treasury.

ACTION: Joint final rule.

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SUMMARY: The Office of the Comptroller of the Currency, Board of 
Governors of the Federal Reserve System, Federal Deposit Insurance 
Corporation, and the Office of Thrift Supervision, (collectively, the 
Agencies) are publishing final privacy rules pursuant to section 504 of 
the Gramm-Leach-Bliley Act (the GLB Act or Act). Section 504 authorizes 
the Agencies to issue regulations as may be necessary to implement 
notice requirements and restrictions on a financial institution's 
ability to disclose nonpublic personal information about consumers to 
nonaffiliated third parties. Pursuant to section 503 of the GLB Act, a 
financial institution must provide its customers with a notice of its 
privacy policies and practices. Section 502 prohibits a financial 
institution from disclosing nonpublic personal information about a 
consumer to nonaffiliated third parties unless the institution 
satisfies various notice and opt-out requirements and the consumer has 
not elected to opt out of the disclosure. These final rules implement 
the requirements outlined above.

EFFECTIVE DATE: This joint rule is effective November 13, 2000. 
However, compliance will be optional until July 1, 2001.

FOR FURTHER INFORMATION CONTACT:
    OCC: Amy Friend, Assistant Chief Counsel, (202) 874-5200; Jeffery 
Abrahamson, Attorney, Legislative and Regulatory Activities Division, 
(202) 874-5090, or Mark Tenhundfeld, Assistant Director, Legislative 
and Regulatory Activities Division, (202) 874-5090; Michael Bylsma, 
Director, Community and Consumer Law, (202) 874-5750; Steve Van Meter, 
Senior Attorney, Community and Consumer Law, (202) 874-5750; Karen 
Furst, Policy Analyst, Economic and Policy Analysis, (202) 874-4509; 
Paul Utterback, National Bank Examiner, Bank Supervision Policy, (202) 
874-5461, Office of the Comptroller of the Currency, 250 E Street, SW., 
Washington, DC 20219.
    Board: Oliver I. Ireland, Associate General Counsel, (202) 452-
3625, Stephanie Martin, Managing Senior Counsel, (202) 452-3198, or 
Thomas Scanlon, Attorney, (202) 452-3594, Legal Division; or Adrienne 
D. Hurt, Assistant Director, (202) 452-2412, Jane J. Gell, Managing 
Counsel, (202) 452-3667, James H. Mann, Attorney, (202) 452-2412, or 
Minh-Duc T. Le, Attorney, (202) 452-3667, Division of Consumer and 
Community Affairs. For the hearing impaired only, contact Janice Simms, 
Telecommunications Device for the Deaf (TDD) (202) 872-4984, Board of 
Governors of the Federal Reserve System, 20th and C Streets, NW., 
Washington, DC 20551.
    FDIC: James K. Baebel, Senior Review Examiner, Division of 
Compliance and Consumer Affairs, (202) 736-0229; Deanna Caldwell, 
Community Affairs Officer, Division of Compliance and Consumer Affairs, 
(202) 736-0141; Robert A. Patrick, Counsel, Regulations and Legislation 
Section, (202) 898-3757; Marc J. Goldstrom, Counsel, Regulations and 
Legislation Section, (202) 898-8807; Marilyn E. Anderson, Senior 
Counsel, Regulations and Legislation Section, (202) 898-3522; Nancy 
Schucker Recchia, Counsel, Regulations and Legislation Section, (202) 
898-8885, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    OTS: Christine Harrington, Counsel (Banking and Finance), (202) 
906-7957, or Paul Robin, Assistant Chief Counsel, (202) 906-6648, 
Regulations and Legislation Division; or Cindy Baltierra, Program 
Analyst, Compliance Policy, (202) 906-6540, Office of Thrift 
Supervision, 1700 G Street, NW., Washington DC 20552.

SUPPLEMENTARY INFORMATION: The contents of this preamble are listed in 
the following outline:

I. Background
II. Overview of Comments Received
III. Section-by-Section Analysis
IV. Guidance for Certain Institutions
V. Regulatory Analysis
    A. Paperwork Reduction Act
    B. Regulatory Flexibility Act
    C. Executive Order 12866
    D. Unfunded Mandates Act of 1995

I. Background

    On November 12, 1999, President Clinton signed the GLB Act (Pub. L. 
106-102) into law. Subtitle A of title V of the Act, captioned 
Disclosure of Nonpublic Personal Information (codified at 15 U.S.C. 
6801 et seq.), limits the instances in which a financial institution 
may disclose nonpublic personal information about a consumer to 
nonaffiliated third parties, and requires a financial institution to 
disclose to all of its customers the institution's privacy policies and 
practices with respect to information sharing with both affiliates and 
nonaffiliated third parties. Title V also requires the Agencies, the 
Secretary of the Treasury, the National Credit Union Administration 
(NCUA), the Federal Trade Commission (FTC), and the Securities and 
Exchange Commission (SEC), after consulting with representatives of 
State insurance authorities designated by the National Association of 
Insurance Commissioners, to prescribe such regulations as may be 
necessary to carry out the purposes of the provisions in title V that 
govern disclosure of nonpublic personal information.
    The Agencies have prepared final rules to implement subtitle A that 
are consistent and comparable to the extent possible, as is required by 
the statute.\1\ The texts of the Agencies' proposed regulations are 
substantively identical, and differ only with respect to the citations 
of authority for each Agency's rulemaking and definitions appropriate 
for institutions within each Agency's primary jurisdiction.
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    \1\ The NCUA, FTC, SEC, and the Treasury Department also have 
participated in the rulemaking process, and the NCUA, FTC, and SEC 
will separately issue comparable final rules.
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II. Overview of Comments Received

    On February 22, 2000, the Agencies published a joint notice of 
proposed rulemaking (the proposal or proposed rule) in the Federal 
Register (65 FR

[[Page 35163]]

8770).\2\ The Agencies collectively received a total of 8,126 comments 
in response to the proposal, although many commenters sent copies of 
the same letter to each of the Agencies.\3\ Of these, several thousand 
were received from individuals, virtually all of whom encouraged the 
Agencies to provide greater protection of individuals' financial 
privacy. Many individuals noted their concerns generally about the loss 
of privacy and the receipt of unwanted solicitations by marketers. A 
large number of individuals also requested the Agencies to support 
legislation that the commenters believe would provide additional 
protections.
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    \2\ The NCUA, FTC, and SEC published separate proposed rules on 
different dates. These proposed rules, which were consistent and 
comparable with the proposals published by the Agencies, appeared in 
the Federal Register at 65 FR 10988 (March 1, 2000) (NCUA), 65 FR 
11174 (March 1, 2000) (FTC), and 65 FR 12354 (March 8, 2000) (SEC).
    \3\ The NCUA, FTC, and SEC received 99, 640, and 112 comments, 
respectively, in response to their proposed rules.
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    Several letters were received from members of Congress. In two 
letters signed by several members of the House of Representatives, the 
Agencies were encouraged to exercise their rulemaking authority to 
provide more protections than were proposed. Other Congressmen 
requested, in separate letters, that the Agencies (a) create an 
exception under limited circumstances to the prohibition against the 
sharing of account numbers for marketing purposes, (b) ensure that 
social security numbers are considered ``nonpublic personal 
information,'' and (c) refrain from extending the effective date of the 
rule.
    The National Association of Insurance Commissioners (NAIC) 
submitted a comment on behalf of the State insurance authorities that 
generally supported the Agencies' proposed rule. The NAIC also proposed 
various measures to provide certain protections for consumers, such as 
specifying means to exercise the right to opt out of the disclosure of 
information. The NAIC further advised the Agencies to clarify the 
boundary of Federal and State jurisdiction over privacy regulations and 
ensure that the financial privacy rules under the Act are compatible 
with the privacy rules relating to medical information that are to be 
issued by the Secretary of the Department of Health and Human Services 
(HHS) under the Health Insurance Portability and Accountability Act 
(HIPPA) of 1996.\4\
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    \4\ These proposed regulations were published for comment at 64 
FR 59918 (Nov. 3, 1999).
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    Other comments were received from consumer groups and others 
advocating that the Agencies extend privacy protections in a number of 
ways, such as by requiring (a) financial institutions to provide 
consumers with access to their information maintained by the 
institutions and the opportunity to correct errors, (b) more detailed 
disclosures of the information collected and disclosed, and (c) 
disclosures of a financial institution's privacy policies and practices 
earlier in the process of establishing a customer relationship. In a 
letter signed by 33 State Attorneys General, the Agencies were 
requested to add certain consumer protections to the disclosure 
requirements and to the provision permitting financial institutions to 
enter into joint marketing agreements.
    The majority of the remainder of comments received by the Agencies 
were from insured depository institutions or their representatives. 
These commenters offered a large number of suggested changes, with the 
most commonly advanced suggestions including: an extension of the 
effective date of the rule; an amendment to the definition of 
``nonpublic personal information'' to focus more clearly on 
``financial'' information; a streamlining of information required in 
the initial and annual disclosures; a clarification of how one or more 
of the statutory exceptions operate; an exclusion from, or 
clarification of, the definitions of ``consumer'' and ``customer'' in 
various contexts; and the addition of flexibility to provide initial 
notices at some point other than ``prior to'' the time a customer 
relationship is established.
    Representatives of a wide variety of other interests, including the 
health care industry, retail merchants, insurance companies, securities 
firms, private investigators, and higher education, also suggested 
changes to the proposed rule.
    The Agencies have modified the proposed rule in light of the 
comments received. These comments, and the Agencies' responses thereto, 
are discussed in the following section-by-section analysis. As was done 
in the preamble discussion of the proposal, the citations are to 
sections only, leaving citations to the part numbers used by each 
Agency blank. Following the section-by-section analysis, the Agencies 
have provided guidance for certain institutions that is intended to 
provide additional guidance on how these institutions may comply with 
the rule in a way that avoids unnecessary burden.

III. Section-by-Section Analysis

    As an initial matter, the Agencies note that the final rule, unlike 
the proposal, presents the various sections in subparts that consist of 
related sections. This change was made to group related concepts 
together and thereby make the rule easier to follow. A derivation table 
is included following this preamble to assist readers in locating 
provisions as set out in the proposal. The Agencies also have added an 
Appendix A to the final rule, setting out sample disclosures for 
financial institutions to consider.

Section __.1 Purpose and Scope

    Proposed Sec. __.1 identified the purposes and scope of the rules. 
As stated in the proposal, the rule is intended to require a financial 
institution to provide notice to customers about its privacy policies 
and practices; to describe the conditions under which a financial 
institution may disclose nonpublic personal information about consumers 
to nonaffiliated third parties; and to provide a method for consumers 
to prevent a financial institution from disclosing that information to 
certain nonaffiliated third parties by ``opting out'' of that 
disclosure, subject to various exceptions as stated in the rule. The 
Agencies invited comment on whether the rules should apply to foreign 
financial institutions that solicit business in the United States but 
that do not have an office in the United States.
    Most of the comments received on this section focused on the scope 
of the rules. Several commenters suggested that the Agencies clarify 
how the rule applies to insurance companies. The Agencies note that 
section 505 of GLB Act, which sets out the enforcement authority of the 
Agencies, extends this authority to subsidiaries of entities within 
each Agency's primary jurisdiction. That section then explicitly 
excludes ``persons providing insurance'' from each Agency's enforcement 
authority (and, by operation of section 504(a)(1) of GLB Act, from the 
Agencies' rulemaking authority). The Agencies affected by this 
provision have concluded that the exclusion of ``persons providing 
insurance'' is not intended to remove insurance activities conducted 
directly by an insured depository institution from the scope of the 
rule. Consistent with this reading of the statute, each Agency's final 
rule states that the exclusion of persons providing insurance applies 
only to persons doing so in a subsidiary of an entity within the 
primary jurisdiction of that Agency. See Sec. 40.1(b) (OCC rule); 
Sec. 216.3(q) (Board rule); Sec. 332.3(q) (FDIC rule); and 
Sec. 573.1(b) (OTS rule). The OTS notes that, while it regulates 
savings and loan holding companies, a different Federal functional 
regulator, a state insurance authority, or the FTC may enforce privacy 
rules as to that holding company, under Sec. 505 of the

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Act, depending on the nature of a savings and loan holding company's 
activities.
    Several other commenters asked that the final rule state that 
certain transactions that are exempt from the coverage of the Truth in 
Lending Act (TILA; 15 U.S.C. 1601 et seq.) and Regulation Z (Reg. Z, 12 
CFR part 226) also be treated as beyond the scope of the privacy rule. 
TILA and Reg. Z, which impose disclosure requirements on credit 
extended to consumers under certain circumstances, exempt several 
transactions, including those involving business, commercial, or 
agricultural credit. 15 U.S.C. 1603(1); 12 CFR 226.3(a). The Agencies 
agree that transactions that fit within the exemptions from TILA and 
Reg. Z for these types of credit also would fall outside the scope of 
the privacy rule, and have amended Sec. __.1(b) accordingly. Thus, 
financial institutions may look at how this exemption is applied under 
Reg. Z for guidance on the scope of covered transactions under the 
privacy rule. It should be noted, however, that TILA exempts several 
other types of transactions that would be covered under the privacy 
rule if they are for the purpose of an individual obtaining a financial 
product or service as that term is defined in the privacy regulation. 
See 15 U.S.C. 1603(2) and (3).
    A few commenters stated that the rule should apply to foreign 
entities who solicit business from people in the United States. The 
OCC, FRB, and FDIC each have been given explicit authority to enforce 
the privacy rule with respect to foreign institutions within their 
respective jurisdictions that have offices in the U.S. Those commenters 
who favored applying the regulation to foreign offices of financial 
institutions that do not have offices within the U.S. suggested that an 
expanded scope would provide additional protections to consumers and 
would eliminate what they perceive to be a competitive disadvantage of 
domestic institutions. While the Agencies support consistent 
protections for consumers regardless of the entity from whom a 
financial product or service is obtained, at this stage the Agencies do 
not believe that it is appropriate to attempt to apply the rule to 
offshore offices of financial institutions.
    Several comments suggested that the rule should not apply to 
entities that must comply with regulations issued by HHS that implement 
HIPAA. Given the broad definition of ``financial institution'' under 
the GLB Act, certain entities, such as health insurers, are subject to 
these privacy rules as well as rules promulgated under HIPAA regarding 
the appropriate handling of protected health information. Accordingly, 
financial institutions may be covered both by this privacy rule and by 
the regulations promulgated by HHS under the authority of sections 262 
and 264 of HIPAA once those regulations are finalized. Based on the 
proposed HIPAA rules, it appears likely that there will be areas of 
overlap between the HIPAA and financial privacy rules. For instance, 
under the proposed HIPAA regulations, consumers must provide 
affirmative authorization before a covered institution may disclose 
medical information in certain instances whereas under the financial 
privacy rules, institutions need only provide consumers with the 
opportunity to opt out of disclosures. In this case, the Agencies 
anticipate that compliance with the affirmative authorization 
requirement, consistent with the procedures required under HIPAA, would 
satisfy the opt out requirement under the financial privacy rules. 
After HHS publishes its final rules, the Agencies will consult with HHS 
to avoid the imposition of duplicative or inconsistent requirements.

Section __.2  Rule of Construction

    Proposed Sec. __.2 of the rules set out a rule of construction 
intended to clarify the effect of the examples used in the rules. As 
noted in the proposal, these examples are not intended to be 
exhaustive; rather, they are intended to provide guidance about how the 
rules would apply in specific situations.
    Commenters generally agreed that examples are helpful in clarifying 
how the rule will work in specific circumstances and suggested that the 
Agencies should include more examples. Many commenters requested the 
Agencies to provide examples of model disclosures. Commenters also 
generally agreed that it is useful to state that the list of examples 
is not intended to be exhaustive, and that compliance with one of the 
examples would be deemed compliance with the regulation. A few 
commenters suggested that the regulation state that a financial 
institution is not obligated to comply with an example but has the 
latitude to comply with the general rules in other ways. Others stated 
that the examples ought to be identical in each privacy regulation 
adopted by the Agencies, the FTC, NCUA, and SEC.
    The Agencies believe that more examples would be helpful, and have 
included additional examples in appropriate places throughout the rule. 
The Agencies also have provided sample clauses in Appendix A to each 
Agency's rule to aid financial institutions in their drafting of 
privacy notices. The sample clauses are provided to illustrate the 
level of detail the Agencies believe is appropriate. The Agencies 
caution financial institutions against relying on the sample 
disclosures without determining the relevance or appropriateness of the 
disclosure for their operations. The Agencies have used statutory 
terms, such as ``nonpublic personal information'' and ``nonaffiliated 
third parties,'' in the sample clauses to convey generally the subject 
of the clauses. However, a financial institution that uses these terms 
must provide sufficient information to enable consumers to understand 
what these terms mean in the context of the institution's notices. 
Moreover, the Agencies note that, in providing the sample disclosures, 
the Agencies are addressing solely the level of detail required and are 
not attempting to provide guidance on issues such as type size, margin 
width, and so on.
    The Agencies have not added a statement in the final rule regarding 
a financial institution's ability to comply with the rule in ways other 
than as suggested in the examples, but instead retain the statement 
that the examples are not exclusive. The rule also states that 
compliance with the examples will constitute compliance with the rule. 
The Agencies believe that, when read together, these provisions give 
financial institutions sufficient flexibility to comply with the 
regulation but also sufficient guidance about the use of examples.
    The Agencies note that an example that mentions a particular 
activity does not, by itself, authorize a financial institution to 
engage in that activity. Any such authority must have a different 
source.

Section __.3  Definitions

a. Affiliate
    The proposal adopted the definition of ``affiliate'' that is used 
in section 509(6) of the GLB Act. An affiliation exists when one 
company ``controls'' (which is defined in Sec. __.3(g), below), is 
controlled by, or is under common control with another company. The 
definition includes both financial institutions and entities that are 
not financial institutions.
    The Agencies received comparatively few comments in response to 
this definition. One commenter requested that the final rule state that 
a bank service company will be deemed to be an affiliate of every bank 
that has an interest in it. The Agencies have declined to adopt this 
suggestion. If the

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relationship between a financial institution and a bank service company 
satisfies the test for affiliation set out in the statute and 
regulation, then an affiliation exists.
    In light of the comparatively few comments received and the nature 
of those comments, the Agencies adopt the definition of ``affiliate'' 
as proposed.
b. Clear and Conspicuous
    Under the proposed rules, various notices must be ``clear and 
conspicuous.'' The proposed rules defined this term to mean that the 
notice must be reasonably understandable and designed to call attention 
to the nature and significance of the information contained in the 
notice. The proposal did not mandate the use of any particular 
technique for making the notices clear and conspicuous, but provided 
examples of how a notice may be made clear and conspicuous. As noted in 
the preamble to the proposed rule, each financial institution retains 
the flexibility to decide for itself how best to comply with this 
requirement.
    The Agencies received a large number of comments on this proposed 
definition. Several commenters favored adopting the definition as 
proposed, with some of these advocating that the final rule add a 
requirement that disclosures be on a separate piece of paper in order 
to ensure that they will be conspicuous. Others stated that the 
definition was unnecessary, given the experience financial institutions 
have in complying with requirements that disclosures mandated by other 
laws be clear and conspicuous. Several commenters maintained that the 
rule proposed is inconsistent with requirements in other consumer 
protection regulations such as Reg. Z and the Truth in Savings 
regulation (Regulation DD, 12 CFR part 230), which require only that a 
disclosure be reasonably understandable. Many of these commenters 
expressed concern that the examples would invite litigation because of 
ambiguities inherent in terms used in the examples in the proposed rule 
such as ``ample line spacing,'' ``wide margins,'' and ``explanations * 
* * subject to different interpretations.'' A few commenters questioned 
how the requirement would work in a document that contains several 
disclosures that each must be clearly and conspicuously disclosed, 
while others raised questions about how a disclosure may be clear and 
conspicuous on a website. These comments are addressed below.
    New standard for ``clear and conspicuous.'' The Agencies recognize 
that the proposed definition develops the concept of ``clear and 
conspicuous'' beyond what is currently understood by the term. However, 
the Agencies added the phrase ``designed to call attention to the 
nature and significance of the information contained'' to provide 
meaning to the term ``conspicuous.'' The Agencies believe that this 
standard, when coupled with the existing standard requiring that a 
disclosure be readily understandable, likely will result in notices to 
consumers that communicate effectively the information needed by 
consumers to make an informed choice about the privacy of their 
information, including whether to transact business with a financial 
institution.
    The standard for clear and conspicuous adopted by the Agencies in 
this rulemaking applies solely to disclosures required under the 
privacy rules. Disclosures governed by other rules requiring clear and 
conspicuous disclosures (such as Reg. Z) are beyond the scope of this 
rulemaking.
    Examples of ``clear and conspicuous.'' The Agencies recognize that 
many of the examples are imprecise. The Agencies believe, however, that 
more prescriptive examples, while perhaps easier to conform to, likely 
would result in requirements that would be inappropriate in a given 
circumstance. To avoid this result, the examples provide generally 
applicable guidance about ways in which a financial institution may 
make a disclosure clear and conspicuous. The Agencies note that the 
examples of how to make a disclosure clear and conspicuous are not 
mandatory. A financial institution must decide for itself how best to 
comply with the general rule, and may use techniques not listed in the 
examples. To address concerns about the imprecision of the examples, 
the Agencies have incorporated several of the commenters' suggestions 
in the final rule for ways to make the guidance more helpful.
    Combination of several ``clear and conspicuous'' notices. A 
document may combine several disclosures that each must be clear and 
conspicuous. The final rule provides an example, in 
Sec. __.3(b)(2)(ii)(E), of how a financial institution may make 
disclosures conspicuous, including disclosures on a combined notice. In 
order to avoid the potential conflicts envisioned by several commenters 
between two different rules requiring that different sets of 
disclosures each be provided clearly and conspicuously, the final rule 
does not mandate precise specifications for how various disclosures 
must be presented.
    Because the Agencies believe that privacy disclosures may be clear 
and conspicuous when contained in a document containing other 
disclosures, the rule does not mandate that disclosures be provided on 
a separate piece of paper. Such a requirement is not necessary and 
would significantly increase the burden on financial institutions.
    Disclosures on web pages. Several commenters requested guidance on 
how they may clearly and conspicuously disclose privacy-related 
information on their Internet sites. The Agencies recognize that 
disclosures over the Internet present some issues that will not arise 
in paper-based disclosures. There may be web pages within a financial 
institution's website that consumers may view in a different order each 
time they access the site, aided by hypertext links. Depending on the 
customer hardware and software used to access the Internet, some web 
pages may require consumers to scroll down to view the entire page. To 
address these issues, the Agencies have included a statement in the 
example in Sec. __.3(b)(2)(iii) concerning Internet disclosures 
informing financial institutions that they may comply with the rule if 
they use text or visual cues to encourage scrolling down the page if 
necessary to view the entire notice and ensure that other elements on 
the web site (such as text, graphics, hyperlinks, or sound) do not 
distract attention from the notice. In addition, a financial 
institution is to place either a notice or a conspicuous link on a page 
frequently accessed by consumers, such as a page on which transactions 
are conducted.
    Given current technology, there are a range of approaches a 
financial institution could take to comply with the rule. For example, 
a financial institution could use a dialog box that pops up to provide 
the disclosure before a consumer provides information to the 
institution. Another approach would be a simple, clearly labeled 
graphic located near the top of the page or in close proximity to the 
financial institution's logo, directing the customer, through a 
hypertext link or hotlink, to the privacy disclosures on a separate web 
page.
    For the reasons advanced above, the Agencies have adopted the 
definition of ``clear and conspicuous,'' with the changes previously 
described and with certain other changes intended to make the 
definition easier to read.
c. Collect
    The statute requires a financial institution to include in its 
initial and annual notices a disclosure of the categories of nonpublic 
personal

[[Page 35166]]

information that the institution collects. The proposal defined 
``collect'' to mean obtaining any information that is organized or 
retrievable on a personally identifiable basis, irrespective of the 
source of the underlying information. This definition was included to 
provide guidance about the information that a financial institution 
must include in its notices and to clarify that the obligations arise 
regardless of whether the financial institution obtains the information 
from a consumer or from some other source.
    Commenters suggested that the final rule treat information that is 
not organized and retrievable in an automated fashion as not 
``collected.'' This approach would exclude separate documents not 
included in a file. The Agencies disagree that information should not 
be deemed to be collected simply because it is not retrievable in an 
automated fashion. The Agencies believe that the method of retrieval is 
irrelevant to whether information should be protected under the rule. 
The Agencies agree, however, that the scope of the regulation should be 
refined, and have changed the definition of ``collect'' by using 
language taken from the Privacy Act of 1974 (5 U.S.C. 552a).
    Other commenters requested that the rule clarify that information 
that is received by a financial institution but then immediately passed 
along without maintaining a copy of the information is not 
``collected'' as this term is used in the final rule. The Agencies 
believe that merely receiving information without maintaining it would 
not be ``collecting'' the information. The final rule reflects this by 
stating that the information must be organized or retrievable by the 
financial institution. Otherwise, the definition of ``collect'' is 
adopted as proposed.
d. Company
    The proposal defined ``company,'' which is used in the definition 
of ``affiliate,'' as any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    The Agencies received no substantive comments on this proposed 
definition. Accordingly, the Agencies adopt the definition of 
``company'' as proposed.
e. Consumer
    The GLB Act distinguishes ``consumers'' from ``customers'' for 
purposes of the notice requirements imposed by the Act. A financial 
institution is required to give a ``consumer'' the notices required 
under Title V only if the institution intends to disclose nonpublic 
personal information about the consumer to a nonaffiliated third party 
for purposes other than as permitted by section 502(e) of the statute 
(as implemented by Secs. __.14 and __.15 of the final rule). By 
contrast, a financial institution must give all ``customers'' a notice 
of the institution's privacy policy at the time of establishing a 
customer relationship and annually thereafter during the continuation 
of the customer relationship.
    The proposal defined ``consumer'' to mean an individual (and his or 
her legal representative) who obtains, from a financial institution, 
financial products or services that are to be used primarily for 
personal, family, or household purposes. Because ``financial product or 
service'' is defined to include the evaluation by a financial 
institution of an application to obtain a financial product or service 
(see further discussion of this point, below) a person becomes a 
consumer even if the application is denied or withdrawn. An individual 
also would be deemed to be a consumer for purposes of a financial 
institution if that institution purchases the individual's account from 
some other institution.
    The Agencies received a large number of comments on this proposed 
definition, raising questions about how the definition would apply in a 
variety of situations. These comments are addressed below.
    Distinction between ``consumer'' and ``customer.'' While many 
agreed with the distinction drawn in the proposal between ``consumer'' 
and ``customer,'' a few commenters suggested that no distinction 
between ``consumer'' and ``customer'' should be made, given that, in 
these commenters'' views, the statute appears to use the terms 
interchangeably. The Agencies believe, however, that the distinction 
was deliberate and that the rule should implement it accordingly. A 
plain reading of the statute supports the conclusion that Congress 
created one set of protections (i.e., a financial institution's privacy 
policy and opt out notice, and the right to opt out if a financial 
institution intends to disclose nonpublic personal information to 
nonaffiliated third parties) for anyone who obtains a financial product 
or service and an additional set of protections (i.e., the initial 
notices at the time of establishing a customer relationship and annual 
notices thereafter) for anyone who establishes a relationship of a more 
lasting nature than an isolated transaction with a financial 
institution. Thus, the statute tailors the notice requirements to the 
type of relationship an individual has with a financial institution. 
This distinction is preserved in the final rule.
    Applicants as consumers. Many of the comments on the proposed 
definition of ``consumer'' disagreed that someone should be deemed a 
consumer of a financial institution by virtue of the institution 
evaluating that individual's application for a financial product or 
service. These commenters maintained that the individual has not 
obtained a financial product or service, as is required by the GLB Act. 
The Agencies remain of the view, however, that it is consistent with 
both the spirit and the letter of the Act to consider an individual as 
having obtained a financial product or service when a financial 
institution evaluates information provided to it from the individual 
for the purpose of obtaining some other financial product or service. 
Financial institutions routinely provide several services that are 
integral to the delivery of a financial product. Frequently among these 
services is the evaluation by the financial institution of information 
provided by an individual. In certain instances, such as when an 
individual is shopping for the best rate on a mortgage loan or the 
lowest premium for an insurance policy, that evaluation may be the sole 
financial product or service delivered. In other instances, that 
evaluation may be one of several services provided in connection with 
establishing a customer relationship. In some cases financial 
institutions impose separate charges for considering applications or 
assessing an individual's credit worthiness, recognizing both the cost 
to the institution and the value to the individual of this service.
    In addition to being consistent with the language of the statute, 
the proposed definition of ``consumer'' is consistent with one of the 
primary purposes of Title V of GLB Act, namely, to enable an individual 
to limit the sharing of nonpublic personal information by a financial 
institution with a nonaffiliated third party. The information provided 
by a person to a financial institution before a customer relationship 
is established is likely to contain the types of information that the 
statute is designed to protect. This information is no less deserving 
of protection simply because an application is denied or withdrawn. For 
these reasons, the Agencies have retained within the definition of 
``consumer'' individuals whose applications are evaluated by a 
financial institution. See Sec. __.3(e)(2)(i).
    Loan sales. Several commenters requested clarification of whether 
an individual becomes a consumer in various other scenarios involving 
loans.

[[Page 35167]]

Commenters posited a wide variety of examples, which, if each were to 
be addressed specifically in the rule, would require a final rule of 
enormous complexity and detail. The Agencies believe that a rule 
setting forth a general principle that is flexible enough to be applied 
in the array of loan transactions posited by the commenters is more 
appropriate.
    Towards this end, the Agencies have stated in the final rule, at 
Sec. __.3(e)(2)(iv), that a person will be a consumer of any entity 
that holds ownership or servicing rights to an individual's loan. (The 
Agencies note that such a person may not be a customer, however; see 
explanation of how the definition ``customer'' will be applied in the 
loan context, in the discussion of the definition of ``customer'' 
below. See also Secs. __.4(c)(2) and__.4(c)(3)(ii) for further 
discussion concerning when a borrower establishes a customer 
relationship in the context of a loan sale.) The Agencies believe that 
financial institutions that own or service a loan are providing a 
financial product or service to the individual borrower in question. In 
some cases, the product or service is the funding of the loan, directly 
or indirectly. In other cases, the product or service is the processing 
of payments, sending account-related notices, responding to consumer 
questions and complaints about the handling of the account, and so on. 
The final rule defines ``consumer'' in a way that covers individuals 
receiving financial products or services in each of these situations.
    Agents of financial institutions. Several commenters agreed with 
the principle set out in the proposed rule that an individual should 
not be considered to be a consumer of an entity that is acting as agent 
for a financial institution. These commenters noted that the financial 
institution that hires the agent is responsible for that agent's 
conduct in carrying out the agency responsibilities. The Agencies agree 
and continue to believe that the financial institution is the entity 
that has a consumer relationship, even if it uses agents to help it 
deliver its products or services. Accordingly, the proposed rule 
retains the rule governing agents, with modifications made to improve 
its clarity. See Sec. __.3(e)(2)(v).
    Legal representative. The Agencies also agree with the suggestion 
made by several commenters that the definition of ``consumer'' should 
clarify that the obligations stemming from a consumer relationship may 
be satisfied by dealing either with the individual who obtains a 
financial product or service from a financial institution or that 
individual's representative. The Agencies do not intend for the rule to 
require a financial institution to send opt out and initial notices to 
both the individual and the individual's legal representatives, and 
have amended the final rule accordingly in Sec. __.3(e)(1).
    Trusts. The Agencies received several comments concerning whether 
an individual who obtains financial services in connection with trusts 
is a consumer or customer of a financial institution. Several 
commenters urged the Agencies to generally exempt a financial 
institution from the requirements of the rule when it acts as a 
fiduciary, or, in the alternative, clarify the categories of 
individuals that are considered to be customers. Commenters proposed, 
for example, that individuals who are beneficiaries with current 
interests should be identified as customers, whereas individuals who 
are only contingent beneficiaries should not be customers. Other 
commenters stated that when the financial institution serves as trustee 
of a trust, neither the grantor nor beneficiary is a consumer or 
customer under the rule. In these commenters' view, the trust itself is 
the institution's ``customer,'' and, therefore, the rule should not 
apply to a financial institution when it acts as trustee. These 
commenters also stated that when a financial institution is a trustee, 
it serves as a fiduciary and is subject to other obligations to protect 
the confidentiality of the beneficiaries' information that are more 
stringent than those under the provisions in the GLB Act. Similarly, 
these and other commenters claimed that an individual who is a 
participant in an employee benefit plan administered or advised by a 
financial institution does not qualify as a consumer or customer. The 
commenters opined that the plan sponsor, or the plan itself, is the 
``customer'' for the purposes of the proposed rule. These commenters 
contended that plan participants have no direct relationship with the 
financial institution and, in any event, the financial institution is 
authorized to use information that would be covered under the GLB Act 
only in accordance with the directions of the plan sponsor. The 
commenters concluded, therefore, that the regulations should 
specifically exclude individuals who are participants in an employee 
benefit plan from the definition of customer.
    The Agencies believe that the definition of ``consumer'' in the GLB 
Act does not squarely resolve whether the beneficiary of a trust is a 
consumer of the financial institution that is the trustee. The Agencies 
agree with the commenters who concluded that, when the financial 
institution serves as trustee of a trust, neither the grantor nor 
beneficiary is a consumer or customer under the rule. Instead, the 
trust itself is the institution's ``customer,'' and therefore, the rule 
does not apply because the trust is not an individual. The Agencies 
note that a financial institution that is a trustee assumes obligations 
as a fiduciary, including the duty to protect the confidentiality of 
the beneficiaries' information, that are consistent with the purposes 
of the GLB Act and enforceable under state law. Accordingly, the 
Agencies have excluded an individual who is a beneficiary of a trust or 
a plan participant of an employee benefit plan from the definitions of 
``consumer'' and ``customer.'' Nevertheless, the Agencies believe that 
an individual who selects a financial institution to be a custodian of 
securities or assets in an IRA is a ``consumer'' under the GLB Act. The 
Agencies have included examples in the rule that appropriately 
illustrate this interpretation of the GLB Act in Secs. __.3(e)(2)(vi)-
(viii) and Sec. __.3(i)(2)(i)(D).
    Requirements arising from consumer relationship. While the proposed 
and final rules define ``consumer'' broadly, the Agencies note that 
this will not result in any additional burden to a financial 
institution in situations where (a) no customer relationship is 
established and (b) the institution does not intend to disclose 
nonpublic personal information about a consumer to nonaffiliated third 
parties. Under the approach taken in the final rule, a financial 
institution is under no obligation to provide a consumer with any 
privacy disclosures unless it intends to disclose the consumer's 
nonpublic personal information to nonaffiliated third parties outside 
the exemptions in Secs. __.14 and __.15. A financial institution that 
wants to disclose a consumer's nonpublic personal information to 
nonaffiliated third parties is not prohibited under the final rule from 
doing so, if the requisite notices are delivered and the consumer does 
not opt out. Thus, as it applies to consumers who are not customers, 
the rule allows a financial institution to avoid all of the rule's 
requirements if it chooses to do so. Conversely, if a financial 
institution determines that the benefits of disclosing consumers' 
nonpublic personal information to nonaffiliated third parties outweighs 
the attendant burdens, the financial institution is free to do so, 
provided it notifies consumers about the disclosure and affords them a 
reasonable opportunity to opt out. In this way, the

[[Page 35168]]

rule attempts to strike a balance between protecting an individual's 
nonpublic personal information and minimizing the burden on a financial 
institution.
f. Consumer Reporting Agency
    The proposal adopted the definition of ``consumer reporting 
agency'' that is used in section 603(f) of the Fair Credit Reporting 
Act (15 U.S.C. 1681a(f)). This term was used in proposed Secs. __.11 
and __.13.
    The Agencies received no comments suggesting any changes to this 
definition. Accordingly, the definition is adopted as proposed. It is 
used in Secs. __.6(f), __.12(a), and __.15(a)(5) of the final rule.
g. Control
    The proposal defined ``control'' using the tests applied in section 
23A of the Federal Reserve Act (12 U.S.C. 371c). This definition is 
used to determine when companies are affiliated (see discussion of 
Sec. __.3(a), above), and would result in financial institutions being 
considered as affiliates regardless of whether the control is by a 
company or individual.
    The Agencies received few comments in response to this definition. 
The one substantive suggestion received was to adopt a test focused 
solely on percent of stock owned in a company so as to avoid the 
uncertainties arising from a ``control in fact'' test. The Agencies 
believe, however, that any test based only on stock ownership is 
unlikely to be flexible enough to address all situations in which 
companies are appropriately deemed to be affiliated. Accordingly, the 
Agencies adopt the definition of ``control'' as proposed.
h. Customer
    The proposal defined ``customer'' as any consumer who has a 
``customer relationship'' with a particular financial institution. As 
is explained more fully in the discussion of Sec. __.4, below, a 
consumer is a customer of a financial institution when the consumer has 
a continuing relationship with the institution.
    The Agencies received a large number of comments on the definition 
of ``customer'' and ``customer relationship.'' Given the 
interdependence of the two terms, the following analysis of the 
comments received will address both under the heading ``customer 
relationship.''
i. Customer Relationship
    The proposed rules defined ``customer relationship'' as a 
continuing relationship between a consumer and a financial institution 
whereby the institution provides a financial product or service that is 
to be used by the consumer primarily for personal, family, or household 
purposes. \5\ As noted in the proposal, a one-time transaction may be 
sufficient to establish a customer relationship, depending on the 
nature of the transaction. A consumer would not become a customer 
simply by repeatedly engaging in isolated transactions that by 
themselves would be insufficient to establish a customer relationship, 
such as withdrawing funds at regular intervals from an ATM owned by an 
institution at which the consumer has no account. The proposal also 
stated that a consumer would have a customer relationship with a 
financial institution that makes a loan to the consumer and then sells 
the loan but retains the servicing rights. The Agencies received a 
large number of comments on this definition, as discussed below.
---------------------------------------------------------------------------

    \5\ As noted in the preamble to the proposed rule, ``customer'' 
may be defined differently for purposes of other regulations. See, 
e.g., 12 CFR 7.4002.
---------------------------------------------------------------------------

    Point at which one becomes a customer. The Agencies received many 
comments in response to the definitions of ``customer'' and ``customer 
relationship.'' Commenters criticized what they considered to be the 
ill-defined line distinguishing consumers from customers. These 
commenters stated that the proposed distinction makes it difficult for 
a financial institution to know when the obligations attendant to a 
customer relationship arise. Several suggested that the distinction 
should be based on when a consumer and financial institution enter into 
a written contract for a financial product or service.
    The Agencies recognize that the distinction between consumers and 
customers will, in some instances, require a financial institution to 
make a judgment about whether a customer relationship is established. 
In those cases where an individual engages in a transaction for which 
it is reasonable to expect no further communication about that 
transaction from the financial institution (such as ATM transactions, 
purchases of money orders, or cashing of checks), the individual will 
not have established a customer relationship as a result of that 
transaction. In other situations where a consumer typically would 
receive some measure of continued service following, or in connection 
with, a transaction (such as would be the case when a consumer opens a 
deposit account, borrows money, or obtains investment advice), a 
customer relationship will be established. The Agencies believe that 
the distinction set out in the proposed rule, as further clarified by 
the examples in the final rule of when a customer relationship is, and 
is not, established, provides a sufficiently clear line while retaining 
flexibility to address less clear-cut situations on a case-by-case 
basis.
    Customer relationship defined by written contract. The Agencies 
agree with those commenters who consider the execution of a written 
contract by a consumer and financial institution as clear evidence that 
a customer relationship has been established. The proposed rule cited 
the execution of a written contract as an example of when a customer 
relationship is established, and the final rule retains that example in 
Sec. __.4(c)(3)(i)(B). However, a test based solely on whether there is 
a written contract could inappropriately exclude situations in which an 
individual is a customer of a financial institution as a result of 
obtaining, for instance, financial, economic, or investment advisory 
services from a financial institution. Accordingly, the final rule does 
not define a customer relationship solely by the execution of a written 
contract.
    Use of ``isolated transaction'' test. The final rule also does not 
define the distinction between consumer and customer based solely on 
whether the transaction is an isolated event. The Agencies used this 
concept in several examples in the proposed rule to illustrate one of 
the factors that may go into whether a relationship is of a continuing 
nature. Several commenters suggested that this approach was 
insufficiently precise to serve as a workable distinction between 
consumers and customers. The Agencies agree that the test may not be 
useful in all instances, but believe that it will help clarify the 
status of relationships in certain situations. Accordingly, the final 
rule retains examples in Secs. __.3(i)(2)(ii)(A) and (C) that cite the 
isolated nature of a given transaction as an indication that the 
transaction in question does not establish a customer relationship.
    Purchase of insurance. Other commenters suggested that, in the 
context of financial institutions that engage in the sale of insurance 
and that are regulated by the Agencies, the customer should be the 
policyholder and not the beneficiary. The Agencies agree, and note that 
the final rule retains the example Sec. __.3(i)(2)(i)(D) of purchasing 
an insurance product as one situation in which a customer relationship 
is formed. In this case, the person obtaining a financial product or 
service from the financial institution is the person purchasing the 
policy.
    Sales of loans. As previously noted, several commenters raised 
questions in the context of loan sales. Many commenters stated that, 
under the final

[[Page 35169]]

rule, a person should not be considered a customer of two financial 
institutions when the originating bank sells the servicing rights. A 
point consistently made by these commenters was that a borrower would 
be equally well protected with less risk of confusion if the borrower 
is deemed to be a customer of only one entity in connection with a 
loan, with that entity perhaps being the party with whom the borrower 
communicates about the loan. The Agencies believe that it is 
appropriate to consider a loan transaction as giving rise to only one 
customer relationship, with the recognition that this customer 
relationship may be transferred in connection with a sale of part or 
all of the loan. In this way, the borrower will not be inundated by 
privacy notices, many of which might be from secondary market 
purchasers that the borrower did not know had any connection to his or 
her loan. The Agencies note, however, that a customer will remain a 
consumer of the entity that transfers the servicing rights, as well as 
a consumer of any other entity that holds an interest in the loan.
    In order to satisfy the statutory requirement that a customer 
receive an annual notice from a financial institution until that 
relationship terminates, the final rule provides that the borrower must 
be deemed to have a customer relationship with at least one of the 
entities that hold an interest in the loan. In the case of a financial 
institution that makes a loan, retains it in its portfolio, and 
provides servicing for the loan, the borrower clearly would have a 
customer relationship with that institution. Less clear, however, are 
situations in which servicing is sold or investors purchase a partial 
interest in a loan. The Agencies have adopted an approach designed to 
ensure that a customer receives annual notices for the duration of the 
customer relationship from the most appropriate financial institution.
    Under the final rule as stated in Sec. __.3(i)(2)(i)(B), a customer 
relationship will be established as a general rule with the financial 
institution that makes a loan to an individual. This customer 
relationship then will attach to the entity providing servicing. Thus, 
if the originating lender retains the servicing, it will continue to 
have a customer relationship with the borrower and will be obligated to 
provide annual notices for the duration of the customer relationship. 
If the servicing is sold, then the purchaser of the servicing rights 
will establish a customer relationship (and the originating lender will 
have a consumer relationship with the borrower). See 
Sec. __.3(i)(2)(ii)(B). In this way, the borrower will be entitled to 
receive an initial notice and annual notices from the loan servicer, 
but will not receive initial and annual notices from entities that hold 
interests in the loan but are unknown to the consumer.
    Mortgage brokers. Several commenters suggested that the use of a 
mortgage broker should not create a customer relationship. The Agencies 
disagree. A relationship between a mortgage broker and a consumer is 
more than an isolated transaction, given that the mortgage broker is 
likely to provide many services for a consumer, such as analyzing 
financial information, performing credit checks, negotiating with other 
financial institutions on the consumer's behalf, and assisting with 
loan closings. In light of the similarities between the services 
provided by a mortgage broker and those provided by, for instance, an 
insured depository institution that makes a mortgage loan, the Agencies 
believe it is appropriate to consider a mortgage broker to be a 
financial institution that establishes a customer relationship when the 
broker enters into an agreement or understanding with a consumer 
whereby the broker undertakes to arrange or broker a home mortgage loan 
for the consumer. The final rule reflects this in 
Sec. __.3(i)(2)(i)(F).
    Trusts. The final rule adds an example in Sec. __.3(i)(2)(i)(E) to 
clarify that an individual will be deemed to establish a customer 
relationship when a bank acts as a custodian for securities or assets 
in an IRA. This example is consistent with the explanation set out 
above in the discussion of ``consumer'' concerning trusts.
j. Federal Functional Regulator
    The proposal sought comment on a definition of ``government 
regulator'' that included each of the Agencies participating in this 
rulemaking, the Secretary of the Treasury, the NCUA, FTC, SEC, and 
State insurance authorities under the circumstances identified in the 
definition. This term was used in the exception set out in proposed 
Sec. __.11(a)(4) for disclosures to law enforcement agencies, 
``including government regulators.''
    The few comments that were received on this definition suggested 
that it be expanded to include additional governmental entities. The 
Agencies note that, for purposes of the privacy rule, this term is 
relevant only in the discussion of when a financial institution may 
disclose information to a law enforcement agency. The exception as 
stated in the statute uses the term ``federal functional regulator'' 
(see section 502(e)(5)), which term is defined in the statute at 
section 509(2) and also includes the Secretary of the Treasury for 
purposes of the exception permitting disclosures to law enforcement 
agencies. The Agencies have decided that it is appropriate simply to 
use the term that is used in the statute and adopt its definition.
k. Financial Institution
    The proposal defined ``financial institution'' as any institution 
the business of which is engaging in activities that are financial in 
nature, or incidental to such financial activities, as described in 
section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)). The proposal exempted from the definition of ``financial 
institution'' those entities specifically excluded by the GLB Act.
    Commenters suggested that the final rule contain several exclusions 
to this definition, including those for securitization trusts, debt 
buyers, and credit bureaus. The Agencies have not included these 
exceptions in the final rule, in part because the Agencies believe that 
it is inappropriate to exclude many of the activities suggested by 
commenters and in part because the objective of the suggested 
exclusions can be achieved in other ways. Even if an entity is a 
financial institution as that term is used in the GLB Act, it will not 
have any disclosure responsibilities under the Act or this rule if it 
does not provide a financial product or service to a consumer. In most 
of the situations posited by the commenters, the entity in question 
will not meet that test and, therefore, will fall outside the scope of 
the rule with respect to privacy disclosures. \6\
---------------------------------------------------------------------------

    \6\ However, these entities will be subject to the limits on 
redisclosures under Sec. _.11 with respect to any nonpublic personal 
information they receive from a nonaffiliated financial institution 
that has disclosure obligations under this rule.
---------------------------------------------------------------------------

    For the reasons discussed above, the Agencies adopt the definition 
of ``financial institution'' as proposed.
l. Financial Product or Service
    The proposal defined ``financial product or service'' as a product 
or service that a financial institution could offer as an activity that 
is financial in nature, or incidental to such a financial activity, 
under section 4(k) of the Bank Holding Company Act of 1956, as amended. 
An activity that is complementary to a financial activity, as described 
in section 4(k), was not included in the proposed definition of 
``financial product or service.'' The proposal's definition included 
the financial institution's evaluation of information collected in 
connection

[[Page 35170]]

with an application by a consumer for a financial product or service 
even if the application ultimately is rejected or withdrawn. It also 
included the distribution of information about a consumer for the 
purpose of assisting the consumer in obtaining a financial product or 
service.
    Several commenters in response to this proposed definition 
criticized the Agencies' interpretation of the Act and suggested that 
the evaluation of application information should not be considered a 
financial product or service. For the reasons advanced above in the 
discussion of the definition of ``consumer,'' the Agencies continue to 
believe that it is appropriate to retain evaluation or brokerage of 
information as within the scope of financial products or services 
covered by the rule. Accordingly, the final rule adopts the definition 
of ``financial product or service'' as proposed.
m. Nonaffiliated Third Party
    The proposal defined ``nonaffiliated third party'' as any person 
(which includes natural persons as well as corporate entities) except 
(1) an affiliate of a financial institution and (2) a joint employee of 
a financial institution and a third party. The proposal clarified the 
circumstances under which a company that is controlled by a financial 
institution pursuant to that institution's merchant banking activities 
or insurance company activities would be a ``nonaffiliated third 
party'' of that financial institution.
    The Agencies received very few comments in response to this 
proposed definition. One commenter requested that the final rule state 
that a disclosure of information to someone who is serving as a joint 
employee of two financial institutions should be deemed to have been 
disclosed to both financial institutions. The Agencies disagree with 
this result. Instead, the Agencies believe it is appropriate to deem 
the information to have been given to the financial institution that is 
providing the financial product or service in question. Thus, for 
instance, if an employee of an insured depository institution is a dual 
employee with a securities firm, information received by that person in 
connection with a securities transaction conducted with the securities 
firm would be deemed to have been received by the securities firm.
    In light of the comments received, the Agencies adopt the 
definition of ``nonaffiliated third party'' as proposed.
n. Nonpublic Personal Information
    Section 509(4) of the GLB Act defines ``nonpublic personal 
information'' to mean ``personally identifiable financial information'' 
that is provided by a consumer to a financial institution, results from 
any transaction with the consumer or any service performed for the 
consumer, or is otherwise obtained by the financial institution. It 
also includes any ``list, description, or other grouping of consumers 
(and publicly available information pertaining to them) that is derived 
using any nonpublic personal information other than publicly available 
information.'' The statute excludes publicly available information 
(unless provided as part of the list, description or other grouping 
described above), as well as a list, description, or other grouping of 
consumers (and publicly available information pertaining to them) that 
is derived without using nonpublic personal information. The statute 
does not define either ``personally identifiable financial 
information'' or ``publicly available information.''
    The proposed rules implemented this provision of the GLB Act by 
restating the categories of information described above. The proposed 
rules presented two alternative approaches to identifying what 
information would be regarded as publicly available (and therefore, as 
a general rule, outside the definition of ``nonpublic personal 
information''). Alternative A deemed information as publicly available 
only if a financial institution actually obtained the information from 
a public source while Alternative B treated information as publicly 
available if a financial institution could obtain it from such a 
source. Both Alternatives A and B included within the definition of 
``nonpublic personal information'' publicly available information that 
is provided as part of a list, description, or other grouping of 
consumers.
    Commenters favoring Alternative A noted that it provided the 
greatest protection for consumers by treating anything the consumer 
gives to a financial institution to obtain a financial product or 
service as nonpublic personal information. Under Alternative A, this 
protection would be lost only if a financial institution actually 
obtained the information from a public source. These commenters also 
preferred the bright-line distinction drawn by treating as nonpublic 
personal information any information given by a consumer to obtain a 
financial product or service or information that results from 
transactions between a financial institution and a consumer. However, 
the majority of those commenting on this issue favored Alternative B, 
noting that this alternative was consistent with the statute and would 
be far less burdensome on financial institutions. These commenters 
suggested that a requirement that the information actually be obtained 
from a public source would impose needless burden on financial 
institutions (by requiring, for instance, that a financial institution 
``tag'' information they obtained from public records) and is not 
required by the statute.
    The final rule adopts an approach that the Agencies believe 
incorporates the benefits of both alternatives. Under the final rule, 
information will be deemed to be ``publicly available'' and therefore 
excluded from the definition of ``nonpublic personal information'' if a 
financial institution has a reasonable basis to believe that the 
information is lawfully made available to the general public from one 
of the three categories of sources listed in the rule. See 
Sec. __.3(p)(1). The final rule states that a financial institution 
will have a ``reasonable basis'' for believing that information is 
lawfully made available if it has taken steps to determine that the 
information is of the type that is available to the general public and, 
if an individual could direct that the information not be made 
available to the general public, whether the individual has done so. In 
this way, a financial institution will be able to avoid the burden of 
having to actually obtain information from a public source, but will 
not be free simply to assume that information is publicly available 
without some reasonable basis for that belief. The final rule cites, as 
an example of information a financial institution might reasonably 
believe to be publicly available, the fact that someone has a loan that 
is secured by a mortgage in jurisdictions where mortgages are recorded. 
See Sec. __.3(p)(3)(iii)(A). The rule also states that a financial 
institution will have a reasonable basis to believe that a telephone 
number is publicly available if the institution either located the 
number in a telephone book or was informed by the consumer that the 
number is not unlisted. See Sec. __.3(p)(3)(iii)(B).
    This approach is based on the underlying principle that, if a 
consumer has some measure of control over the public availability of 
his or her information, a financial institution should not 
automatically assume that the information is in fact publicly 
available. In the case of a mortgage in most jurisdictions, the 
borrower has no choice about whether the lender will

[[Page 35171]]

make the mortgage a matter of public record; a lender must do so in 
order to protect its security interest. In the case of a telephone 
number, a person may request that his or her number be unlisted. Thus, 
in evaluating whether it is reasonable to believe that information is 
publicly available, a financial institution should consider whether the 
information is of a type that a consumer could keep from being a matter 
of public record.
    To implement the complex definition of ``nonpublic personal 
information'' that is provided in the statute, the final rule adopts a 
definition that consists, generally speaking, of (1) personally 
identifiable financial information, plus (2) a consumer list (and 
publicly available information pertaining to the consumers) that is 
derived using any personally identifiable financial information that is 
not publicly available. From that body of information, the final rule 
excludes publicly available information (except as noted above) and any 
consumer list that is derived without using personally identifiable 
financial information that is not publicly available. See 
Secs. __.3(n)(1) and (2). Examples are provided in Sec. __.3(n)(3) to 
illustrate how this definition applies in the context of consumer 
lists.
o. Personally Identifiable Financial Information
    The proposed rules defined ``personally identifiable financial 
information'' to include information that a consumer provides a 
financial institution in order to obtain a financial product or 
service, information resulting from any transaction between the 
consumer and the financial institution involving a financial product or 
service, and information about a consumer a financial institution 
otherwise obtains in connection with providing a financial product or 
service to the consumer. The proposed rule also treated the fact that 
someone is a customer of a financial institution as personally 
identifiable financial information. In essence, the proposed rules 
treated any personally identifiable information as financial if it was 
obtained by a financial institution in connection with providing a 
financial product or service to a consumer. The Agencies noted in the 
preamble to the proposed rule that this interpretation may result in 
certain information being covered by the rules that may not be 
considered intrinsically financial, such as health status.
    The Agencies received a large number of comments in response to 
this definition, most of which maintained that the definition 
inappropriately included certain identifying information that is not 
financial, such as name, address, and telephone number. Many others 
maintained that ``personally identifiable financial information'' 
should not include the fact that someone is a customer of a financial 
institution. These commenters typically noted that many customer 
relationships are matters of public record (such as would be the case, 
for instance, anytime a transaction results in the recordation of a 
security interest) while other customer relationships are matters of 
public knowledge (because consumers frequently disclose the 
relationships by writing checks, using credit cards, and so on). Many 
commenters stated that aggregate data about a financial institution's 
customers that lack personal identifiers should not be considered 
personally identifiable financial information.
    Treatment of identifying information as financial. The Agencies 
continue to believe that it is appropriate to treat any information as 
financial information if it is requested by a financial institution for 
the purpose of providing a financial product or service. The Agencies 
also believe this approach is consistent with the express language of 
the statute. Although the statute does not define the term 
``financial,'' it does include a broad definition of ``financial 
institution'' which encompasses a large number of entities (such as 
travel agencies, insurance companies, and data processors) that engage 
in activities not traditionally considered financial. As a consequence 
of that definition, the range of information that has a bearing on the 
terms and availability of a financial product or service or that is 
used by a financial institution in connection with providing a 
financial product or service is extremely broad and may include, for 
instance, medical information and other sorts of information that might 
not be thought of as financial. Further, the information that the 
agencies have defined as financial is the information that the 
institution itself has determined is relevant to providing a financial 
product or service, as evidenced by the fact that the institution 
requests the information from the consumer, obtains it from a 
transaction involving a financial product or service with the consumer, 
or otherwise obtains it in connection with providing a financial 
product or service to a consumer.
    The Agencies are sensitive to the concern expressed by many 
commenters, including several hundred private investigators, about the 
need for ready access to identifying information to locate people 
attempting to evade their financial obligations. These commenters 
consistently suggested that names, addresses, and telephone numbers 
should not be treated as financial information. However, financial 
institutions rely on a broad range of information, including 
information such as addresses and telephone numbers, when providing 
financial products or services. Location information is used by 
financial institutions to provide a wide variety of financial services, 
from the sending of checking account statements to the disbursing of 
funds to a consumer. Other information, such as the maiden name of a 
consumer's mother often will be used by a financial institution to 
verify the consumer's identity. The Agencies concluded that it would be 
inappropriate to exclude certain items of information from the 
definition of personally identifiable financial information simply 
because a particular financial institution might not rely on those 
items when providing a particular financial product or service.
    The Agencies note that names, addresses, and telephone numbers, if 
publicly available, will not be subject to the opt out provisions of 
the statute unless that information is ``derivative information'' 
(i.e., information that is part of a list, description, or other 
grouping of consumers that is derived from personally identifiable 
financial information that is not publicly available). Thus, in 
instances involving specific requests about individuals, a financial 
institution still may disclose information about the individual that 
the institution reasonably believes to be publicly available, provided 
that in so doing the institution does not disclose the existence of a 
customer relationship that is not a matter of public record. Moreover, 
in instances when a consumer does not opt out, a financial institution 
may disclose any nonpublic personal information to a nonaffiliated 
third party provided that the disclosure is consistent with the 
institution's opt out and privacy notices.
    Customer relationship as ``personally identifiable financial 
information.'' The Agencies disagree with those commenters who maintain 
that customer relationships should not be considered to be personally 
identifiable financial information. Clearly, information that a 
particular person has a customer relationship identifies that person, 
and thus is personally identifiable. The Agencies believe that this 
information also is financial under the express terms of the statute, 
because it communicates that the person in question has a transaction 
involving a financial product or service with a

[[Page 35172]]

financial institution. While this information could in certain cases be 
a matter of public record, that does not change the analysis of whether 
the information is personally identifiable financial information.
    Changes made to the definition. The final rule makes various 
stylistic changes to the definition that are intended to make it easier 
to read and understand. In addition, the final rule adds to the 
examples of information covered by the rule any information that the 
institution collects through an information collecting device from a 
web server, often referred to as a ``cookie.'' See Sec. __.3(o)(2)(F). 
This illustrates one of the various means by which a financial 
institution may ``otherwise obtain'' information about a consumer in 
connection with providing a financial product or service to that 
consumer.
    The final rule also includes, as a negative example in 
Sec. __.3(o)(2)(ii)(B), a statement that aggregate information or blind 
data lacking personal identifiers is not covered by the definition of 
``personally identifiable financial information.'' The Agencies agree 
with those commenters who opined that such data, by definition, do not 
identify any individual.
p. Publicly Available Information
    The proposal defined ``publicly available information'' to include 
information that is lawfully available to the general public from 
official public records (such as real estate recordations or security 
interest filings), information from widely distributed media (such as a 
telephone book, television or radio program, or newspaper), and 
information that is required to be disclosed to the general public by 
Federal, State, or local law (such as securities disclosure documents). 
The proposed rules stated that publicly available information from 
widely distributed media would include information from an Internet 
site that is available to the general public without requiring a 
password or similar restriction.
    As previously explained in the discussion of ``nonpublic personal 
information,'' the proposed rules invited comment on two versions of 
the definition of ``publicly available information.'' The Agencies have 
adopted an approach in the final rule that they believe closely tracks 
the statute while providing much of the benefit provided under 
Alternative A.
    Several commenters questioned the appropriateness of excluding 
information from the definition of ``publicly available information'' 
if a person who seeks to obtain the information over the Internet must 
have a password or comply with a similar restriction. These commenters 
made the point that many Internet sites are available to a large number 
of people, each of whom need a user name and identification number to 
access the sites. Several of these commenters suggested that it is more 
appropriate to focus on whether the information was lawfully placed on 
the Internet.
    The Agencies agree with these comments, and have amended the final 
rule to remove the reference to passwords or similar restrictions from 
the example of the Internet as a ``widely distributed'' medium of 
communication. In its place, the Agencies have substituted a standard 
that requires the information, whether from the Internet or otherwise, 
to be available on an unrestricted basis. Information that an 
individual specifically requests be compiled, such as information that 
a locator or ``look up'' service provides with respect to a particular 
individual that may combine confidential information in addition to 
publicly available information, will not be considered available to the 
general public on an unrestricted basis, regardless of whether the 
information is provided over the Internet or otherwise.
    On the other hand, the rule states that an Internet site is not 
restricted merely because an Internet service provider or a site 
operator requires a fee or password as long as access is otherwise 
available to the general public. The traditional use of passwords is to 
confine the access of individual customers to specific, individual 
information. However, website operators, in particular, may require 
user identifications and passwords as a method of tracking access 
rather than restricting access to the information available through the 
website. Fees may be levied to obtain access to the Internet or to 
particular sites rather than restrict access to particular information. 
For example, Internet service providers may charge a fee for accessing 
the Internet. Other sites available to the general public, such as 
daily newspapers, also may charge a fee to access archived information. 
Therefore, the Agencies believe that the definition of ``widely 
distributed media'' should properly focus on whether the information is 
lawfully available to the general public, rather than on the type of 
medium from which information is obtained.
    The Agencies note that the concept of information being lawfully 
obtained was included in the proposal, and is retained in the final 
rule. Thus, information unlawfully obtained will not be deemed to be 
publicly available notwithstanding that it may be available to the 
general public through widely distributed media.
    To help understand how ``nonpublic personal information,'' 
``personally identifiable financial information,'' and ``publicly 
available information'' will work under the final rule, the following 
example is offered. Assume that Mary provides her bank with various 
information in order to obtain a mortgage loan and to open a deposit 
account. Under the final rule, all of this information would be 
personally identifiable financial information. Once Mary establishes 
the customer relationships she seeks, the fact that Mary is a mortgage 
loan customer and a deposit accountholder at the bank also would be 
personally identifiable financial information.
    It may be that certain information provided by Mary, such as her 
name and address, is publicly available. If the bank has a reasonable 
basis to believe that this information is publicly available, and if 
the information was included on a list of the bank's mortgage loan 
customers that was derived using only publicly available information, 
then her name and address would fall outside the definition of 
``nonpublic personal information'' in those jurisdictions where 
mortgages are a matter of public record. However, Mary's name and 
address would be protected as nonpublic personal information if the 
bank wanted to include those items on a list of its deposit 
accountholders. The difference in treatment stems from the distinction 
drawn in the statute between lists prepared using publicly available 
information (as would be the case in the mortgage loan hypothetical) 
and lists prepared using information that is not publicly available (as 
would be the case in the deposit account hypothetical).
    The Agencies recognize the complexity of this approach, but believe 
that it is mandated by the way the statute defines ``nonpublic personal 
information.'' It also is consistent with the fact that certain 
relationships are matters of public record, and, therefore, arguably 
deserving of less protection from disclosure.
q. You
    Several Agencies used the pronoun ``you'' to refer to entities 
within their primary jurisdiction in the proposal and defined ``you'' 
to mean those entities. \7\
---------------------------------------------------------------------------

    \7\ The OCC used the term ``bank'' instead of ``you'' in its 
regulation.
---------------------------------------------------------------------------

    The Agencies received very few comments in response to this 
definition.

[[Page 35173]]

While one commenter preferred the term ``bank'' to ``you,'' those 
Agencies using the term ``you'' believe that it makes the rule easier 
to read and have, therefore, adopted the definition substantially as 
proposed. The Board has revised its definition of ``you'' to clarify 
that insurance, broker dealer, investment adviser, and investment 
company subsidiaries of the financial institutions within its primary 
jurisdiction are not covered.

Section __.4  Initial Privacy Notice to Consumers Required

    The GLB Act requires a financial institution to provide an initial 
notice of its privacy policies and practices in two circumstances. For 
customers, the notice must be provided at the time of establishing a 
customer relationship. For consumers who are not customers, the notice 
must be provided prior to disclosing nonpublic personal information 
about the consumer to a nonaffiliated third party.
    The proposed rule implemented these requirements by mandating that 
a financial institution provide the initial notice to an individual 
prior to the time a customer relationship is established and the opt 
out notice prior to disclosing nonpublic personal information to 
nonaffiliated third parties. These disclosures were required under the 
rule to be clear and conspicuous and to accurately reflect the 
institution's privacy policies and practices. The proposal also set out 
rules governing when a customer relationship is established and how a 
financial institution is to provide notice.
    The Agencies received many comments raising concerns about a large 
number of issues arising under proposed Sec. __.4. Most of the comments 
raised questions about the time by which initial notices must be 
provided, whether new notices are required for each new financial 
product or service obtained by a customer, the point at which a 
customer relationship is established, and how initial notices may be 
provided.
Providing Initial Notices ``Prior To'' Time Customer Relationship Is 
Established
    Many commenters stated that, because the statute requires only that 
the initial notice be provided ``at the time of establishing a customer 
relationship,'' the regulation should not require that the notice be 
provided ``prior to'' the point at which a customer relationship is 
established. These commenters were concerned that the rule could be 
interpreted as requiring a financial institution to provide disclosures 
at a point different from when they must provide other federally 
mandated consumer disclosures during the process of establishing a 
customer relationship.
    In response to these comments, the Agencies have clarified the 
timing for providing initial notices. The final rule states that, as a 
general rule, the initial notice must be given not later than the time 
when a financial institution establishes a customer relationship. See 
Sec. __.4(a)(1). As stated in the preamble to the proposed rule, the 
initial notices may be provided at the same time a financial 
institution is required to give other notices, such as those required 
by the Board's regulations implementing the TILA. This approach, like 
the approach taken in the proposed rule, strikes a balance between (1) 
ensuring that consumers will receive privacy notices at a meaningful 
point along the continuum of ``establishing a customer relationship'' 
and (2) minimizing unnecessary burden on financial institutions that 
may otherwise result if the final rule were to require financial 
institutions to provide consumers with a series of notices at different 
times in a transaction.
Providing Notices After Customer Relationship Is Established
    Several commenters stated that the rule should provide financial 
institutions with the flexibility to deliver the initial notice after 
the customer relationship is established under certain circumstances. 
These commenters posited several situations in which a customer 
relationship is established without face-to-face contact between the 
consumer and financial institution. The commenters stated that delivery 
of the initial notice before the customer relationship is established 
in these situations would be impractical, and a requirement along those 
lines would have a significant adverse effect on the ability to provide 
a financial product or service to a consumer as quickly as the consumer 
desires.
    The Agencies believe that it is appropriate for financial 
institutions to have flexibility in certain circumstances to provide 
the initial notice at a point after the customer relationship is 
established. To accommodate the wider range of situations presented by 
the commenters, the Agencies have modified the examples set out in the 
proposal of when a subsequent delivery of the initial notice is 
appropriate so that they now are more broadly applicable. As stated in 
the final rule in Sec. __.4(e), a financial institution may provide the 
initial notice within a reasonable time after establishing a customer 
relationship in two instances. First, notice may be provided after the 
fact if the establishment of the customer relationship is not at the 
customer's election. See Sec. __.4(e)(1)(i). This might occur, for 
instance, when a deposit account is sold. Second, a notice may be sent 
after establishing a customer relationship when to do otherwise would 
substantially delay the consumer's transaction and the consumer agrees 
to receive the notice at a later time. See Sec. __.4(e)(1)(ii). An 
example of this would be when a transaction is conducted over the 
telephone and the customer desires prompt delivery of the item 
purchased. Another example of when this might occur is when a bank 
establishes a customer relationship with an individual under a student 
loan program as described in the final rule where loan proceeds are 
disbursed promptly without prior communication between the bank and the 
customer.
    The Agencies note that in most situations, and particularly in 
situations involving the establishment of a customer relationship in 
person, a financial institution should give the initial notice at a 
point when the consumer still has a meaningful choice about whether to 
enter into the customer relationship. The exceptions listed in the 
examples, while not exhaustive, are intended to illustrate the less 
frequent situations when delivery either would pose a significant 
impediment to the conduct of a routine business practice or the 
consumer agrees to receive the notice later in order to obtain a 
financial product or service immediately.
    In circumstances when it is appropriate to deliver an initial 
notice after the customer relationship is established, a financial 
institution should deliver the notice within a reasonable time 
thereafter. Several commenters requested that the final rule specify 
precisely how many days a financial institution has in which to deliver 
the notice under these circumstances. However, the Agencies believe 
that a rule prescribing the maximum number of days would be 
inappropriate because (a) the circumstances of when an after-the-fact 
notice is appropriate are likely to vary significantly, and (b) a rule 
that attempts to accommodate every circumstance is likely to provide 
more time than is appropriate in many instances. Thus, rather than 
establish a rule that the Agencies believe may be viewed as applicable 
in all circumstances, the Agencies have elected to retain the more 
general rule as set out in the proposal in Sec. __.4(e)(1).

[[Page 35174]]

    As the Agencies noted in the preamble to the proposed rule, nothing 
in the rule is intended to discourage a financial institution from 
providing an individual with a privacy notice at an earlier point in 
the relationship if the institution wishes to do so in order to make it 
easier for the individual to compare its privacy policies and practices 
with those of other institutions in advance of conducting transactions.
New Notices Not Required for Each New Financial Product or Service
    Several commenters asked whether a new initial notice is required 
every time a consumer obtains a financial product or service from that 
financial institution. These commenters suggested that a consumer would 
not materially benefit from repeated disclosures of the same 
information, and that requiring additional initial notices to be 
provided to the same consumer would be burdensome on financial 
institutions.
    The Agencies agree that it would be burdensome with little 
corresponding benefit to the consumer to require a financial 
institution to provide the same consumer with additional copies of its 
initial notice every time the consumer obtains a financial product or 
service. Accordingly, the final rule states, in Sec. __.4(d), that a 
financial institution will satisfy the notice requirements when an 
existing customer obtains a new financial product or service if the 
institution's initial, revised, or annual notice (as appropriate) is 
accurate with respect to the new financial product or service.
Joint Accountholders
    The majority of comments on how to provide notice suggested that 
the final rule state that a financial institution is not obligated to 
provide more than one notice to joint accountholders. Several of these 
commenters noted that disclosure obligations arising from joint 
accounts are well settled under other rules, such as the regulations 
implementing the Equal Credit Opportunity Act (Regulation B, 12 CFR 
part 202, ) and TILA. Commenters noted that under both Reg. B and Reg. 
Z, a financial institution is permitted to give only one notice. The 
authorities cited include requirements that the financial institution 
give disclosures, as appropriate, to the ``primary applicant'' if this 
is readily apparent (in the case of Reg. B; see 12 CFR 202.9(f)) or to 
a person ``primarily liable on the account'' (in the case of Reg. Z; 
see 12 CFR 226.5(b)).
    The Agencies agree that a financial institution should be allowed 
to provide initial notices in a manner consistent with other disclosure 
obligations. Accordingly, the final rule clarifies, in Sec. __.9(g), 
that only one notice is required to be sent in connection with a joint 
account. A financial institution may, in its discretion, provide 
notices to each party to the account. This situation might arise, for 
instance, when a financial institution does not want one opt out 
election to apply automatically to all joint accountholders (see 
discussion of how to provide opt out notices, below).
Mergers
    A few commenters requested guidance on what notices are required in 
the event of a merger of two financial institutions or an acquisition 
of one financial institution by another. In such a situation, the need 
to provide new initial (and opt out) notices to the customers of the 
entity that ceases to exist will depend on whether the notices 
previously given to those customers accurately reflect the policies and 
practices of the surviving entity. If they do, the surviving entity 
will not be required under the rule to provide new notices.
    As was stated in the preamble to the proposed rule, a financial 
institution may not fail to maintain the protections that it represents 
in the notice that it will provide. The Agencies expect that financial 
institutions will take appropriate measures to adhere to their stated 
policies and practices.

Section __.5  Annual Privacy Notice to Customers Required

    Section 503 of the GLB Act requires a financial institution to 
provide notices of its privacy policies and practices at least annually 
to its customers ``during the continuation'' of a customer 
relationship. The proposed rules implemented this requirement by 
requiring a clear and conspicuous notice that accurately reflects the 
privacy policies and practices then in effect to be provided at least 
once during any period of twelve consecutive months. The proposed rules 
noted that rules governing how to provide an initial notice also would 
apply to annual notices, and stated that a financial institution would 
not be required to provide annual notices to a customer with whom it no 
longer has a continuing relationship.
    Several commenters requested that the final rule permit annual 
notices to be given each calendar year, instead of every twelve months. 
A variation suggested by a few commenters was to state that notices 
must be provided during each calendar year, with no more than 15 months 
elapsing between mailings. To clarify the extent of financial 
institutions' flexibility, the final rule retains the general rule 
requiring annual notices but then provides an example, in 
Sec. __.5(a)(2)(ii), stating that a financial institution may select a 
calendar year as the 12-month period within which notices will be 
provided and provide the first annual notice at any point in the 
calendar year following the year in which the customer relationship was 
established. The final rule also requires that a financial institution 
apply the 12-month cycle to its consumers on a consistent basis.
    Several commenters suggested that a financial institution be 
permitted to make the annual notice available upon request only, 
particularly if there have been no material changes to the notice since 
it was last delivered. These commenters maintained that little value is 
added by providing customers with additional copies each year of the 
same information. Some suggested that financial institutions be 
permitted to provide a ``short-form'' annual notice, in which the 
institution informs its customers that there has been no change to its 
privacy policies and practices and that the customers may obtain a copy 
upon request.
    The Agencies have not amended the final rule to permit this 
approach, for two reasons. First, the Agencies view the statute as 
contemplating complete disclosures annually to all customers during the 
duration of the customer relationship. Section 503 of the GLB Act 
states that ``not less than annually during the continuation of [a 
customer] relationship, a financial institution shall provide a clear 
and conspicuous disclosure to such consumer [i.e., one with whom a 
customer relationship has been formed], * * * of such financial 
institution's policies and practices with respect to'' the information 
enumerated in the statute. The Agencies believe that this provision 
contemplates a full set of disclosures to each customer once a year.
    Second, the clarifications made in the final rule to the disclosure 
provisions make it clear that a financial institution is not required 
to provide a lengthy and detailed privacy notice to comply with the 
rule. Small institutions that do not share information with third 
parties beyond the statutory exceptions should be able to provide a 
short, streamlined notice. The rule also permits a financial 
institution to provide annual notices to customers over the 
institution's web site if the customer conducts transactions 
electronically and agrees to such disclosures (see additional 
discussion of this flexibility, below, in Sec. __.9). As a

[[Page 35175]]

result, the final rule achieves much of the burden reduction sought by 
those requesting a short-form annual notice option.
    Most of the remaining comments received in response to proposed 
Sec. __.5 addressed the rules governing when a customer relationship is 
terminated. Several focused on whether ``dormancy'' of a deposit 
account, which was presented as an example in the proposed rule of when 
a customer relationship is terminated, should be determined according 
to state law or a financial institution's internal policies. These 
commenters were unanimous in their view that ``dormancy'' should be 
determined according to an institution's own policies, without reliance 
on state laws that may produce conflicting results and unnecessary 
burden for institutions operating in more than one state. A few 
commenters suggested that the final rule use ``inactive'' instead of 
``dormant'' in order to avoid unintended consequences of classifying an 
account as dormant. In light of these comments, the final rule retains 
in the examples of when a customer relationship will be terminated the 
situation where there is no activity in a deposit account according to 
a financial institution's policies. The Agencies also have used the 
term ``inactive'' rather than ``dormant'' in Sec. __.5(b)(2)(i) to 
avoid the unintended consequences posited by the comments.
    A few commenters stated that the example of no communication with a 
customer for twelve months should be amended to clarify that 
promotional materials would not be considered a communication about the 
relationship sufficient to extend the duration of the customer 
relationship. These commenters generally suggested that the rule be 
tied to communications initiated by the customer. The Agencies agree 
that a communication that merely informs a person about, or seeks to 
encourage use of, a financial institution's products or services is not 
the type of communication that signifies an ongoing relationship. The 
final rule has been amended in Sec. __.5(b)(2)(iv) to reflect that the 
distribution of promotional materials will not prolong a customer 
relationship under the rule. The Agencies disagree, however, that the 
test should focus on whether there has been any customer-initiated 
contact, because there will be instances in which the customer will not 
initiate a contact with a financial institution within the relevant 
time period but nonetheless has an ongoing relationship.

Section __.6  Information To Be Included in Initial and Annual Privacy 
Notices

    Section 503 of the GLB Act identifies the items of information that 
must be included in a financial institution's initial and annual 
notices. Section 503(a) of the GLB Act sets out the general requirement 
that a financial institution must provide customers with a notice 
describing the institution's policies and practices with respect to, 
among other things, disclosing nonpublic personal information to 
affiliates and nonaffiliated third parties. Section 503(b) of the Act 
identifies certain elements that must be addressed in that notice.
    The proposed rule implemented section 503 by requiring a financial 
institution to provide information concerning:
     The categories of nonpublic personal information that a 
financial institution may collect;
     The categories of nonpublic personal information that a 
financial institution may disclose;
     The categories of affiliates and nonaffiliated third 
parties to whom a financial institution discloses nonpublic personal 
information, other than those to whom information is disclosed pursuant 
to an exception in section 502(e) of the GLB Act;
     The financial institution's policies with respect to 
sharing information about former customers;
     The categories of information that are disclosed pursuant 
to agreements with third party service providers and joint marketers 
and the categories of third parties providing the services;
     A consumer's right to opt out of the disclosure of 
nonpublic personal information to nonaffiliated third parties;
     Any disclosures regarding affiliate information sharing 
opt outs a financial institution is providing under the FCRA; and
     The bank's policies and practices with respect to 
protecting the confidentiality, security, and integrity of nonpublic 
personal information.
    The Agencies received a large number of comments concerning these 
requirements, with the majority of comments making the points 
summarized below.
Level of Detail Required
    Many commenters offered the general observation that the level of 
detail that would be required under the proposed rule would result in 
lengthy, complicated, and ultimately confusing disclosures. These 
comments have led the Agencies to conclude that additional 
clarification is required concerning the level of detail that the 
Agencies expect a financial institution's initial and annual 
disclosures to contain.
    The Agencies do not believe that the statute requires--nor do the 
Agencies intend to require--a financial institution to publish lengthy 
disclosures that identify with precision every type of information 
collected or disclosed, the name of every entity with whom the 
financial institution shares information, and a complete description of 
the technical specifications of how the institution protects its 
customers' records or the identity of each employee who has access to 
such records. Instead, the Agencies have concluded that the statute, by 
focusing on ``categories'' of information and recipients of 
information, is intended to require notices that provide consumers with 
a general description of the third parties to whom a financial 
institution discloses nonpublic personal information, the types of 
information it discloses, and the other information about the 
institution's privacy policies and practices listed above. The final 
rule, like the proposal, permits a financial institution to comply with 
these notice requirements by providing a description that is 
representative of its privacy policies and practices. The Agencies 
believe that in most cases the initial and annual disclosure 
requirements can be satisfied by disclosures contained in a tri-fold 
brochure.
    To address commenters' concerns about the likelihood that consumers 
will not read long, detailed disclosures, the Agencies have revised the 
examples of the disclosures set out in proposed Sec. __.6(c) to clarify 
the level of detail that the Agencies think is appropriate under the 
statute. Sample clauses have been provided in Appendix A to the rules, 
and guidance for certain institutions has been set out later in this 
preamble. Because the examples are not exclusive, the final rule 
permits a financial institution to use different categories than those 
provided in the examples, thereby providing additional flexibility for 
financial institutions in complying with the disclosure requirements. 
In addition, the language in Sec. __.6(a) that precedes the items of 
information to be addressed in the initial notice has been amended to 
clarify that a financial institution is required only to address those 
items that apply to the institution. Thus, for instance, if a financial 
institution does not disclose nonpublic personal information to third 
parties, it may simply omit any reference to the categories of 
affiliates and nonaffiliated third parties to whom the institution

[[Page 35176]]

discloses nonpublic personal information.
    As was noted in the preamble to the proposed rule, the required 
content is the same for both the initial and annual notices of privacy 
policies and practices. While the information contained in the notices 
must be accurate as of the time the notices are provided, a financial 
institution may prepare its notices based on current and anticipated 
policies and practices.
Short-Form Initial Notice
    The Agencies have reconsidered the need to give consumers a copy of 
a financial institution's complete initial notice when there is no 
customer relationship. In these circumstances, the Agencies believe 
that the objectives of the statute can be accomplished in a less 
burdensome way than was proposed. Accordingly, the Agencies have 
exercised their exemptive authority as provided in section 504(b) to 
create an exception to the general rule that otherwise requires a 
financial institution to provide both the initial and opt out notices 
to a consumer before disclosing nonpublic personal information about 
that consumer to nonaffiliated third parties.
    This exception is set out in Sec. __.6(d) of the final rule, which 
states that a financial institution may provide a ``short-form'' 
initial privacy policy notice along with the opt out notice to a 
consumer with whom the institution does not have a customer 
relationship. The short-form notice must clearly and conspicuously 
state that the disclosure containing information about the 
institution's privacy policies and practices is available upon request 
and provide one or more reasonable means by which the consumer may 
obtain a copy of the notice. This approach reflects the Agencies' 
belief that a consumer who does not become a customer of a financial 
institution generally may have less interest in certain elements of the 
institution's privacy policies. Relative to other aspects of the 
transaction, the consumer may receive greater benefit from obtaining a 
concise, but meaningful, opt out notice that informs the consumer about 
the categories of his or her information the institution may disclose 
and the categories of nonaffiliated third parties that may receive the 
information. The rule also requires a financial institution to provide 
a consumer who is interested in the more complete privacy disclosures 
with a reasonable means to obtain them.
Information About Affiliate Sharing
    Another point made by several commenters in response to proposed 
Sec. __.6 was that the rule should not include a requirement that 
categories of affiliates with whom a financial institution shares 
information be included in the initial and annual notices. These 
commenters pointed out that the statute specifically requires 
disclosures of categories of nonaffiliated third parties only, and that 
the only statutorily mandated disclosures concerning affiliate sharing 
are disclosures required, if any, concerning affiliate sharing pursuant 
to section 603(d)(2)(A)(iii) of the Fair Credit Reporting Act (FCRA) 
(15 U.S.C. 1681a(d)(2)(A)(iii)). \8\ These commenters concluded that 
the Agencies, by expanding the disclosure requirements in the manner 
prescribed in the proposed rule, would be exceeding their rulemaking 
authority and imposing unnecessary burden on financial institutions.
---------------------------------------------------------------------------

    \8\ Section 603(d)(2)(A)(iii) excludes from the definition of 
``consumer report'' the communication of certain consumer 
information among affiliated entities if the consumer is notified 
about the disclosure of such information and given an opportunity to 
opt out of the disclosure of that information. The information that 
can be disclosed to affiliates under this provision includes, for 
instance, information from consumer reports and applications for 
financial products or services. In general, this information 
represents personal information provided directly by the consumer to 
the institution, such as income and assets, in addition to 
information contained within consumer reports.
---------------------------------------------------------------------------

    The Agencies believe that the language and legislative history of 
section 503 support requiring disclosures of affiliate sharing beyond 
what may be required by the FCRA. First, section 503(b) does not state 
that the items listed therein are to be the only items set out in a 
financial institution's initial and annual disclosures. Instead, it 
uses the nonrestrictive phrase ``shall include'' when discussing the 
contents of the disclosures, thereby preserving flexibility for the 
Agencies (which were expressly granted authority under section 503(a) 
to prescribe rules governing these notices) to require that additional 
items be addressed in the disclosures consistent with those 
specifically enumerated.
    Second, section 503(a) states that the financial institution shall 
provide in its initial and annual notices ``a clear and conspicuous 
disclosure * * * of such financial institution's policies and practices 
with respect to--(1) disclosing nonpublic personal information to 
affiliates and nonaffiliated third parties, consistent with section 
502, including the categories of information that may be disclosed; * * 
*'' While the FCRA disclosures would be a subset of the disclosures 
required by section 503(a)(1), they may not be sufficient to fully 
satisfy that requirement.
    Third, the legislative history of the GLB Act suggests that 
Congress intended for the disclosures to provide more information about 
affiliate sharing than what may be required under the FCRA.\9\ That 
history underscores the Congressional intent of ensuring that 
individuals are given the opportunity to make informed decisions about 
the privacy policies and practices of financial institutions. The 
Agencies believe that limiting the disclosures about affiliate sharing 
just to those disclosures that may be required under the FCRA would 
frustrate that purpose.
---------------------------------------------------------------------------

    \9\ See, e.g., remarks of Sen. Gramm (noting that the privacy 
bill contains ``for the first time a full disclosure requirement. It 
requires every bank in America, when you open your account to tell 
you precisely what their policy is: Do they share personal financial 
information within the bank? Do they share it outside the bank?''), 
145 Cong. Rec. S13786 (daily ed. Nov. 3, 1999); remarks of Sen. 
Hagel, id. at S13876 (``Financial institutions would be required to 
disclose their privacy policies to their customers on a timely 
basis. If customers do not believe adequate protections exist at 
their institution, they can take their business elsewhere.'').
---------------------------------------------------------------------------

Disclosures of the FCRA Opt Out Right
    Another commonly advanced argument was that a financial institution 
should not be required to include FCRA disclosures in its annual 
notices. As previously discussed, section 503(b)(4) of the GLB Act 
requires a financial institution's initial and annual notice to include 
the disclosures required, if any, under section 603(d)(2)(A)(iii) of 
the FCRA. The proposed rules implemented section 503(b)(4) of the GLB 
Act by including the requirement that a financial institution's initial 
and annual notice include any disclosures a financial institution makes 
under section 603(d)(2)(A)(iii) of the FCRA. Several commenters pointed 
out that the FCRA requires disclosures of a consumer's right to opt out 
of affiliate sharing only once. They noted that the GLB Act states, in 
section 506(c), that nothing in the GLB Act is to be construed to 
modify, limit, or supersede the operation of the FCRA. These commenters 
maintain that the ``if any'' language of section 503(b)(4), read in the 
context of section 506, suggests that, since at most only one notice 
must be provided under the FCRA, section 503 should require only one 
FCRA disclosure under the privacy rule. The commenters concluded that, 
by requiring more notices than are required

[[Page 35177]]

under the FCRA, the Agencies would be violating this express 
preservation of the FCRA.
    As discussed above, the Agencies believe that a financial 
institution, in order to comply with the requirement that it disclose 
its policies and practices with respect to sharing information with 
affiliated and nonaffiliated third parties, must describe the 
circumstances under which it will be sharing information with 
affiliates. Clearly, the ability of consumers to opt out of affiliate 
information sharing under the FCRA affects a financial institution's 
policies and practices with respect to disclosing information to its 
affiliates. Failing to include this information and an explanation of 
how the opt out right may be exercised would, in the view of the 
Agencies, make the disclosures incomplete. Thus, a financial 
institution will need to include this information in its initial and 
annual notices.
    The Agencies note, moreover, that they disagree with the 
commenters' reading of sections 503 and 506. Section 503 does not 
distinguish between the disclosures to be provided in the initial 
notice from those to be provided in the annual notice. Thus, a plain 
reading of section 503 suggests that any disclosures that are required 
under the FCRA must be included in both the initial and annual notices.
    The Agencies interpret the ``if any'' language as a recognition 
that not all institutions provide FCRA notices because not all 
institutions engage in the type of affiliate sharing covered by the 
FCRA. By requiring the FCRA notice to appear as part of the annual 
notice under the privacy rule, the Agencies believe that they are not 
modifying, limiting, or superseding the operation of the FCRA; 
financial institutions will have exactly the same FCRA obligations 
following the effective date of the privacy rule as they had before. 
The only difference will be that, as is required by the GLB Act, a 
financial institution's initial and annual disclosures about its 
privacy policy and practices will need to reflect how the financial 
institution complies with the affiliate sharing provisions of the FCRA.
Disclosures of the Right to Opt Out
    Other commenters suggested that the final rule eliminate the 
requirement that the initial and annual notices contain disclosures 
about a consumer's right to opt out. These commenters pointed out that 
the statute does not specifically require these disclosures.
    As previously discussed, section 503(a) of the statute requires a 
financial institution to disclose its policies and practices with 
respect to sharing information, both with affiliated and nonaffiliated 
third parties. Given that a financial institution's practices with 
respect to sharing nonpublic personal information with nonaffiliated 
third parties will be affected by the opt out rights created by the 
statute, an institution will need to describe these opt out rights in 
order to provide a complete disclosure that satisfies the statute.
Other Comments
    The Agencies received many comments expressing support for a number 
of the provisions in proposed Sec. __.6. For instance, several 
commenters noted their agreement with the approach of permitting a 
financial institution to state generally that it makes disclosures to 
nonaffiliated third parties ``as permitted by law'' to describe 
disclosures made pursuant to one of the exceptions. Others agreed with 
the proposed flexibility to allow a disclosure to be based on current 
and contemplated information sharing. In light of these comments, the 
Agencies have adopted proposed Sec. __.6 with changes as discussed 
above. The final rule makes several other stylistic changes to the 
material in Sec. __.6 that are intended to make the rule easier to 
read. \10\
---------------------------------------------------------------------------

    \10\ The Agencies expect to publish proposed standards in the 
near future relating to administrative, technical, and physical 
safeguards as required by section 501(b) of the GLB Act.
---------------------------------------------------------------------------

    Section __.7  Form of Opt Out Notice to Consumers; Opt Out Methods
    Paragraph (a) of proposed Sec. __.8 required that any opt out 
notice provided by a financial institution be clear and conspicuous and 
accurately explain the right to opt out. The proposed rule also 
required a financial institution to provide the consumer with a 
reasonable means by which to opt out, required a financial institution 
to honor an opt out election as soon as reasonably practicable, and 
stated that an opt out election survived until revoked by the consumer. 
The Agencies received a large number of comments in response to each of 
these provisions, addressing the application of these rules to joint 
accounts, the means by which an opt out right may be exercised, 
duration of an opt out, the level of detail required in the opt out 
notice, and the time by which an opt out election must be honored. 
These points are addressed below.
Joint Accounts
    Most of the commenters on this issue stated that a financial 
institution should have the option of providing one notice per account, 
regardless of the number of persons on the account. The Agencies agree 
that this is appropriate, and have added a new Sec. __.7(d) to address 
this issue. Under the final rule, a financial institution has the 
option of providing only one initial, annual, and opt out notice per 
account. However, any of the accountholders must have the right to opt 
out. The final rule requires a financial institution to state in the 
opt out notice provided to a joint accountholder whether the 
institution will consider an opt out by a joint accountholder as an opt 
out by all of the associated accountholders or whether each 
accountholder is permitted to opt out separately.
Means of Opting Out
    Another issue addressed by many commenters concerned the means by 
which consumers may opt out. Several suggested that a financial 
institution, after having provided reasonable means of opting out, 
should be able to require consumers to use those means exclusively. The 
Agencies agree with this suggestion, recognizing that a financial 
institution may not have trained personnel or systems in place to 
handle opt out elections at each point of contact between a consumer 
and financial institution. Assuming a financial institution offers one 
or more of the opt out means provided in the examples in the final rule 
or a means of opting out that is comparably convenient for a consumer, 
the institution may require consumers to opt out in accordance with 
those means and choose not to honor opt out elections communicated to 
the institution through alternative means. A new paragraph (iv) has 
been added to Sec. __.7(a)(2)(iv) to reflect this.
    The final rule adds an example of a toll-free telephone number in 
Sec. __.7(a)(2)(ii)(D) as another way by which financial institutions 
may allow consumers to opt out. As stated in Sec. __.7(a)(2)(iii)(A), a 
financial institution may not require a consumer to write his or her 
own letter in order to opt out.
Duration of Opt Out
    Several commenters requested that the rule concerning duration of 
an opt out, as provided in Sec. __.8(e) of the proposal, be changed to 
require a more workable approach. These commenters noted that, under 
the proposal, a financial institution would be required to keep track 
of opt out elections forever. To illustrate their point, the commenters 
posited the example of a person who opts out during the course of 
establishing a customer relationship with a financial institution, 
terminates that relationship, and then establishes

[[Page 35178]]

another customer relationship several years later, perhaps under a 
different name or with someone on a joint account. The commenters 
suggested that it would be more appropriate in these circumstances to 
treat the opt out election made in connection with the first 
relationship as applying solely to that relationship.
    The Agencies agree with the commenters' suggestions. Thus, under 
the final rule, a financial institution is to treat an opt out election 
made by a customer in connection with a prior customer relationship as 
applying solely to the nonpublic personal information that the 
financial institution collected during, or related to, that 
relationship. That opt out will continue until the customer revokes it. 
However, if the customer relationship terminates and a new one is 
established at a later point, the financial institution must then 
provide a new opt out notice to the customer in connection with the new 
relationship and any prior opt out election does not apply to the new 
relationship.
Level of Detail Required in Opt Out Notice
    A few commenters expressed concern about the level of detail they 
perceived the proposed rule to require in an opt out notice. These 
commenters interpreted the statement in proposed Sec. __.8(a)(2) that a 
financial institution ``provides adequate notice * * * if [the 
institution] identifies all of the categories of nonpublic personal 
information that [the institution] discloses or reserves the right to 
disclose to nonaffiliated third parties as described in [Sec. __.6]'' 
as requiring a more detailed disclosure of categories of nonpublic 
personal information and nonaffiliated third parties than is required 
in the initial and annual notices.
    The Agencies did not intend this result, and specifically referred 
to Sec. __.6 in the proposed opt out provision to address precisely the 
concern raised by these commenters. The disclosures in the initial and 
annual notices of the categories of nonpublic personal information 
being disclosed and the categories of nonaffiliated third parties to 
whom the information is disclosed will suffice for purposes of the opt 
out notices as well. If the opt out notice is a part of the same 
document that contains the disclosures that must be included in the 
initial notice, then the financial institution is not required to 
restate the same information in the opt out notice. In this instance, 
the rule requires only that the categories of nonpublic personal 
information the institution intends to share and the categories of 
nonaffiliated third parties with whom it will share are clearly 
disclosed to the consumer when the opt out and privacy notices are read 
together.
    One commenter suggested that, while a financial institution should 
have the option of providing an opt out notice that is sufficiently 
broad to cover anticipated disclosures, the financial institution also 
should be permitted to provide a customer who already has opted out 
with a new opt out notice in connection with a new financial product or 
service and, if the consumer does not opt out a second time, be free to 
disclose nonpublic personal information obtained in connection with 
that financial product or service to nonaffiliated third parties. The 
Agencies believe that a financial institution should be permitted the 
flexibility to provide opt out notices that are either narrowly 
tailored to specific types of nonpublic personal information and types 
of nonaffiliated third parties or that are more broadly worded to 
anticipate future disclosure plans. However, if a consumer opts out 
after receiving an opt out notice from a financial institution that is 
broad enough to cover the new type of information sharing desired by 
that institution, the failure of the consumer to opt out again does not 
revoke the earlier opt out election.
Time by Which Opt Out Must Be Honored
    Under the proposal, a financial institution is directed to comply 
with an opt out election ``as soon as reasonably practicable.'' A large 
number of comments asked the Agencies to clarify in the final rule how 
long a financial institution has after receiving an opt out election to 
cease disclosing nonpublic personal information to nonaffiliated third 
parties. Suggestions for a more precise standard ranged from mandating 
that a financial institution stop disclosing information immediately to 
a mandatory cessation within several months of receiving the opt out. 
As was the case with other suggestions for bright-line standards in 
different contexts, the Agencies believe that it is appropriate to 
retain a more general rule in light of the wide range of practices 
throughout the financial institutions industry. A potential drawback of 
a more prescriptive rule is that an institution might use the standard 
as a safe harbor in all instances and thus fail to honor an opt out 
election as early as it is otherwise capable of doing. Another drawback 
is that a standard that is set in light of current industry practices 
and capabilities is likely to become outmoded quickly as advances in 
technology increase efficiency. The Agencies therefore decline to adopt 
a more rigid standard, and instead retain the rule as set out in 
Sec. __.7(e) of the final rule.
    For the reasons stated above, the Agencies adopt, in Sec. __.7, the 
rule governing the form of opt out notices and methods of opting out as 
discussed above. This section contains other stylistic changes to what 
was proposed in order to make the final rule easier to read.

Section __.8  Revised Privacy Notices

    The proposed rule, in Sec. __.8(c), prohibited a financial 
institution, directly or through its affiliates, from disclosing 
nonpublic personal information about its consumers to nonaffiliated 
third parties unless the institution first provided a copy of its 
privacy notice and opt out notice. The proposal also required that 
these notices be accurate when given. Thus, if an institution wants to 
disclose nonpublic personal information in a way that is not accurately 
described in its notices, the institution would be required under the 
proposed rule to provide new notices before making the disclosure in 
question.
    The Agencies received no comments raising questions about these 
requirements. Accordingly, the final rule adopts them, but sets them 
out in a separate section (Sec. __.8) in the final rule for emphasis. 
The final rule sets out examples in Sec. __.8(b) of when a new notice 
would, and would not, be required.

Section __.9  Delivering Privacy and Opt Out Notices

    The proposed rules governing delivery of initial, annual, and opt 
out notices were set out in proposed Secs. __.4(d), __.5(b), and 
__.8(b), respectively. Given the substantial similarities between the 
three sets of rules, the Agencies have decided to combine the rules in 
one section in order to make it easier for the reader. Accordingly, the 
final rule states these rules in Sec. __.9.
    The general rule requires that notices be provided in a manner so 
that each consumer can reasonably be expected to receive actual notice 
in writing, or, if the consumer agrees, electronically. The Agencies 
received a number of comments on the various provisions governing 
delivery, as discussed below.
Posting Initial Notices on a Web Site
    A few commenters suggested that a financial institution be allowed 
to

[[Page 35179]]

deliver initial notices simply by posting its notice on the 
institution's web site. The Agencies recognize that there will be 
instances when a notice on a web site may be delivered in a way that 
will enable the financial institution to reasonably expect that the 
consumer will receive it. The final rule retains, as an example of one 
way to comply with the rule, the posting of a notice on a web site and 
requiring a consumer to acknowledge receipt of the notice as a step in 
the process of obtaining a financial product or service. See 
Sec. __.9(b)(1)(iii). However, the Agencies believe that the mere 
posting of a notice on a web site would not be sufficient in all cases 
for the financial institution to reasonably expect its consumers to 
receive the notice. Accordingly, the Agencies have declined to expand 
the rule beyond the circumstance described in the example provided.
Posting Annual Notices on a Web Site
    Several commenters requested that a privacy notice posted by a 
financial institution on its web site be deemed to satisfy the annual 
notice requirement, at least for customers who agree to receive notices 
on the institution's web site. The Agencies believe that it is 
appropriate to provide annual notices in this way for customers who 
conduct transactions electronically and agree to accept notices on a 
web site. Accordingly, the Agencies have amended the rule by adding a 
new Sec. __.9(c)(1) to clarify that a financial institution may 
reasonably expect a customer who uses the institution's web site to 
access financial products or services will receive actual notice if the 
customer has agreed to accept notices at the institution's web site and 
the financial institution posts a current notice of its privacy 
policies and practices continuously and in a clear and conspicuous 
manner on the web site. The Agencies believe that this will reduce 
burden on financial institutions while ensuring that customers who 
transact business electronically will have continuous access to 
institutions' privacy policies and practices.
Disclosures to Customers Requesting No Communication
    Several commenters suggested the Agencies clarify in the final rule 
how the disclosure obligations may be met in the case of a customer who 
requests that the institution refrain from sending information about 
the customer's relationship. These commenters stated that, in this 
case, the customer's request should be honored.
    The Agencies agree. When a customer provides explicit instructions 
for a financial institution not to communicate with that customer, the 
Agencies believe that the request should be honored. The final rule 
clarifies, in Sec. __.9(c), that financial institutions need not send 
notices to a customer who requests no communication, provided that a 
notice is available upon request.
Reaccessing a Notice
    A few commenters stated that the requirement that a privacy policy 
be provided in a way that enables a customer to either retain or 
reaccess the notice should clarify that the rule obligates a financial 
institution to make available only the privacy policy currently in 
effect. These commenters were concerned about the potential for 
confusion and the burden stemming from a rule that would require a 
financial institution to make available every version of its privacy 
policies. The Agencies agree that it is appropriate to require only 
that the current privacy policy be made available to someone seeking to 
obtain it after having received the initial notice, and have amended 
the rule accordingly in Sec. __.9(e)(2)(iii).
Joint Notices
    Other commenters requested that the rule clarify that the privacy 
policies and practices of several different affiliated financial 
institutions may be described on a single notice. Related to this 
point, commenters requested that the final rule address whether 
affiliated financial institutions, each of whom has a customer 
relationship with the same consumer, may elect to send only one notice 
to the consumer on behalf of all of the affiliates covered by the 
notice and have that one notice satisfy the disclosure obligations 
under Sec. __.4 of each affiliate. The Agencies believe that financial 
institutions should be able to combine initial disclosures in one 
document. The Agencies also believe that it is appropriate to permit 
financial institutions that prepare a combined initial, annual, or 
revised notice to give, on a collective basis, a consumer only one copy 
of the notice. The final rule reflects this flexibility, in 
Sec. __.9(f). The Agencies emphasize that the notice must be accurate 
for all financial institutions using the notice and must identify by 
name each of the institutions.

Section __.10  Limits on Disclosure of Nonpublic Personal Information 
to Nonaffiliated Third Parties

    Section 502(a) of the GLB Act generally prohibits a financial 
institution, directly or through its affiliates, from sharing nonpublic 
personal information about a consumer with a nonaffiliated third party 
unless the institution provides the consumer with a notice of the 
institution's privacy policies and practices. Section 502(b) further 
requires that the financial institution provide the consumer with a 
clear and conspicuous notice that the consumer's nonpublic personal 
information may be disclosed to nonaffiliated third parties, that the 
consumer be given an opportunity to opt out of that disclosure, and 
that the consumer be informed of how to opt out. Section __.7 of the 
proposed rules implemented these provisions by requiring a financial 
institution to give the consumer the initial notice required by 
Sec. __.4, the opt out notice required by Sec. __.8, and a reasonable 
opportunity to opt out.
    Most of the comments on this section focused on the question of 
what is a reasonable opportunity to opt out. Suggestions ranged from a 
financial institution having the right to begin sharing information 
immediately (when the opt out and initial notices are provided as part 
of a transaction being conducted electronically, such as might be the 
case in an ATM transaction) up to a mandatory delay of 120 days from 
the time the notices are provided.
    The Agencies believe that the wide variety of suggestions 
underscores the appropriateness of a more general test that avoids 
setting a mandatory waiting period applicable in all cases. For 
isolated transactions where a financial institution intends to disclose 
nonpublic personal information that it obtains through an electronic 
transaction and the consumer is provided a convenient means of opting 
out as part of the transaction, it would be reasonable not to force the 
financial institution to wait a set period of time before sharing the 
information. An example of this is provided at Sec. __.10(a)(3)(iii). 
For notices that are provided by mail, the Agencies believe it is 
appropriate to allow the consumer additional time. In these latter 
instances, the Agencies consider it reasonable to permit the consumer 
to opt out by mailing back a form, by calling a toll-free number, or by 
any other reasonable means within 30 days from the date the opt out 
notice was mailed. See Sec. __.10(a)(3)(i). The final rule also 
provides an example of a reasonable opportunity for opting out in 
connection with accounts opened on-line. See Sec. __.10(a)(3)(ii). 
However, rather than try to anticipate every scenario and establish a 
time frame that would accommodate each, the Agencies think it is 
appropriate simply to state that the consumer must be given a 
reasonable opportunity to opt out and then provide a few illustrative 
examples

[[Page 35180]]

of what would be reasonable in different contexts.
    Other comments pointed out that proposed Sec. __.7(a)(3)(i) 
(Sec. __.10(a)(3)(i) of the final rule) inappropriately implied that 
the opportunity to opt out by mail is available only when a consumer 
has a customer relationship with the financial institution. The final 
rule deletes the reference to a customer relationship in that section 
to avoid creating that implication.

Section __.11  Limits on Redisclosure and Reuse of Information

    Section 502(c) of the GLB Act provides that a nonaffiliated third 
party that receives nonpublic personal information from a financial 
institution shall not, directly or indirectly through an affiliate, 
disclose the information to any person that is not affiliated with both 
the financial institution and the third party, unless the disclosure 
would be lawful if made directly by the financial institution. A 
financial institution may generally disclose nonpublic personal 
information to a nonaffiliated third party for any purpose subject to 
notice and opt out, for certain service and joint marketing 
arrangements under section 502(b), and in accordance with specific 
enumerated exceptions under section 502(e).
    The limits on redisclosure and reuse that were set out in the 
proposal reflected the Agencies' belief that implicit in the joint 
marketing and the enumerated exceptions is the idea that information 
may only be used for the purposes for which the third party received 
it.\11\ The proposed rule implemented section 502(c) by imposing limits 
on redisclosure that apply both to a financial institution that 
receives information from a nonaffiliated financial institution and to 
any nonaffiliated third party that receives nonpublic personal 
information from a financial institution. The proposed rule implemented 
the implicit limitations on use by imposing limits on the ability of 
financial institutions and nonaffiliated third parties to reuse 
nonpublic personal information they receive. The Agencies sought 
comment on whether the final rule should limit the ability of an entity 
that receives nonpublic personal information pursuant to an exception 
to use that information only for the purpose of that exception. The 
Agencies also sought comment on what the term ``lawful'' means in the 
context of section 502(c), and whether a recipient of nonpublic 
personal information could ``lawfully'' disclose information if the 
disclosure complied with a notice provided by the institution that made 
the disclosure initially. Finally, the Agencies invited comment on 
whether the rules should require a financial institution that discloses 
nonpublic personal information to a nonaffiliated third party to 
develop policies and procedures to ensure that the third party complies 
with the limits on redisclosure of that information.
---------------------------------------------------------------------------

    \11\ For example, as discussed further below, permitted use for 
an enumerated exception would not include use for marketing 
purposes.
---------------------------------------------------------------------------

    The Agencies received a large number of comments in response to 
this proposed section. A few maintained that the Agencies would exceed 
their rulemaking authority if the final rule were to retain the limits 
on reuse of information, given that section 502(c) expressly addresses 
only redisclosures and not reuse. Most comments concerning proposed 
Sec. __.12 stated that financial institutions should not have to 
monitor compliance with the redisclosure and reuse provisions of the 
rule, although these commenters said that financial institutions 
typically will contractually limit the recipient's ability to reuse 
information for purposes other than those for which the information was 
disclosed. These issues are addressed below.
Limits on Reuse and Redisclosure
    The position advanced by those critical of imposing limits on reuse 
is premised on the conclusion that Congress, by addressing limits on 
redisclosures in section 502(c), provided the only limits that may be 
imposed on what a recipient of nonpublic personal information can do 
with that information. The Agencies disagree with this premise. 
Although section 502(c) does not expressly address reuse, reuse 
limitations are, as indicated, implicit in the provisions authorizing 
or permitting disclosures. For example, it would be inconsistent with 
the purposes of the Act to permit information disclosed in accordance 
with section 502(e)(1) (which permits disclosures as necessary to 
effect, administer, or enforce a transaction with a consumer or in 
connection with certain routine activities related to such a 
transaction) to be used for the third party recipient's marketing 
purposes. Moreover, permitting reuse without limits would undermine the 
protections afforded to a consumer who does not establish a customer 
relationship. Such a person is not put on notice that the disclosures 
under section 502(e) are even made because these disclosures do not 
entitle the consumer to any privacy or opt out notice. Thus, the limits 
on reuse are the only protection the individual has arising under the 
statute. Accordingly, the Agencies have concluded that it is 
appropriate to exercise their rulemaking authority under section 
504(a)(1) (which authorizes the Agencies to write regulations necessary 
to carry out the purposes of Subtitle A of Title V) to impose limits on 
reuse when information is received under an exception in section 502(e) 
of the GLB Act.
    By contrast, when a consumer decides not to opt out after being 
given adequate notices and the opportunity to do so, that consumer has 
made a decision to permit the sharing of his or her nonpublic personal 
information with the categories of entities identified in the financial 
institution's notices. The consumer's primary protection in the case of 
a disclosure falling outside the section 502(e) exceptions comes from 
receiving the mandatory disclosures and the right to opt out. The 
statute provides only the additional protection in section 502(c), 
restricting a recipient's ability to redisclose information to entities 
that are not affiliated with either the recipient or the financial 
institution making the disclosure initially. Thus, if a consumer 
permits a financial institution to disclose nonpublic personal 
information to the categories of nonaffiliated third parties that are 
described in the institution's notices, recipients of that nonpublic 
personal information appear authorized under the statute to make 
disclosures that comply with those notices.
    To implement this statutory scheme, the Agencies have imposed the 
following limits on redisclosure and reuse, which will vary depending 
on whether the information was provided pursuant to one of the 502(e) 
exceptions or otherwise.
    Limits on redisclosure and reuse when information is received 
pursuant to section 502(e). For nonpublic personal information provided 
pursuant to section 502(e), a financial institution receiving the 
information may disclose the information to its affiliates or to 
affiliates of the financial institution from which the information was 
received. It may also disclose and use the information pursuant to an 
exception in Secs. __.14 or __.15 in the ordinary course of business to 
carry out the activity covered by the exception under which the 
institution received the information. The financial institution's 
affiliates may disclose and use the information, but only to the extent 
permissible for the financial institution.
    These same general rules apply to a non-financial institution third 
party that receives nonpublic personal information from a financial 
institution under

[[Page 35181]]

section 502(e). Thus, the third party receiving the information 
pursuant to one of the section 502(e) exceptions may disclose the 
information to its affiliates or to the affiliates of the financial 
institution that made the disclosure. The third party also may disclose 
and use the information pursuant to one of the section 502(e) 
exceptions as noted in the rule. The affiliates of the third party may 
disclose and use the information only to the extent permissible for the 
third party.
    Limits on redisclosure when information is not received pursuant to 
section 502(e). For nonpublic personal information provided outside one 
of the section 502(e) exceptions, the financial institution receiving 
the information may disclose the information to its affiliates or to 
the affiliates of the financial institution that made the initial 
disclosure. It may also disclose the information to any other person, 
if the disclosure would be lawful if made directly by the financial 
institution from which the information was received. This would enable 
the receiving institution to disclose pursuant to one of the section 
502(e) exceptions. It also would permit the receiving institution to 
redisclose information in accordance with the opt out and privacy 
notices given by the institution making the initial disclosures, as 
limited by any opt out elections received by that institution. The 
affiliates of a financial institution that receives nonpublic personal 
information may disclose only to the extent that the financial 
institution may disclose the information.
    If a third party receives information from a financial institution 
outside one of the section 502(e) exceptions, the third party may 
disclose to its affiliates or to the affiliates of the financial 
institution. It may also disclose to any other person if the disclosure 
would be lawful if made by the financial institution. The third party's 
affiliates may disclose and use the information to the same extent 
permissible for the third party.
    In cases where an entity receives information outside of one of the 
section 502(e) exceptions, that entity will in essence ``step into the 
shoes'' of the financial institution that made the initial disclosures. 
Thus, if the financial institution made the initial disclosures after 
representing to its consumers that it had carefully screened the 
entities to whom it intended to disclose the information, the receiving 
entity must comply with those representations. Otherwise, the 
subsequent disclosure by the receiving entity would not be in 
accordance with the notices given to consumers and would not, 
therefore, be lawful. Even if such representations do not prevent the 
recipient from redisclosing the information, the recipient's ability to 
redisclose will be limited by whatever opt out instructions were given 
to the institution making the initial disclosures and by whatever new 
opt out instructions that are given after the initial disclosure. The 
receiving entity, therefore, must have procedures in place to 
continually monitor the status of who opts out and to what extent. 
Given these practical limitations on the ability of a recipient to 
disclose pursuant to another institution's privacy and opt out notices, 
redisclosure of information is most likely to arise under one of the 
section 502(e) exceptions (as implemented by Secs. __.14 and __.15 of 
the final rule).
Monitoring Third Parties
    The Agencies have decided not to amend their respective rules to 
impose a specific duty on financial institutions to monitor third 
parties' use of nonpublic personal information provided by the 
institutions. This does not address whether obligations to do so may 
arise in other contexts. The Agencies note, for instance, that most of 
the commenters who requested that the Agencies not impose such a duty 
stated that they have contracts in place that limit what the recipient 
may do with the information. The Agencies also note that the limits on 
reuse as stated in the final rule provide a basis for an action to be 
brought against an entity that violates those limits.

Section __.12  Limits on Sharing Account Number Information for 
Marketing Purposes

    Section 502(d) of the GLB Act prohibits a financial institution 
from disclosing, ``other than to a consumer reporting agency, an 
account number or similar form of access number or access code for a 
credit card account, deposit account, or transaction account of a 
consumer to any nonaffiliated third party for use in telemarketing, 
direct mail marketing, or other marketing through electronic mail to 
the consumer.'' Proposed Sec. __.13 applied this statutory prohibition 
to disclosures made directly or indirectly by a financial institution, 
and sought comment on whether one or more exceptions to the flat 
prohibition should be created.
    The Agencies received comments from people who suggested that 
various exceptions be created as well as from people who believe that a 
flat prohibition is necessary to protect consumers from unscrupulous 
practices. After considering the suggestions from all of the commenters 
addressing this issue, the Agencies have decided to amend proposed 
Sec. __.13 by (a) adding two exceptions that the Agencies believe are 
necessary for financial institutions to engage in legitimate, routine 
business practices and that are unlikely to pose a significant 
potential for abuse and (b) clarifying that the prohibition does not 
apply in two circumstances frequently mentioned in the comments. These 
exceptions and clarifications are discussed below.
Disclosures to a Financial Institution's Agent or Service Provider
    Many financial institutions noted that they use agents or service 
providers to conduct marketing on the institution's behalf. This might 
occur, for instance, when an insured depository institution instructs a 
service provider that assists in the delivery of monthly statements to 
include a ``statement stuffer'' with the statement informing consumers 
about a financial product or service offered by the institution. The 
Agencies recognize the need to disclose account numbers in this 
instance, and believe that there is little risk to the consumer 
presented by such disclosure.
    Similarly, the Agencies recognize that a financial institution may 
use agents to market the institution's own financial products and 
services. Commenters advocating that the final rule exclude disclosures 
to agents stated that the agents effectively act as the financial 
institution in the marketing of the institution's financial products 
and services. These commenters suggested that there was no more reason 
to preclude sharing the account numbers with an agent hired to market 
the institution's financial products and services than there would be 
to preclude sharing between two departments of the same institution. 
The Agencies are concerned, however, about the possibility of 
transactions being consummated by a financial institution's agent who 
may be engaging in practices contrary to the institution's 
instructions. While the Agencies recognize that a financial institution 
frequently will use agents to assist it in marketing its products, the 
Agencies believe that a consumer's protections are potentially eroded 
by allowing agents to have access to a consumer's account. Accordingly, 
the Agencies have added an exception in Sec. __.12(b)(1) that would 
permit disclosures of account numbers by a financial institution to an 
agent for the purpose of marketing the financial institution's 
financial product or services, but have qualified that exception by 
requiring

[[Page 35182]]

that the agent have no authority to initiate charges to the account.
Private Label Credit Cards and Affinity Programs
    Many commenters stated that the final rule should not prevent the 
disclosure of account numbers in the situation where a consumer chooses 
to participate in a private label credit card program or other affinity 
program. Under these programs, a consumer typically will be offered 
certain benefits, often by a retail merchant, in return for using a 
credit card that is issued by a particular financial institution. The 
commenters suggested that, in the example of an affinity program, the 
consumer understands the need for the merchant and financial 
institution to share the consumer's account number. The Agencies agree 
that this type of disclosure is appropriate and does not create a 
significant risk to the consumer. Accordingly, Sec. __.12(b)(2) has 
been added to the final rule to exclude the sharing of account numbers 
where the participants are identified to the consumer at the time the 
consumer enters into the program.
Encrypted Numbers
    Many commenters urged the Agencies to exercise their exemptive 
authority to permit the transmission of account numbers in encrypted 
form. Several commenters noted that encrypted account numbers and other 
internal identifiers of an account are frequently used to ensure that a 
consumer's instructions are properly executed, and that the inability 
to continue using these internal identifiers would increase the 
likelihood of errors in processing a consumer's instructions. These 
commenters also point out that if internal identifiers may not be used, 
a consumer would need to provide an account number in order to ensure 
proper handling of a request, which would expose the consumer to a 
greater risk than would the use of an internal tracking system that 
preserves the confidentiality of a number that may be used to access 
the account.
    The Agencies believe an encrypted account number without the key is 
something different from the number itself and thus falls outside the 
prohibition in section 502(d). In essence, it operates as an identifier 
attached to an account for internal tracking purposes only. The 
statute, by contrast, focuses on numbers that provide access to an 
account. Without the key to decrypt an account number, an encrypted 
number does not permit someone to access an account.
    In light of the statutory focus on access numbers, and given the 
demonstrated need to be able to identify which account a financial 
institution should debit or credit in connection with a transaction, 
the Agencies have included a clarification in Sec. __.12(c)(1) of the 
final rule stating that an account number, or similar form of access 
number or access code, does not include a number or code in an 
encrypted number form, as long as the financial institution does not 
provide the recipient with the means to decrypt the number. The 
Agencies believe that consumers will be adequately protected by 
disclosures of encrypted account numbers that do not enable the 
recipient to access the consumer's account.
Definition of ``Transaction Account''
    Several commenters suggested that the final rule clarify that 
accounts to which no charge may be posted are not covered by the 
prohibition against disclosing account numbers. These commenters 
frequently cited mortgage loan accounts as typical of those that should 
fall outside the scope of the prohibition. The Agencies agree with the 
principle behind these suggestions. However, the Agencies note that 
there have been instances in which a borrower's monthly payments on a 
mortgage loan have been increased in connection with the marketing of a 
financial product or service without the borrower's knowledge or 
permission. Accordingly, the final rule clarifies, in Sec. __.12(c)(2), 
that a transaction account is an account other than a deposit account 
or a credit card account, and does not include an account to which 
third parties cannot initiate charges. If it would be possible, for 
instance, for a third party marketer to initiate a charge to a mortgage 
loan account, then the final rule would prohibit the disclosure of that 
account number to the marketer.

Section __.13  Exception to Opt Out Requirements for Service Providers 
and Joint Marketing

    Section 502(b) of the GLB Act creates an exception to the opt out 
rules for the disclosure of information to a nonaffiliated third party 
for use by the third party to perform services for, or functions on 
behalf of, the financial institution, including the marketing of the 
financial institution's own products or services or financial products 
or services offered pursuant to a joint agreement between two or more 
financial institutions. A consumer will not have the right to opt out 
of disclosing nonpublic personal information about the consumer to 
nonaffiliated third parties under these circumstances, if the financial 
institution ``fully discloses'' to the consumer that it will provide 
this information to the nonaffiliated third party before the 
information is shared and enters into a contract with the third party 
that requires the third party to maintain the confidentiality of the 
information. As noted in the proposed rule, this contract should be 
designed to ensure that the third party (a) will maintain the 
confidentiality of the information at least to the same extent as is 
required for the financial institution that discloses it, and (b) will 
use the information solely for the purposes for which the information 
is disclosed or as otherwise permitted by Secs. __.10 and __.11 of the 
proposed rules.
    The majority of the comments on this exception expressed concern 
that routine servicing agreements between a financial institution and, 
for instance, a loan servicer would be subject to the requirements of 
proposed Sec. __.9 (Sec. __.13 in the final rule). These commenters 
consistently pointed out that section 502(e) of the GLB Act contains 
several exceptions for the sharing of information by a financial 
institution that is necessary to permit a third party to perform 
services for a financial institution. The commenters requested 
clarification that disclosures made pursuant to one of the section 
502(e) exceptions are not subject to the requirements imposed on 
disclosures made pursuant to section 502(b)(2) of the GLB Act. The 
Agencies agree that when a disclosure may be made under section 502(e), 
the statute permits that disclosure without the financial institution 
first complying with the requirements imposed by section 502(b)(2).
    A related issue is whether a financial institution must satisfy the 
disclosure obligations of section 502(b)(2) and have a confidentiality 
agreement in the case of a service provider that is performing an 
activity governed by section 502(b)(2) (i.e., those that are not 
covered by one of the section 502(e) exceptions). Several commenters 
maintained that it is illogical to impose a set of requirements on 
disclosures to the section 502(b)(2) service providers when no such 
requirements are imposed on the section 502(e) service providers. The 
Agencies believe, however, that a plain reading of section 502(b)(2) 
leads to that result.\12\ The Agencies read the phrase

[[Page 35183]]

``if the financial institution fully discloses * * *'' as used in 
section 502(b)(2) as modifying the phrase ``This subsection shall not 
prevent a financial institution from providing nonpublic personal 
information to a nonaffiliated third party to perform services for or 
functions on behalf of the financial institution, * * *'' The Agencies 
thus have concluded that any disclosure to a service provider not 
covered by section 502(e) must satisfy the disclosure and written 
contract requirements of section 502(b)(2).
---------------------------------------------------------------------------

    \12\ The statute states, in relevant part, that section 502(b) 
``* * shall not prevent a financial institution from providing 
nonpublic personal information to a nonaffiliated third party to 
perform services for or functions on behalf of the financial 
institution, including the marketing of the financial institution's 
own products or services, or financial products or services offered 
pursuant to joint agreements between two or more financial 
institutions that comply with the requirements imposed by the 
regulations prescribed under section 504, if the financial 
institution fully discloses the providing of such information and 
enters into a contractual agreement with the third party that 
requires the third party to maintain the confidentiality of such 
information.''
---------------------------------------------------------------------------

    Several other commenters addressed the question of whether the rule 
should include safeguards beyond those provided by the statute to 
protect a financial institution from the risks that can arise from 
agreements with third parties. Most suggested that safety and soundness 
concerns were more appropriately addressed in a forum other than a rule 
designed to protect consumers' financial privacy. Others opined that 
financial institutions did not need the rule to mandate certain 
protections on their behalf. The Agencies have concluded that the 
protections set out in the statute, as implemented by Sec. __.13(a)(1), 
are adequate for purposes of the privacy rule. Those protections 
require a financial institution to provide the initial notice required 
by Sec. __.4 of the final rule as well as enter into a contractual 
agreement with a third party that prohibits the third party from 
disclosing or using the information other than to carry out the 
purposes for which the bank disclosed the information, including use 
under an exception in Secs. __.14 or __.15 in the ordinary course of 
business to carry out those purposes. These limitations will preclude 
recipients from sharing a consumer's nonpublic personal information 
pursuant to a chain of third party joint marketing agreements.
    Several commenters asked whether a financial institution would have 
to modify existing contracts with third parties to comply with the 
rule. The Agencies believe that a balance must be struck that minimizes 
interference with existing contracts while preventing evasions of the 
regulation. To achieve these goals, the final rule states, in 
Sec. __.18(c), that contracts entered into on or before July 1, 2000 
must be brought into compliance with the provisions of Sec. __.13 by 
July 1, 2002.
    For the reasons expressed above, the Agencies have adopted, in 
Sec. __.13 of the final rule, the provisions that were set out in 
Sec. __.9 of the proposal with the changes noted above. The Agencies 
note that financial institutions should remain vigilant in their 
efforts to ensure that agreements they enter into with third parties do 
not expose the institutions to undue risks. These risks are 
particularly prevalent in arrangements whereby a financial institution 
endorses or sponsors a financial product or service offered by the 
third party.

Section __.14  Exceptions to Notice and Opt Out Requirements for 
Processing and Servicing Transactions

    As previously discussed, section 502(e) of the GLB Act creates 
exceptions to the requirements that apply to the disclosure of 
nonpublic personal information to nonaffiliated third parties. 
Paragraph (1) of that section sets out certain exceptions for 
disclosures made, generally speaking, in connection with the 
administration, processing, servicing, and sale of a consumer's 
account. Proposed Sec. __.10 implemented those exceptions by restating 
them with only stylistic changes that were intended to make the 
exceptions easier to read. The preamble to that proposed section noted 
that the exceptions set out in proposed Sec. __.10 (as well as the 
exceptions set out in Sec. __.11 of the proposal) do not affect a 
financial institution's obligation to provide initial notices of its 
privacy policies and practices prior to the time it establishes a 
customer relationship and annual notices thereafter.
    The Agencies received several comments from institutions pointing 
out that, by deleting the statutory phrase ``in connection with'' from 
the exceptions for information shared (a) to service or process a 
financial product or service requested by the consumer or (b) to 
maintain or service a customer account, the Agencies narrowed the 
application of the exception. The Agencies did not intend this result, 
and have changed the final rule accordingly. See Sec. __.14(a).
    Several other commenters requested that the final rule specifically 
state that certain services, such as those provided by attorneys, 
appraisers, and debt collectors (as appropriate), are ``necessary'' to 
effect, administer, or enforce a transaction, as that term is used in 
paragraph (a) and defined in paragraph (b) of proposed Sec. __.10. 
Others cited examples of entities seeking to verify funds availability 
or obtain loan payoff information as instances where a disclosure would 
fall within the exceptions described in proposed Sec. __.10. The 
Agencies believe that disclosures to these types of professionals and 
under the circumstances posited by the commenters may be necessary to 
effect, administer, or enforce a transaction in a given situation. 
However, the Agencies have not listed specific types of disclosures in 
the regulation as necessarily falling within the scope of the exception 
because they are concerned that a general statement could be applied 
inappropriately to shelter disclosures that, in fact, are not necessary 
to effect, administer, or enforce a transaction.
    Other commenters suggested that the final rule clarify, in 
situations where a financial institution uses an agent to provide 
services to a consumer, that the consumer need not have directly 
requested or authorized the service provider to provide the financial 
product or service but may request it from the principal instead. The 
Agencies agree that the communication may be between the consumer and 
the service provider, and note that the rule governing agents as set 
out in the definition of ``consumer,'' above, provides the flexibility 
sought by the commenters. Briefly stated, an individual will not be a 
consumer of an entity that is acting as agent for another financial 
institution in connection with that financial institution's providing a 
financial product or service to the consumer.

Section __.15  Other Exceptions to Notice and Opt Out Requirements

    As noted above, section 502(e) contains several exceptions to the 
requirements that otherwise would apply to the disclosures of nonpublic 
personal information to nonaffiliated third parties. Proposed 
Sec. __.11 set out those exceptions for disclosures that are not made 
in connection with the administration, processing, servicing, and sale 
of a consumer's account, and made stylistic changes to the statutory 
language intended to clarify the exceptions. The proposal also provided 
an example of the consent exception in the context of a financial 
institution that has received an application from a consumer for a 
mortgage loan informing a nonaffiliated insurance company that the 
consumer has applied for a loan. The Agencies invited comment on 
whether safeguards should be added to the exception for consent in 
order to minimize the potential for consumer confusion.
    Several commenters responded to the request for comment on whether 
the consent exception should include

[[Page 35184]]

safeguards, such as a requirement that the consent be written, be 
indicated by a signature on a separate line, or automatically terminate 
after a certain period of time. Of these, some favored the additional 
safeguards discussed in the proposal, while others maintained that 
safeguards are unnecessary. Several suggested that the consent 
exception include a provision noting that participation in a program 
where a consumer receives ``bundled'' products and services (such as 
would be the case, for instance, in an affinity program) necessarily 
implies consent to the disclosure of information between the entities 
that provide the bundled products or services. Others suggested that 
certain terms and conditions be imposed on any consent agreement, such 
as a time by which the financial institution must stop disclosing 
nonpublic personal information once a consent is revoked.
    The Agencies have declined to elaborate on the requirements for 
obtaining consent or the consumer safeguards that should be in place 
when a consumer consents. The Agencies believe that the resolution of 
this issue is appropriately left to the particular circumstances of a 
given transaction. The Agencies note that any financial institution 
that obtains the consent of a consumer to disclose nonpublic personal 
information should take steps to ensure that the limits of the consent 
are well understood by both the financial institution and the consumer. 
If misunderstandings arise, consumers may have means of redress, such 
as in situations when a financial institution obtains consent through a 
deceptive or fraudulent practice. Moreover, a consumer may always 
revoke his or her consent. In light of the safeguards already in place, 
the Agencies have decided not to add safeguards to the consent 
exception.
    Many commenters offered specific suggestions for additional 
exceptions or amendments to the proposed exceptions. In many cases, the 
suggestions are accommodated elsewhere in the regulation (such as is 
the case, for instance, for exceptions to permit (a) verification of 
available funds or (b) disclosures to or by appraisers, flood insurers, 
attorneys, insurance agents, or mortgage brokers to effect a 
transaction). In other cases, the suggestions are inconsistent with the 
statute (as is the case, for instance, with one commenter's suggestion 
that the Agencies completely exempt a financial institution from all of 
the statute's requirements if the institution makes no disclosures 
other than what is permitted by section 502(e)). While the Agencies 
recognize the merits of many of the remaining suggestions, they believe 
that the volume and complexity of these suggestions exceed what is 
appropriate in a regulation. Accordingly, the Agencies have retained, 
in Sec. __.15, the statement of the exceptions as proposed and invite 
interested parties to pursue with the Agencies clarifications as 
necessary in their particular circumstance.

Section __.16  Protection of Fair Credit Reporting Act

    Section 506 of the GLB Act makes several amendments to the FCRA to 
vest rulemaking authority in various agencies and to restore the 
Agencies' regular examination authority. Paragraph (c) of section 506 
states that, except for the amendments noted regarding rulemaking 
authority, nothing in Title V of the GLB Act is to be construed to 
modify, limit, or supersede the operation of the FCRA, and no inference 
is to be drawn on the basis of the provisions of Title V whether 
information is transaction or experience information under section 603 
of the FCRA. Proposed Sec. __.14 implemented section 506(c) of the GLB 
Act by restating the statute, making only minor stylistic changes 
intended to make the rule clearer.
    Comments about this provision focused on whether the Agencies, by 
requiring annual notice of a consumer's right to opt out under the 
FCRA, were modifying, limiting, or superseding the operation of the 
FCRA. For the reasons explained in the discussion of Sec. __.6, above, 
the Agencies do not believe that the annual disclosure mandated by the 
GLB Act affects in any way the obligations imposed by the FCRA.
    The Agencies received no other comment on this section, and, 
therefore, adopt the text set out in Sec. __.14 of the proposal. See 
Sec. __.16.

Section __.17  Relation to State Laws

    Section 507 of the GLB Act states, in essence, that Title V does 
not preempt any State law that provides greater protections than are 
provided by Title V. Determinations of whether a State law or Title V 
provides greater protections are to be made by the Federal Trade 
Commission (FTC) after consultation with the agency that regulates 
either the party filing a complaint or the financial institution about 
whom the complaint was filed, and may be initiated by any interested 
party or on the FTC's own motion. Proposed Sec. __.15 essentially 
restated section 507, noting that the proposed rules (as opposed to the 
statute) do not preempt State laws that provide greater protection for 
consumers than do the rules.
    Comments on this section ranged from those who suggested that 
federal law should preempt state law in every case where there is a 
conflict to those who encouraged the Agencies to support the rights of 
states to enact greater protections. Some requested clarification of 
whether a particular state law would be considered more restrictive, 
while others suggested that the Agencies establish in the final rule a 
choice of law principle for financial institutions operating in more 
than one state. The Agencies believe that these and other suggestions 
made by the commenters exceed the scope of this rulemaking and are 
better addressed, to the extent the Agencies have authority to address 
them, in other forums. Accordingly, the Agencies have adopted the text 
set out in proposed Sec. __.15. See Sec. __.17 of the final rule.

Section __.18  Effective Date; Transition Rule

    Section 510 of the GLB Act states that, as a general rule, the 
relevant provisions of Title V take effect 6 months after the date on 
which rules are required to be prescribed, i.e., November 12, 2000. 
However, section 510(1) authorizes the Agencies to prescribe a later 
date in the rules enacted pursuant to section 504. The proposed rule 
sought comment on the effective date prescribed by the statute. It also 
would have required that financial institutions provide initial 
notices, within 30 days of the effective date of the final rule, to 
people who were customers as of the effective date. The preamble to the 
proposed rule noted that a financial institution would have to provide 
opt out notices before the rule's effective date if the institution 
wanted to continue sharing nonpublic personal information with 
nonaffiliated third parties without interruption.
    The overwhelming majority of commenters addressing this provision 
requested additional time to comply with the final rule. Commenters 
stated that six months would not be sufficient to take the steps needed 
to comply with the regulation, including preparing new disclosure 
forms, developing software needed to track opt outs, training 
employees, creating management oversight systems, and undergoing 
internal examination and auditing to ensure compliance. Several 
commenters suggested that it would be less effective and potentially 
more confusing for consumers to receive several notices all around the 
end of the year 2000 than it would be for the notices to be delivered 
during a rolling phase-in. Others noted that the proposed effective 
date would

[[Page 35185]]

place a severe strain on financial institutions at a time when other 
year-end notices need to be prepared and delivered. Several commenters 
noted that financial institutions have not budgeted for the expenses in 
the current year that likely will be incurred. They also noted that the 
disclosures regarding the standards to be followed to protect 
customers' records have not been proposed for comment, thereby making 
it impossible for financial institutions to know how to prepare at 
least that part of the initial privacy notices. Requests for extensions 
of the effective date typically ranged from 12 months to 24 months from 
the date the final rules are published.
    Many commenters also stated that a 30-day phase-in for initial 
notices to existing customers is not feasible, given the large number 
of notices, the short period of time allowed, and the competing demands 
on financial institutions at the time when the initial notices must be 
sent. A few suggested that the rule require initial notices to be sent 
only to people who establish customer relationships after the effective 
date of the rule, and allow a financial institution to send annual 
notices to existing customers at some point during the next 12 months 
and annually thereafter.
    The Agencies agree that six months may be insufficient in certain 
instances for a financial institution to have ensured that its forms, 
systems, and procedures comply with the rule. In order to accommodate 
situations requiring additional time, the Agencies have retained the 
effective date of November 13, but, consistent with their authority 
under section 510(1) of the GLB Act to extend the effective date, the 
Agencies will give financial institutions until July 1, 2001 to be in 
full compliance with the regulation. Financial institutions are 
expected, however, to begin compliance efforts promptly, to use the 
period prior to June 30, 2001, to implement and test their systems, and 
to be in full compliance by July 1, 2001. Given that this provides 
financial institutions with slightly over 13 months in which to comply 
with the rule, the Agencies have determined that there no longer is any 
need for a separate phase-in for providing initial notices. Thus, a 
financial institution will need to deliver all required opt out notices 
and initial notices before July 1, 2001.
    Financial institutions are encouraged to provide disclosures as 
soon as practicable. Institutions that do not disclose nonpublic 
personal information to third parties have fewer burdens under the 
regulation (both in terms of the notice requirements and opt out 
mechanism) and should therefore be able to provide privacy notices to 
their consumers more expeditiously. Depending on the readiness of an 
institution to process opt out elections, institutions might wish to 
consider including the privacy and opt out notices in the same mailing 
as is used to provide tax information to consumers in the first quarter 
of 2001 to increase the likelihood that a consumer will not mistake the 
notices for an unwanted solicitation. The Agencies believe that this 
extension represents a fair balance between those seeking prompt 
implementation of the protections afforded by the statute and those 
concerned about the reliability of the systems that are put in place.
    The Agencies have concluded that the extension of the date by which 
financial institutions must be in full compliance provides much of the 
relief sought by those who suggested that initial notices should not be 
required for existing customers. By allowing financial institutions to 
deliver notices over a significantly longer period of time than was 
proposed, the concentrated burden that would have been imposed by the 
proposed rule is avoided. Accordingly, the Agencies have decided not to 
adopt the suggestion that initial notices be required only for new 
customers after the effective date of the rule.
    Initial notices need not be given to customers whose relationships 
have terminated prior to the date by which institutions must be in 
compliance with the rule. Thus, if an account is inactive according to 
a financial institution's policies before July 1, 2001, then no initial 
notice would be required in connection with that account. However, 
because these former customers would remain consumers, a financial 
institution would have to provide a privacy and opt out notice to them 
if the financial institution intended to disclose their nonpublic 
personal information to nonaffiliated third parties beyond the 
exceptions in Secs. __.14 and __.15.
    The Agencies note that full compliance with the rule's restrictions 
on disclosures is required on July 1, 2001. To be in full compliance, 
institutions must have provided their existing customers with a privacy 
notice, an opt out notice, and a reasonable amount of time to opt out 
prior to that date. If these have not been provided, the disclosure 
restrictions will apply. This means that an institution would have to 
cease sharing customers' nonpublic personal information with 
nonaffiliated third parties on that date, unless it may share the 
information pursuant to an exception under Secs. __.14 or __.15. 
Financial institutions that both provide the required notices and allow 
a reasonable period of time to opt out before July 1, 2001, may 
continue to share nonpublic personal information after that date for 
customers who do not opt out.

Appendix A--Sample Clauses

    In order to provide additional guidance to financial institutions 
concerning the level of detail the Agencies believe is appropriate 
under the statute, the Agencies have prepared a variety of sample 
clauses for financial institutions to consider. The Agencies urge 
financial institutions to carefully review whether these clauses 
accurately reflect a given institution's policies and practices before 
using the clauses. Financial institutions are free to use different 
language and to include additional detail as they think is appropriate 
in their notices.

Derivation Chart

    Below is a chart showing the derivation of the sections in the 
final privacy rule from the proposal. Only changes are noted.

----------------------------------------------------------------------------------------------------------------
                     Proposal                            Content of provision                Final rule
----------------------------------------------------------------------------------------------------------------
4(d)..............................................  How to provide initial notice  9(a)
N/A...............................................  New product for existing       4(d)
                                                     customer.
4(d)(3)...........................................  Oral delivery................  9(d)
4(d)(4)...........................................  Retainable notice............  9(e)
N/A...............................................  Joint relationships (privacy   9(g)
                                                     notice).
5(b)..............................................  How to provide annual notice.  9(a)
5(b)..............................................  Actual notice of annual        9(c)
                                                     notice.
5(c)..............................................  Terminated customer            5(b)
                                                     relationships.
N/A...............................................  Delivering short-form initial  6(d)
                                                     notices.
7.................................................  Main operative provision.....  10

[[Page 35186]]


8(a)..............................................  Opt out methods and opt out    7(a)
                                                     notice content.
8(b)(1)...........................................  How to deliver opt out         9(a)
                                                     notices.
8(b)(2)...........................................  Oral delivery................  9(d)
8(b)(3)...........................................  Same form as initial notice..  7(b)
8(b)(4)...........................................  Initial notice must accompany  7(c)
                                                     opt out notice.
N/A...............................................  Joint relationships (opt out   7(d)
                                                     notice).
8(d)..............................................  Time to comply with opt out;   7(e) & (f)
                                                     continuing right to opt out.
8(e)..............................................  Duration of opt out..........  7(g)
8(c)(1)...........................................  Revised notices..............  8(a)
8(c)(2)...........................................  How to deliver revised notice  8(c)
8(c)(3)...........................................  Examples of when revised       8(b)
                                                     notice is required.
9.................................................  Exception for service          13
                                                     providers and joint
                                                     marketers.
10................................................  Exceptions for processing and  14
                                                     servicing transactions.
11................................................  Other exceptions.............  15
12................................................  Redisclosure and reuse.......  11
13................................................  Sharing account number         12
                                                     information.
14................................................  FCRA.........................  16
15................................................  State law....................  17
16................................................  Effective date...............  18
----------------------------------------------------------------------------------------------------------------

IV. Guidance for Certain Institutions

    To minimize the burden and costs to a financial institution 
(``you'') and generally clarify the operation of the final rule, the 
Agencies have included this guidance that you may use in conjunction 
with the sample clauses in Appendix A. This guidance specifically 
applies to you if you:
    (1) Do not have any affiliates;
    (2) Only disclose nonpublic personal information to nonaffiliated 
third parties in accordance with an exception under Secs. __.14 or 
__.15, such as in connection with servicing or processing a financial 
product or service that a consumer requests or authorizes; and
    (3) Do not reserve the right to disclose nonpublic personal 
information to nonaffiliated third parties, except under Secs. __.14 
and __.15.\13\
---------------------------------------------------------------------------

    \13\ If you disclose or reserve the right to disclose nonpublic 
personal information to a nonaffiliated third party under other 
circumstances, you must comply with other provisions in the rule, 
notably Secs. __.7, __.8, and __.13, if applicable. If you disclose 
or reserve the right to disclose nonpublic personal information to 
an affiliate you must comply with other provisions in the rule, 
notably Sec. __.6(a)(7), as applicable.
---------------------------------------------------------------------------

    In addition, if you disclose nonpublic personal information in 
accordance with the exception in Sec. __.13, for service providers and 
joint marketers, you also must include an accurate description of that 
information, as illustrated by the sample clause in section (K) below.
    In general, if you disclose nonpublic personal information to 
nonaffiliated third parties only as authorized under an exception, then 
your only responsibilities under the regulation are to provide initial 
and annual notices to each of your customers. You do not need to 
provide an opt out notice or opt out rights to your customers.

A. Initial Notice to Customers

    You must provide an initial notice to each of your customers. A 
customer is a natural person who has a continuing relationship with 
you, as described in Sec. __.4(c). For instance, an individual who 
opens a credit card or checking account with you is your customer. By 
contrast, an individual who uses your ATM to withdraw funds from a 
checking account at another financial institution is not your customer. 
Even if an individual repeatedly uses your ATM that individual is not 
your customer. In other words, you must provide initial and annual 
notices to each of your customers, but not to others.

B. Time to Provide Initial Notice

    You must provide an initial privacy notice to each of your 
customers not later than when you establish a customer relationship 
(Sec. __.4(a)(1)). For instance, you must provide a privacy notice to 
an individual not later than when that individual executes the contract 
to open a checking account. Thus, you can provide the notice to a 
checking account customer together with the account agreement and 
signature card.
    Similarly, in the case of a loan, you must provide a privacy notice 
to an individual not later than when that individual executes the loan 
contract. For example, you can provide the notice to an individual 
together with the documents (or other forms) that constitute the loan 
contract. You may always deliver your privacy notices earlier than 
required.
    If one of your existing customers obtains a new financial product 
or service from you, then you need not provide another initial notice 
to that customer (Sec. __.4(d)) if that earlier notice covered the 
subsequent product.
    For instance, if Alison Individual walks into Bank for the first 
time on July 2, 2001, to open a checking account, then Bank complies 
with Sec. __.4(a)(1) of the rule if it provides an initial notice to 
Alison together with the deposit contract. When Alison opens her 
checking account, she becomes a customer of Bank. Alison maintains her 
checking account and, six months later, returns to Bank to obtain a 
loan. If the initial notice that Bank provided to Alison was accurate 
with respect to that loan, then Bank need not provide another initial 
notice to her when she obtains the loan because it has provided a 
notice to Alison that covered the loan when she opened her checking 
account.

C. Method of Providing the Initial Notice

    You must provide your initial notice so that each customer can 
reasonably be expected to receive actual notice of it, in writing 
(Sec. __.9(a)). For example, you may provide the initial notice by 
mailing a printed copy of it together with a loan contract. Similarly, 
you may provide the initial notice by hand-delivering a printed copy of 
it to the customer together with a deposit account agreement.

D. Compliance With Initial Notice Requirement for Existing Customers by 
Effective Date

    You must provide an initial notice to each of your current 
customers not later than July 1, 2001 (Sec. __.18(b)). You may do so by 
mailing a printed copy of the notice to the customer's last known 
address.

E. Annual Notice

    During the continuation of the customer relationship, you must 
provide an annual notice to the customer, as described in Sec. __.5(a). 
You

[[Page 35187]]

must provide an annual notice to each customer at least once in any 
period of 12 consecutive months during which the customer relationship 
exists. You may define the 12-consecutive-month period, but must 
consistently apply that period to the customer. You may define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the 
calendar year in which you provided the initial notice.
    For example, assume that Bank defines the 12-consecutive-month 
period as a calendar year and provides annual notices to all of its 
customers on October 1 of each year. If Alison Individual opens a 
checking account with a Bank on July 2, 2001, thereby becoming a 
customer, then Bank must provide an initial notice to Alison together 
with the deposit agreement or earlier. Bank must provide an annual 
notice to Alison by December 31, 2002. If Bank provides an annual 
notice to Alison on October 1, 2002, as it does for other customers, 
then it must provide the next annual notice to Alison not later than 
October 1, 2003.

F. Method of Providing the Annual Notice

    Like the initial notice, you must provide the annual notice so that 
each customer can reasonably be expected to receive actual notice of 
it, in writing (Sec. __.9(a)). You may do so by mailing a printed copy 
of the notice to the customer's last known address.

G. Joint Accounts

    If two or more customers jointly obtain a financial product or 
service, then you may provide one initial notice to those customers 
jointly. Similarly, you may provide one annual notice to those 
customers jointly (Sec. __.9(g)).

H. Information Described in the Initial and Annual Notices

    The initial and annual notices must include an accurate description 
of the following four items of information:
    1. The categories of nonpublic personal information that you 
collect (Sec. __.6(a)(1));
    2. The fact that you do not disclose nonpublic personal information 
about your current and former customers to affiliates or nonaffiliated 
third parties, except as authorized by Secs. __.14 and __.15 
(Sec. __.6(a)(2)-(4)). When describing the categories with respect to 
those parties, you are required to state only that you make disclosures 
to other nonaffiliated third parties as permitted by law 
(Sec. __.6(c));
    3. Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information 
(Sec. __.6(a)(8)).
    For each of these items of information above, you may use a sample 
clause from Appendix A. The Agencies emphasize that you may use a 
sample clause only if that clause accurately describes your actual 
policies and practices.

I. Example of Notice

    A financial institution (``Bank'') that (i) does not have any 
affiliates and (ii) only discloses nonpublic personal information to 
nonaffiliated third parties as authorized under Secs. __.14 and __.15, 
may comply with the requirements of Sec. __.6 of the rule by using the 
following notice, if applicable.
    Bank collects nonpublic personal information about you from the 
following sources:
     Information we receive from you on applications or other 
forms;
     Information about your transactions with us or others; and
     Information we receive from a consumer reporting 
agency.\14\
---------------------------------------------------------------------------

    \14\ You need to describe only those general categories that 
apply to your policies and practices. Accordingly, if you do not 
collect information from ``a consumer reporting agency,'' for 
instance, then you need not describe that category in your notices.
---------------------------------------------------------------------------

    We do not disclose any nonpublic personal information about you to 
anyone, except as permitted by law.
    If you decide to close your account(s) or become an inactive 
customer, we will adhere to the privacy policies and practices as 
described in this notice.
    Bank restricts access to your personal and account information to 
those employees who need to know that information to provide products 
or services to you. Bank maintains physical, electronic, and procedural 
safeguards that comply with federal standards to guard your nonpublic 
personal information.

J. Initial and Annual Notices Must Be Clear and Conspicuous

    The Agencies emphasize that you must ensure that both the initial 
and annual notices are clear and conspicuous, as defined in 
Sec. __.3(b).

K. Example of Notice for Disclosure to Service Providers and Joint 
Marketers

    If you disclose nonpublic personal information in accordance with 
the exception in Sec. __.13, for service providers and joint marketers, 
you also must include an accurate description of that information. You 
may comply with the requirements of __.13 of the rule by including the 
following sample clause, if applicable, in the example of notice 
described in section (I) above:
    We may disclose all of the information we collect, as described 
[describe location in the notice, such as ``above'' or ``below''] to 
companies that perform marketing services on our behalf or to other 
financial institutions with whom we have joint marketing agreements.

V. Regulatory Analysis

A. Paperwork Reduction Act

    The Agencies may not conduct or sponsor, and an organization is not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
The OMB control numbers are listed below.
    OCC: 1557-0216.
    Board: 7100-0294.
    FDIC: 3064-0136.
    OTS: 1550-0103.
    The Agencies sought comment on the burden estimates for the 
information collections listed below. Many commenters suggested, in 
response to specific proposed sections, that the rule would impose 
significant burden on them. Most of those suggestions concerned 
requirements that are imposed by the statute (such as the need to 
provide annual notices if an institution's previous notice remains 
accurate or the need to provide any notices at all in situations where 
an institution does not disclose nonpublic personal information to 
nonaffiliated third parties). The Agencies have attempted to address 
other concerns by amending several provisions as discussed above and by 
clarifying the Agencies' expectations as far as disclosures are 
concerned. Below is a brief summary of the remaining paperwork burdens 
implemented by this final rule.
    The final rule contains several disclosure requirements. The 
respondents must prepare and provide the initial notice to all current 
customers and all new customers not later than when a respondent 
establishes a customer relationship (Sec. __.4(a)). Subsequently, an 
annual notice must be provided to all customers at least once during a 
twelve-month period during the continuation of the customer 
relationship (Sec. __.5(a)). The opt out notice (and partial opt out 
notice, if applicable; see Sec. __.10(c)) must be provided prior to 
disclosing nonpublic personal information to certain nonaffiliated 
third parties. If a financial institution wishes to disclose 
information in a way that is inconsistent with the notices previously 
given to a

[[Page 35188]]

consumer, the institution must provide consumers with revised notices 
(Sec. __.8(a)).
    The final regulation also contains affirmative actions that 
consumers must take to exercise their rights. In order for consumers to 
prevent financial institutions from sharing their information with 
nonaffiliated third parties, they must opt out (Secs. __.7(a)(2)(ii)), 
__.10(a)(2) and __.10(c)). At any time during their continued 
relationship with the institution, consumers have the right to change 
or update their opt out status with the institution (Secs. __.7(f) and 
(g)).
    OCC: The rule requires the collection of certain information from 
national banks, District of Columbia banks, and Federal branches and 
agencies of foreign banks. OMB has reviewed and approved the 
collections of information contained in the final rule under control 
number 1557-0216, in accordance with the Paperwork Reduction Act of 
1995 (PRA) (44 U.S.C. 3501 et seq.). OMB clearance will expire on March 
31, 2003. There are 2,400 respondents with a total annual burden of 
108,000 hours.
    Board: The rule requires the collection of certain information from 
state member banks, bank holding companies, affiliates and certain non-
bank subsidiaries of bank holding companies, uninsured state agencies 
and branches of foreign banks, commercial lending companies owned or 
controlled by foreign banks, and Edge and agreement corporations. In 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 
CFR 1320 Appendix A.1), the Board approved the rule under the authority 
delegated to the Board by OMB. The OMB control number is 7100-0294. 
There are 9,500 respondents with a total annual burden of 427,500 
hours.
    FDIC: The rule requires the collection of certain information from 
insured nonmember banks, insured state branches of foreign banks, and 
certain subsidiaries of these entities. The Office of Management and 
Budget (OMB) has reviewed and approved the collections of information 
contained in the final rule under control number 3064-0136, in 
accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 
3501 et seq.). OMB clearance will expire on April 30, 2003. There are 
5,764 respondents with a total annual burden of 259,380 hours.
    OTS: The rule requires the collection of certain information from 
savings associations and certain of their subsidiaries. OMB has 
reviewed and approved the collections of information contained in the 
final rule under control number 1550-0103, in accordance with the 
Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.). OMB 
clearance will expire on April 30, 2003. There are 1,104 respondents 
with a total annual burden of 49,680 hours.
    The Agencies have a continuing interest in the public's opinion 
regarding collections of information. Members of the public may submit 
comments, at any time, regarding any aspect of these collections of 
information. Comments may be sent to:
    OCC: Communications Division, Attention: 1557-0216, Office of the 
Comptroller of the Currency, 250 E Street, SW, Third Floor, Washington, 
DC 20219.
    Board: Mary M. West, Federal Reserve Board Clearance Officer, Mail 
Stop 97, Division of Research and Statistics, Board of Governors of the 
Federal Reserve System, Washington, D.C. 20551.
    FDIC: Steven F. Hanft, Assistant Executive Secretary (Regulatory 
Analysis), Federal Deposit Insurance Corporation, Room F-4080, 550 17th 
Street NW., Washington, DC 20429.
    OTS: Dissemination Branch (1550-0103), Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.
    A copy of all comments should also be sent to Office of Management 
and Budget, Paperwork Reduction Project (include OMB control number), 
Washington, D.C. 20503.

B. Regulatory Flexibility Act

    OCC: Under the Regulatory Flexibility Act (RFA), the OCC must 
either provide a Final Regulatory Flexibility Analysis (FRFA) with a 
final rule or certify that the final rule ``will not, if promulgated,'' 
have a significant economic impact on a substantial number of small 
entities.\15\ Given that the burden imposed on small institutions stems 
in large part from the statute, and in light of the significant number 
of changes described previously that reduce the rule's burden on 
financial institutions of all sizes, the OCC does not expect that the 
rule will have a significant economic impact on a substantial number of 
small entities. However, because the statute creates a set of 
requirements that are new both to the OCC and to financial institutions 
in general, the OCC has prepared the following FRFA and intends to 
publish a compliance guide for small entities.
---------------------------------------------------------------------------

    \15\ The RFA defines the term ``small entity'' in 5 U.S.C. 601 
by reference to definitions published by the Small Business 
Administration (SBA). The SBA has defined a ``small entity'' for 
banking purposes as a national or commercial bank, savings 
institution or credit union with less than $100 million in assets. 
See 13 CFR 121.201.
---------------------------------------------------------------------------

Need for and Objectives of the Final Rule; Legal Basis for the Rule
    The final rule implements the provisions of Title V, Subtitle A of 
the GLB Act addressing consumer privacy. In general, these statutory 
provisions require banks to provide notice to consumers about a bank's 
privacy policies and practices, restricts institutions from sharing 
nonpublic personal information about consumers to nonaffiliated third 
parties, and permits consumers to prevent institutions from disclosing 
nonpublic personal information about them to certain non-affiliated 
third parties by ``opting out'' of that disclosure.
    Section 504 of the GLB Act authorizes the OCC to prescribe ``such 
regulations as may be necessary'' to carry out the purposes of Title V, 
Subtitle A. If no regulations were promulgated, substantive burdens 
imposed by the Act (e.g., the notice, information sharing restrictions, 
and opt out requirements) would have become effective and binding on 
banks one year from the date the Act was signed into law. The OCC 
believes that a regulatory promulgation gives the private sector 
greater certainty about how to comply with the statute and clearer 
guidance regarding how it will be enforced.
Small Entities to Which the Rule Will Apply
    The proposed rule would apply to all banks, regardless of size, 
including those with assets of under $100 million. As of December 1999, 
1203 (of 2365 total) national banks had assets of under $100 million. 
As explained below, Title V, Subtitle A of the GLB Act did not provide 
a general exception for small banks, nor did it appear that such an 
exception would be consistent with the purposes of the Act.
Compliance Requirements and Effects of the Final Rule on Small Entities
    A detailed description of the final rule's requirements is set 
forth above in the section-by-section analysis (Supplementary 
Information, part III). Among other things, a bank will generally be 
required to prepare a notice of its privacy policies and practices and 
provide that notice to consumers under conditions as specified in the 
rule (e.g., a privacy notice must be provided no later than the time 
that a customer relationship is established and then once annually for 
the duration of that customer relationship). Banks that disclose 
nonpublic personal information about consumers to nonaffiliated third 
parties will be subject to additional mandates, including a requirement 
to

[[Page 35189]]

provide an opt out notice to consumers along with a reasonable 
opportunity to opt out of certain disclosures.
    There are a host of exceptions to the general rules stated above. 
For example, a bank may share a consumer's nonpublic personal 
information with nonaffiliated third parties without having to give an 
opt out notice if such sharing is necessary to effect, administer, or 
enforce a transaction requested or authorized by the consumer. These 
exceptions have the effect of minimizing the burden on institutions of 
all sizes.
    To comply with the final rule, banks will need to, among other 
things, prepare disclosure forms, make various operational changes, and 
train staff. Professional skills needed to comply with the final rule 
may include clerical, computer systems, personnel training, as well as 
legal drafting and advice.
    The compliance requirements and costs are likely to vary 
considerably among institutions, depending upon a number of factors, 
such as:

--Whether a bank intends to disclose covered information. A bank that 
does not disclose nonpublic personal information about consumers to 
third parties (or shares only to the extent permitted under the 
exceptions) (i) could have a streamlined privacy notice, (ii) will not 
need to provide an opt out notice to consumers, and (iii) will not need 
to implement procedures to honor the wishes of consumers that choose to 
opt out of certain information sharing.
--Whether the bank already has a notice describing its privacy policy. 
Various surveys suggest that a majority of banks already have privacy 
policies in place as part of usual and customary business practices. 
For these institutions, the costs for revising that policy to comply 
with the regulation are likely to be significantly less than would be 
the costs for those institutions having to develop a new policy.
--Whether the bank already has an opt-out mechanism in place pursuant 
to the Fair Credit Reporting Act (FCRA). Under the FCRA, a bank must 
provide opt out notices and have an opt out mechanism in place if the 
bank (i) shares certain consumer information (i.e., application or 
credit report information) with its affiliates, and (ii) does not want 
to be treated as a consumer reporting agency under the Act. A bank that 
already gives FCRA notices and wants to share nonpublic personal 
information with nonaffiliated third parties should be able to adapt 
its existing opt out mechanism to accommodate the requirements of the 
final rule.
Summary of Significant Issues Raised by the Public Comments; 
Description of Steps the Agency Has Taken To Minimize Burden
    One approach to minimizing the burden on small entities would be to 
provide a specific exemption for such institutions. The OCC has no 
authority under the statute to grant an exception that would remove 
small institutions from the entire scope of the rule. The OCC does have 
exemptive authority under section 504(b) to grant such exceptions to 
the opt out provisions ``as are deemed consistent with the purposes 
of'' the statute. The OCC believes that a wholesale exemption for small 
banks from the opt out provisions would be inconsistent with the 
purposes of the Act. As stated in section 501(a) of the Act, ``It is 
the policy of the Congress that each financial institution has an 
affirmative and continuing obligation to respect the privacy of its 
customers and to protect the security and confidentiality of those 
customers' nonpublic personal information.'' (Emphasis added.) The OCC 
believes the privacy of someone's nonpublic personal information is no 
less deserving of protection simply because the information is obtained 
by a small bank.
    The final rule does, however, provide substantial flexibility so 
that any bank, regardless of size, may tailor its practices to its 
individual needs. For example, to minimize the burden and costs of 
distributing privacy policies, the final rule (i) allows each bank to 
choose the method by which it will distribute required notices (e.g., 
banks may include an annual privacy notice with periodic account 
statements that the bank already sends to the customer) and (ii) allows 
for the initial privacy notice to be provided with other Federally 
mandated consumer disclosures, such as those required under the Truth-
in-Lending Act.
    In addition, the OCC carefully considered comments that suggested a 
variety of other alternatives to reduce burden. In response to these 
comments, the agency attempted to minimize the burden on all 
businesses, including small entities, in a manner consistent with 
providing the privacy protections mandated by the Act. The discussion 
below reviews some of the changes adopted in the final rule to 
accomplish this purpose. For a more complete discussion of significant 
issues raised by public comments and the changes adopted in the final 
rule, see the section-by-section analysis above, which is incorporated 
herein by reference (Supplementary Information, part III).
    Content of disclosures. Many commenters interpreted the rule as 
requiring long, detailed privacy disclosures that, in these commenters' 
view, would be of little benefit to consumers. To address these 
comments, the final rule clarifies the level of detail that the OCC 
believes is appropriate under the statute. In particular, the final 
rule substantially revises the examples of disclosures that would 
satisfy the rule; Appendix A includes sample clauses that might be 
used; and the preamble states that the Agencies believe disclosures 
required by the rule could fit on a typical tri-fold brochure. Also, 
the Agencies have provided additional guidance under the caption 
Guidance for Certain Financial Institutions (Guidance) (Supplementary 
Information, Part IV). This Guidance, as well as the sample clauses in 
Appendix A, are intended to minimize the burden and costs for all 
banks, particularly small banks that will not generally be sharing 
nonpublic personal information with nonaffiliated third parties (except 
pursuant to the exceptions). In addition, the final rule permits a bank 
to provide a short-form privacy notice to a consumer that does not 
become a customer, provided the bank gives the consumer an opt out 
notice and notifies the consumer of a reasonably convenient method by 
which to obtain a copy of the full privacy notice.
    Definition of nonpublic personal information. A bank that wants to 
share nonpublic personal information about a consumer with a 
nonaffiliated third party generally must comply with the opt out 
restrictions in the rule. However, information that is considered 
``publicly available information'' is excluded from the definition of 
nonpublic personal information. The proposed rule offered two 
alternatives. Under Alternative A, information that is generally 
available from a public source would not be considered ``publicly 
available information'' unless a bank actually obtains the information 
from a public source. Under Alternative B, the fact that the 
information could be obtained from a public source is sufficient for 
the information to be considered publicly available. For the reasons 
stated earlier in the preamble, the OCC adopted a slightly revised 
version of Alternative B, the less burdensome option.
    Effective date. By operation of section 510 of the statute, the 
relevant provisions of Title V take effective November 12, 2000. 
However, the statute authorizes the agencies to

[[Page 35190]]

prescribe a later date if implementing regulations are adopted. The 
proposed rule used the effective date prescribed by the statute. The 
OCC received a large number of comments from banks, including many from 
small entities, that requested more time to comply. Many such comments 
suggested that overall compliance costs could be reduced by delaying 
the effective date. For the reasons stated earlier in the preamble, the 
OCC believes it would be appropriate to give banks until July 1, 2001, 
to comply with the rule.
    New notices not required for each new financial product or service. 
Some banks, including small entities, expressed concern that the 
proposed rule may require a new initial notice each time a consumer 
obtains a new financial product or service. This would be especially 
burdensome for banks that adopt a universal privacy policy that covers 
multiple products and services. To address these concerns and minimize 
economic burden, the final rule clarifies that a new initial notice is 
not required if the bank has given the customer the bank's initial 
notice, and that the bank's initial notice remains accurate with 
respect to the new product or service.
    Annual notice requirement. Many banks, including small entities, 
suggested alternative, less burdensome methods for complying with the 
requirement that banks provide their customers with an annual privacy 
notice. As discussed earlier in the preamble, the OCC responded to 
these comments with a provision in the final rule that permits a bank 
to comply with the annual privacy notice requirements for customers 
under certain circumstances by continually posting the notice on the 
bank's web site in a clear and conspicuous manner.
    Notice to joint account holders. As noted earlier in the preamble, 
the final rule allows banks to provide one notice to joint account 
holders, with the understanding being that a decision to opt out made 
by one of the account holders will, absent a provision in the opt out 
notice to the contrary, prevent the bank from disclosing any nonpublic 
personal information about any of the account holders. This is 
particularly advantageous for banks, including small entities, that do 
not intend to share nonpublic personal information with nonaffiliated 
third parties (except as permitted under the exceptions).
    The OCC, along with the other Agencies, intends to publish a small 
entity compliance guide--separate from and in addition to the guidance 
for certain financial institutions included as part of this Federal 
Register notice--that will clarify the operation of and compliance with 
the rule.
    Board: The Regulatory Flexibility Act (5 U.S.C. 604) requires an 
agency to publish a final regulatory flexibility analysis when 
promulgating a final rule that was subject to notice and comment.
Need for and Objectives of Rule
    As discussed above, this rule implements the privacy provisions in 
sections 502-510 of the GLB Act. The rule's objectives are to protect 
nonpublic personal information about consumers collected by financial 
institutions by:
    (1) Requiring a financial institution to provide notice to 
customers about its privacy policies and practices;
    (2) Describing the conditions under which a financial institution 
may disclose nonpublic personal information about consumers to 
nonaffiliated third parties; and
    (3) Providing a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated 
third parties by ``opting out'' of that disclosure, subject to certain 
exceptions.
Comments on the Initial Regulatory Flexibility Analysis
    Although few commenters addressed the initial regulatory 
flexibility analysis specifically, many commenters addressed the 
regulatory burdens that were discussed in that analysis. Commenters 
provided a wide range of estimates of the costs of compliance, 
demonstrating the difficulty of precisely measuring the implementation 
costs for GLB Act privacy provisions. For example, one commenter 
representing a $4 billion dollar multi-bank holding company with ten 
financial institutions, estimated compliance costs at $160,000/year (an 
average of $16,000 per institution), contrasted with a $500 million 
institution that estimated compliance costs at $40,000/year. Another 
commenter representing an $18 billion dollar bank holding company 
estimated compliance costs at $2.1 million, while one of the nation's 
largest financial institutions estimated compliance costs between $2.5-
$18 million. In another comment, a public policy group estimated that 
the costs of the rule ``may likely exceed $223 million annually'' based 
on a sample of deposit accounts and estimated loan accounts at 54 
``major institutions'' around the United States.
    Many commenters principally discussed the burdens that would be 
imposed by the proposed rule due to the effective date and the amount 
of detail that financial institutions would have to describe in their 
initial and annual notices.
    Many commenters urged the Board to extend the proposed November 13, 
2000, effective date, for periods ranging from six months to two years. 
Most of these commenters argued that complying with the rule by 
November 13, 2000, would place an extraordinary burden on their 
businesses, particularly because the notices required by the rule would 
mandate changes to computer software, employee training, and compliance 
systems. To address these concerns, compliance with the final rule will 
be deferred until July 1, 2001.
    Many commenters urged the Board to reduce the level of detail that 
they perceived would be required in the notices under the proposed 
rule. Commenters argued, for instance, that requiring a detailed 
description of all of the sources of information that they use to 
collect information about their customers would make the notices too 
lengthy and complicated. In a similar vein, many commenters proposed 
that the Board should issue model forms to demonstrate the kinds of 
notices that would be permitted by the rule.
    The Board believes that the intent of the original proposal on the 
level of detail expected under the proposed rule was widely 
misinterpreted. The notices section has been redrafted in an effort to 
clarify the requirements. This should lead to modular provisions based 
on examples in the regulations that could be used by most institutions. 
The Board and the other Agencies have included, in an appendix to the 
final rule, sample clauses illustrating elements of the notice 
requirements for a small institution that does not sell information for 
marketing purposes and a large holding company with multiple affiliates 
that distributes information broadly. To further assist institutions in 
complying with the rule, the Board and the other Agencies have included 
in this Federal Register notice guidance for certain institutions that 
do not disclose nonpublic personal information to nonaffiliated third 
parties outside of the statutory exceptions.
    Nevertheless, some institutions may have to craft notice provisions 
to cover unique aspects of their privacy practices. This is necessary 
because it is impossible for the Board to anticipate all disclosure 
practices. In the absence of knowledge of these practices, any attempt 
to craft ``model notices'' that could be used by all institutions runs 
a substantial risk of being misleading.
    The Board also modified the final rule to clarify that a financial 
institution need not provide another initial notice to an existing 
customer who obtains a

[[Page 35191]]

new financial product or service so long as the previous notice 
provided to that customer was accurate with respect to the new 
financial product or service. The Board believes that this provision 
will enable a financial institution to adopt a single, comprehensive 
privacy policy for its financial products and services, and at the same 
time, reduce the costs to ensure that it delivers an accurate copy of 
its policy to each customer.
    The Board also clarified the final rule to permit a financial 
institution to provide one copy of the initial, annual, and revised 
notices, respectively, to consumers who jointly obtain a financial 
product or service. Correspondingly, the Board clarified that a 
financial institution may provide one opt out notice, if applicable, to 
consumers who jointly obtain a financial product or service.
Institutions Covered
    The Board's final rule will apply to approximately 9,500 
institutions, including state member banks, bank holding companies and 
certain of their nonbank subsidiaries or affiliates, state uninsured 
branches and agencies of foreign banks, commercial lending companies 
owned or controlled by foreign banks, and Edge and Agreement 
corporations. The Board estimates that over 4,500 of the institutions 
are small institutions with assets less than $100 million.
New Compliance Requirements
    The final rule contains new compliance requirements for all covered 
institutions, most of which are required by the GLB Act. The 
institutions will be required to prepare notices of their privacy 
policies and practices and provide those notices to consumers as 
specified in the rule. Institutions that disclose nonpublic personal 
information about consumers to nonaffiliated third parties will be 
required to provide opt out notices to consumers as well as a 
reasonable opportunity to opt out of certain disclosures. These 
institutions will have to develop systems for keeping track of 
consumers' opt out directions. Some institutions, particularly those 
that disclose nonpublic information about consumers to nonaffiliated 
third parties, will likely need the advice of legal counsel to ensure 
that they comply with the rule, and may also require computer 
programming changes and additional staff training.
Minimizing Impact on Small Institutions
    The Board believes the requirements of the Act and this rule will 
create additional burden for covered institutions, particularly those 
that disclose nonpublic personal information about consumers to 
nonaffiliated third parties. The rule applies to all covered 
institutions, regardless of size. The Act does not provide the Board 
with the authority to exempt a small institution from the requirement 
to provide a notice of its privacy policies and practices to its 
customers. Although the Board could exempt small institutions from 
providing a notice and opportunity for consumers to opt out of certain 
information disclosures, the Board does not believe that such an 
exemption would be appropriate, given that one of the purposes of the 
Act is to provide notice to consumers about the disclosure of nonpublic 
personal information.
    The Board believes that the burden is significantly lower for 
institutions that do not disclose nonpublic personal information about 
consumers to nonaffiliated third parties. These institutions may 
provide relatively simple initial and annual notices to consumers with 
whom they establish customer relationships. Also, the Board intends to 
publish a small entity compliance guide--separate from and in addition 
to the guidance for certain financial institutions included as part of 
this Federal Register notice--aimed to generally clarify the operation 
of and compliance with the rule.
    FDIC: The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) 
requires, subject to certain exceptions, that federal agencies prepare 
an initial regulatory flexibility analysis (IRFA) with a proposed rule 
and a final regulatory flexibility analysis (FRFA) with a final rule, 
unless the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities. \16\ At the 
time of issuance of the proposed rule, the FDIC could not make such a 
determination for certification, therefore the FDIC issued an IRFA 
pursuant to section 603 of the RFA. After considering the comments 
submitted in response to the proposed rule, the FDIC believes that it 
does not have sufficient information to determine whether the final 
rule would have a significant economic impact on a substantial number 
of small entities. Therefore, pursuant to section 604 of the RFA, the 
FDIC provides the following FRFA.
---------------------------------------------------------------------------

    \16\ The RFA defines the term ``small entity'' in 5 U.S.C. 601 
by reference to definitions published by the Small Business 
Administration (SBA). The SBA has defined a ``small entity for 
banking purposes as a national or commercial bank, savings 
institution or credit union with less than $100 million in assets. 
See 13 CFR 121.201.
---------------------------------------------------------------------------

    This FRFA incorporates the FDIC's initial findings, as set forth in 
the IRFA; addressees the comments submitted in response to the IRFA; 
and describes the steps the FDIC has taken in the final rule to 
minimize the impact on small entities, consistent with the objectives 
of the GLB Act. Also, in accordance with Section 212 of the Small 
Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-
121), the FDIC will in the near future issue a Small Entity Compliance 
Guide to assist small entities in complying with this rule.
Statement of the Need/Objectives of the Rule
    The final rule implements the provisions of Title V, Subtitle A of 
the GLB Act addressing consumer privacy. In general, these statutory 
provisions require banks to provide notice to consumers about an 
institution's privacy policies and practices, restrict institutions 
from sharing nonpublic personal information about consumers with 
nonaffiliated third parties, and permit consumers to prevent 
institutions from disclosing nonpublic personal information about them 
to certain non-affiliated third parties by ``opting out'' of that 
disclosure. Section 504 of the GLB Act requires the FDIC, in 
consultation with representatives of State insurance authorities, to 
prescribe ``such regulations as may be necessary'' to carry out the 
purposes of Title V, Subtitle A. If no regulations were promulgated, 
substantive burdens imposed by the Act (e.g., the notice, information 
sharing restrictions, and opt out requirements) would have become 
effective and binding on banks one year from the date the Act was 
signed into law. The FDIC believes that the final rule gives the 
private sector greater certainty on how to comply with the statute and 
clearer guidance regarding how it will be enforced.
Summary of Significant Issues Raised in Public Comments
    In the IRFA, the FDIC specifically requested information on the 
costs of creating privacy policy disclosures, distributing privacy 
policy disclosures, implementing ``opt out'' disclosure and processing 
requirements, and complying with the proposed rule in its entirety. The 
FDIC received few comments responsive to the issue of implementation 
costs. While the majority of commenters representing the financial 
services industry indicated that compliance with the regulation

[[Page 35192]]

would require significant effort, these comments most often requested 
additional time to comply with the final rule, and did not address 
estimated costs to comply with the regulation.
    The few comments that the FDIC did receive quantifying the economic 
costs of compliance reflected a wide range of estimates, demonstrating 
the difficulty of precisely measuring the implementation costs for GLB 
Act privacy provisions. For example, one commenter representing a $4 
billion dollar multi-bank holding company with ten financial 
institutions, estimated compliance costs at $160,000/year (an average 
of $16,000 per institution), contrasted with a $500 million dollar 
institution that estimated compliance costs at $40,000/year. Another 
commenter representing an $18 billion dollar bank holding company 
estimated compliance costs at $2.1 million, while one of the nation's 
largest financial institutions estimated compliance costs between $2.5-
$18 million. In another comment, a public policy group estimated that 
the costs of the rule ``may likely exceed $223 million annually'' based 
on a sample of deposit accounts and estimated loan accounts at 54 
``major institutions'' around the United States \17\.
---------------------------------------------------------------------------

    \17\ This estimate was not limited to FDIC-supervised 
institutions, but rather was based on all financial institutions 
subject to the GLB Act.
---------------------------------------------------------------------------

Summary of the Agency Assessment of Issues Raised in Public Comments
    Both the limited numbers of comments received that discussed 
compliance costs and the wide range of estimates provided, reflect the 
uncertainty of estimating the costs of implementing the GLB Act 
requirements. The new compliance requirements will indeed create 
additional economic costs for institutions, especially those that 
disclose information to nonaffiliated third parties. These costs 
include, but are not limited to (1) reviewing current information 
sharing practices; (2) determining operational changes necessary; (3) 
identifying sources/uses of customer information; (4) preparing 
disclosure forms; and (5) training staff. Most, if not, all of these 
costs result from requirements expressly mandated by the GLB Act.
    After a careful review of the comments received, the FDIC does not 
have a practicable or reliable basis for quantifying the costs of 
implementing the requirements of the GLB Act. We expect that compliance 
costs will vary significantly between institutions depending on 
information sharing practices. The FDIC continues to believe that the 
costs of implementing the opt out provisions of the final rule will be 
insubstantial for financial institutions that do not disclose nonpublic 
personal information to nonaffiliated third parties or only do so 
pursuant to the exceptions provided under sections 332.14 and 332.15. 
FDIC's determination is based on the observations of FDIC examiners, 
which were discussed in the IRFA, and the analysis of comments received 
in response to the proposed rule. These institutions may provide 
relatively simple initial and annual notices to consumers with whom 
they establish customer relationships. However, the FDIC cannot 
determine either the number or identity of institutions that will not 
disclose nonpublic personal information about consumers to 
nonaffiliated third parties or that only do so pursuant to the 
exceptions provided under sections 332.14 and 332.15.
Description/Estimate of Small Entities To Which the Rule Will Apply
    The final rule will apply to approximately 3,700 FDIC-insured State 
nonmember banks that are small entities (assets less than $100 million) 
as defined by the RFA.
Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    The final rule contains new compliance requirements for all covered 
institutions, most of which are required by the GLB Act. The 
institutions will be required to prepare notices of their privacy 
policies and practices, and provide those notices to consumers as 
specified in the rule. Institutions that disclose nonpublic personal 
information about consumers to nonaffiliated third parties will be 
required to provide opt out notices to consumers, as well as a 
reasonable opportunity to opt out of certain disclosures. These 
institutions will have to develop systems for keeping track of 
consumers' opt out directions. Some institutions, particularly those 
that disclose nonpublic information about consumers to nonaffiliated 
third parties, will likely need the advice of legal counsel to ensure 
that they comply with the rule, and may also require computer 
programming changes and additional staff training. As discussed 
earlier, the FDIC does not have a practicable or reliable basis for 
quantifying the compliance costs of the final rule. Nor can the FDIC 
determine the number of small entities that will disclose nonpublic 
personal information about consumers to nonaffiliated third parties.
Steps Agency Has Taken To Minimize the Significant Economic Impact on 
Small Entities
    The final rule incorporates new compliance requirements, which are 
expressly mandated by the GLB Act. The GLB Act mandates (1) providing 
notice of privacy policies/practices; (2) restricting the conditions 
under which a financial institution may disclose nonpublic personal 
information to nonaffiliated third parties; and (3) providing a method 
for consumers to prevent their nonpublic personal information from 
being shared with nonaffiliated third parties. The FDIC has sought to 
minimize the burden on all businesses, including small entities, in 
promulgating this final rule. Nonetheless, the statute does not 
authorize the FDIC to create exemptions from the GLB Act based on an 
institution's size. While the final rule attempts to clarify, 
consolidate, and simplify the statutory requirements for all entities, 
the FDIC has little discretion, if any, to mandate different compliance 
standards for small entities. Moreover, different compliance standards 
would be inconsistent with the purposes of GLB Act.
    Throughout this rulemaking proceeding, the FDIC sought to gather 
information regarding the economic impact of the GLB Act's requirements 
for all financial institutions, including small entities. The proposed 
rule and the IRFA included a number of questions for public comment 
regarding the costs associated with complying with the rule and the 
impact on small entities. In addition, the FDIC held a public forum on 
privacy \18\ during the comment period, which included representatives 
of small insured depository institutions and topics designed to elicit 
information about the rule's economic impact. The FDIC carefully 
considered comments that suggested a variety of alternatives that could 
minimize the economic and overall burden of complying with the final 
rule. The discussion below reviews some of the significant changes 
adopted in the final rule to accomplish this purpose. For a more 
complete discussion of the changes adopted in the final rule, see the 
``Section-by-section analysis'' under Supplementary Information, Part 
III.
---------------------------------------------------------------------------

    \18\ FDIC Forum, ``Is it Any of Your Business? Consumer 
Information, Privacy, and the Financial Services Industry'' (March 
23, 2000).
---------------------------------------------------------------------------

    1. Sample disclosure clauses (Appendix A to Part 332) and guidance

[[Page 35193]]

for certain institutions (supplementary information, part IV). Many 
commenters expressed concern over the amount of detail that appears to 
be required in both initial and annual Notices. In addition many of the 
commenters requested model forms for guidance as to the level of detail 
required. The FDIC did not intend for the disclosures to be overly 
detailed and thus, burdensome for institutions and potentially 
overwhelming for consumers. In response to these comments, Appendix A 
to Part 332 contains sample clauses to clarify the level of detail that 
the FDIC believes is necessary and appropriate to be consistent with 
the statute. The FDIC has also provided additional assistance under the 
caption Guidance for Certain Institutions (Guidance) (Supplementary 
Information, Part IV). The Guidance generally clarifies the operation 
of the final rule. It also provides an example of a notice for 
institutions that only share nonpublic personal information with 
nonaffiliated third parties pursuant to the exceptions provided in 
Sections 332.14 and 332.15. The Guidance may be used in conjunction 
with the sample clauses contained in Appendix A.
    The sample clauses under Appendix A and the Guidance are intended 
to minimize the burden and costs to financial institutions, including 
small entities. This is especially true for small institutions that do 
not share nonpublic personal information with nonaffiliated third 
parties or only do so pursuant to the exceptions provided in sections 
332.14 and 332.15. These institutions may provide relatively simple 
initial and annual notices to consumers with whom they establish 
customer relationships.
    2. Definition of nonpublic personal information. In the proposed 
rule, the FDIC provided two alternatives for defining nonpublic 
personal information. The first, (Alternative A) deemed information as 
publicly available only if a financial institution actually obtained 
the information from a public source, whereas the second (Alternative 
B) treated information as publicly available if a financial institution 
could obtain it from such a source. A significant majority of 
commenters who commented on Alternatives A and B favored Alternative B. 
Many commenters suggested that implementing Alternative A would be 
overly burdensome. Institutions would have to develop some sort of 
methodology to distinguish between information obtained from consumers, 
versus information obtained through public sources. In response to 
these comments, the final rule adopts a modified version of Alternative 
B (refer to Section-by-section analysis for additional information) 
that treats information as publicly available if a financial 
institution could obtain the information from a public source. The 
final rule addresses the concerns of financial institutions--including 
small institutions--by adopting the less economically burdensome 
definition of nonpublic personal information.
    3. Effective date. Section 510 of the GLB Act states that, as a 
general rule, the relevant provisions of Title V take effect 6 months 
after the date on which rules are required to be prescribed, i.e., 
November 12, 2000. However, section 510(1) authorizes the Agencies to 
prescribe a later date in the rules enacted pursuant to section 504. 
The proposed rule sought comment on the effective date prescribed by 
the statute. The overwhelming majority of financial institution 
commenters requested additional time to comply with the final rule. 
Several commenters noted that financial institutions may encounter 
difficulty managing the expenses and resources required to comply with 
the final rule as the institution's budget for the current year was 
established prior to the issuance of the proposed regulation. This may 
be especially true for small institutions that face already tight 
budgetary constraints due to heightened competition. For the reasons 
stated in the preamble, the FDIC has retained the effective date of 
November 13, 2000, but, in order to provide sufficient time for 
institutions to establish policies and systems to comply with the 
requirements of this part, the FDIC has extended the time for 
compliance with this part until July 1, 2001. This additional time will 
allow financial institutions to properly budget for any necessary 
expenses and staff resources required to comply with this rule and to 
make all necessary operational changes.
    4. New notices not required for each new financial product or 
service. Some commenters expressed concern that the proposed rule may 
require a new initial notice each time a consumer obtains a new 
financial product or service. This would be especially burdensome for 
institutions that adopt a universal privacy policy that covers multiple 
products and services. To address these concerns and minimize economic 
burden, the final rule was clarified to instruct institutions that a 
new initial notice is not required if the institution has given the 
customer the institution's initial notice, and that the institution's 
initial notice remains accurate with respect to the new product or 
service.
    5. Short form initial notice for consumers. In the proposed rule, 
financial institutions were required to provide consumers a copy of 
their complete initial notice when there is no customer relationship. 
In response to comments that suggested that the objectives of the 
initial notice requirements of the statute could be accomplished in a 
less burdensome way, the FDIC has exercised its exemptive authority as 
provided in section 504(b) to create an exception to the general rule 
that otherwise requires a financial institution to provide both the 
initial and opt out notices to a consumer before disclosing nonpublic 
personal information about that consumer to nonaffiliated third 
parties. A financial institution may provide a ``short-form'' initial 
notice along with the opt out notice to a consumer with whom the 
institution does not have a customer relationship. This short-form 
notice must state that the disclosure containing information about the 
institution's privacy policies and practices is available upon request 
and provide one or more reasonable means by which the consumer may 
obtain a copy of the notice. This provision in the final rule will 
lessen the burden on financial institutions, including small entities.
    6. Notice to joint account holders. As noted earlier in the 
preamble, the final rule allows financial institutions to provide one 
notice to joint account holders, with the understanding that a decision 
to opt out made by one of the account holders will, absent a provision 
in the opt out notice to the contrary, prevent the institution from 
disclosing any nonpublic personal information about any of the account 
holders. This is particularly advantageous for institutions, including 
small entities, that do not intend to share nonpublic personal 
information with nonaffiliated third parties (except as permitted under 
the exceptions).
    OTS: The Regulatory Flexibility Act (5 U.S.C. 601-612) requires OTS 
to prepare a final regulatory flexibility analysis with a final rule, 
unless the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities.\19\ OTS does 
not believe this rule will have a significant economic impact on a 
significant number of thrifts or thrift subsidiaries because the burden 
imposed on small thrifts stems in large part from the GLB Act rather 
than from the final rule. The rule restates and clarifies the statutory 
requirements. These clarifications should reduce the burden of 
complying with the GLB Act

[[Page 35194]]

provisions. OTS has revised the proposed rule to reduce the regulatory 
burden on financial institutions of all sizes, as discussed below. In 
addition, OTS intends to publish a compliance guide to assist 
institutions in complying with this rule. However, because the GLB Act 
creates requirements that are new to both the OTS and to the thrift 
industry, and because OTS is uncertain what the economic impact will be 
of compliance with the new requirements, OTS has prepared the following 
final regulatory flexibility analysis.
---------------------------------------------------------------------------

    \19\ For purposes of the Regulatory Flexibility Act, a small 
savings association is one with less than $100 million in assets. 13 
CFR 121.201 (Division H).
---------------------------------------------------------------------------

Need for and Objectives of the Rule; Compliance Requirements; 
Institutions Covered
    The final rule is needed to implement the provisions of Title V, 
Subtitle A of the GLB Act addressing consumer privacy. The objectives 
of the rule are to protect nonpublic personal information that 
financial institutions collect by:
    (1) Requiring each financial institution to provide notice to 
customers about its privacy policies and practices;
    (2) Describing the conditions under which a financial institution 
may disclose nonpublic personal information to nonaffiliated third 
parties;
    (3) Providing a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated 
third parties by opting out of that disclosure, subject to certain 
exceptions.
    The compliance requirements of the rule are detailed earlier in 
this preamble.
    Financial institutions will need professional skills to comply with 
this rule. To prepare the required privacy disclosures and opt out 
disclosures, institutions may need legal or other professional advice 
and drafting. This is true for the initial disclosures and notices, as 
well as for any subsequent changes to those documents. For institutions 
that publish privacy notices electronically or accept electronic opt 
outs, computer expertise will be necessary to convert the documents to 
the appropriate electronic form. Financial institutions that contract 
with nonaffiliates to perform services for the institution may require 
legal advice and drafting to ensure that such contracts contain the 
required restrictions on the nonaffiliates' use of information it 
receives. Financial institutions that make disclosures from which 
consumers may opt out may require professional skills to process opt 
out directions. Some institutions may use clerical or computer 
programmer skills to perform these tasks. Some degree of personnel 
training will be necessary, such as to train staff on the procedures 
for entering opt out data into a computer database.
    This rule will apply to approximately 486 small thrifts, 
approximately 97 of which have subsidiaries.
Effects of the Final Rule
    Commenters provided a wide range of estimates of the costs of 
compliance, demonstrating the difficulty of measuring the costs of 
implementing the GLB Act privacy provisions.
    Complying with consumers' opt out directions will account for a 
significant portion of the implementation costs. Measuring the costs of 
complying with opt outs is especially difficult because of two 
uncertainties. First, OTS does not know how many financial institutions 
now make the type of information disclosures that will give rise to 
consumer opt out rights. Some institutions that currently make such 
disclosures may cease doing so. OTS cannot predict how many 
institutions will make such disclosures in the future. A second 
uncertainty is the number of consumers who will opt out of information 
disclosures. Because such opt out rights are new, OTS has no basis upon 
which to predict future consumer elections. Thus, OTS does not know how 
many institutions will need to comply with opt out directions, and does 
not know how many opt out directions those institutions will receive. 
For these reasons, OTS cannot provide a practicable or reliable 
quantification of the effects of the rule or of any of the significant 
alternatives OTS considered.
    OTS expects that compliance costs will vary significantly between 
thrifts depending on their information sharing practices. OTS expects 
that the costs of implementing the opt out provisions will be 
insubstantial for thrifts that do not disclose nonpublic personal 
information to nonaffiliated third parties. These institutions need 
only provide relatively simple initial and annual privacy notices to 
their customers.
    OTS, consistent with the other Agencies, has revised some 
requirements in this rule so that they are less burdensome. The 
discussion below reviews the significant changes to reduce regulatory 
burden.
Summary of Significant Issues Raised in Public Comments; Significant 
Alternatives
    Although few commenters addressed the initial regulatory 
flexibility analysis, many commenters addressed the regulatory burdens. 
These commenters included both large and small institutions. In 
response, OTS considered different alternatives, and made certain 
changes to the rule to reduce undue regulatory burden, consistent with 
the purposes of GLB. These efforts to reduce regulatory burden will 
affect both large and small institutions. The significant alternatives 
that commenters discussed and that OTS considered are as follows.
    Effective date. One of the most significant comments on burden 
discussed the rule's effective date. Many industry commenters urged OTS 
to extend the rule's proposed November 13, 2000 effective date. As 
discussed above, many of these commenters argued that complying with 
the rule by November 13, 2000 would place an extraordinary burden on 
their businesses, particularly because the required privacy and opt out 
notices would necessitate changes to computer software and would 
require employee training. After considering these concerns, OTS has 
delayed mandatory compliance with the regulation until July 1, 2001. 
However, OTS encourages thrifts to comply with the rule before that 
date.
    Content of privacy notices. Many commenters were concerned that the 
rule would require an inappropriate level of detail in privacy notices, 
making those notices too lengthy. Some commenters noted that detailed 
privacy notices would require burdensome and costly frequent revisions. 
Many commenters suggested that OTS issue model privacy disclosures. OTS 
responded to such comments by clarifying the requirements for the 
content of privacy notices, as discussed more fully in the preceding 
section-by-section analysis. These clarifications should ease the 
compliance burden of this rule.
    Further, OTS has included an appendix to the rule, containing a 
variety of sample clauses for privacy notices. OTS also has included in 
this Federal Register notice a Compliance Guide. Both the Appendix and 
the Compliance Guide are designed to assist financial institutions, 
especially small institutions, in complying with this new rule.
    Exemption for small institutions. Some commenters suggested that 
small institutions be exempt from many requirements of this rule. 
However, OTS does not believe the GLB Act allows alternative privacy 
rules based on a financial institution's size. As Congress stated in 
Sec. 501(a) of the Act, ``It is the policy of the Congress that each 
financial institution has an affirmative and continuing obligation to 
respect the privacy of its customers and to protect

[[Page 35195]]

the security and confidentiality of those customers' nonpublic personal 
information.'' (Emphasis added.) OTS believes a person's privacy is 
equally deserving no matter the size of the financial institutions with 
which the person interacts. OTS did not, therefore, exempt small 
institutions from this rule.
    Number of notices. Many commenters believe that the proposed rule 
would have required an undue number of privacy notices. In response, as 
discussed above, OTS considered alternative methods to reduce the 
burden of providing redundant or unhelpful privacy notices. First, the 
final rule makes clear that financial institutions do not need to 
provide a repetitive privacy notice each time an existing customer 
obtains a new financial product or service, as long as that customer 
already received a notice covering the new product or service.
    Second, the final rule clarifies the notice requirements in 
connection with joint accounts. It makes clear that financial 
institutions do not necessarily have to provide privacy and opt out 
notices to each joint account holder.
    Third, the final rule does not require a financial institution to 
provide a full initial notice to consumers who do not establish a 
customer relationship with the institution, if the institution will not 
share that consumer's nonpublic personal information with nonaffiliated 
third parties. In these situations, the institution may instead provide 
a short-form initial notice, and give the consumer a reasonable means 
to obtain the full initial notice if the consumer wishes to do so. A 
full initial notice would not be helpful in these cases to consumers 
who have no continuing relationship with the institution. The 
institution is still restricted from disclosing that consumer's 
nonpublic personal information to nonaffiliated parties without first 
providing opt out rights, as GLB requires.
    Fourth, the final rule requires fewer notices than the proposed 
rule would have required, concerning loans that involve multiple 
financial institutions. The proposed rule would have required privacy 
notices to consumers from each financial institution that owns any part 
of, or that services, a single consumer loan. Commenters suggested that 
multiple privacy notices in these cases would be unnecessarily 
burdensome. In response to these comments, OTS has included a special 
rule for loans, discussed more fully earlier in this preamble, that 
would reduce the number of privacy notices required in these cases.
    These changes are designed to reduce the number of redundant and 
unhelpful notices required, and thereby reduce the regulatory burden of 
this rule, without eroding consumer protections.
    Annual notices. Many commenters requested that OTS reduce 
regulatory burden by requiring less frequent or shorter annual notices. 
The GLB Act plainly requires annual privacy notices to customers, so 
OTS lacks authority to eliminate the requirement altogether. However, 
as discussed earlier, the final rule does allow institutions under 
certain circumstances to provide annual notices on their web sites. 
This change should reduce costs of providing required annual notices, 
consistent with GLB Act mandates.
    Outside service providers. Some commenters expressed concern that 
the proposed rule would have required burdensome contractual terms in 
connection with outside service providers. Disclosures a financial 
institution makes to its service providers are exempt from opt out 
requirements under Sec. 573.13, but require the disclosing financial 
institution to restrict, by contract, the service provider's ability to 
use the information. Other disclosures are exempt from the rule's 
notice and opt out requirements under Secs. 573.14 and 573.15, but, 
unlike Sec. 573.13, Secs. 573.14 and 573.15 do not require contractual 
restrictions on recipients' use of information. Commenters noted that 
some disclosures simultaneously quality for exemption under Sec. 573.13 
and under Secs. 573.14 or 573.15. These commenters requested that the 
final rule clarify whether, in such cases, the specific contractual 
requirements in Sec. 573.13 apply. The final rule clarifies that they 
do not, as discussed more fully in the preceding section-by-section 
analysis.
    This clarification may be especially important to smaller 
institutions because they may be more likely than large institutions to 
use outside parties to service transactions. Further, small 
institutions may be less likely to have in-house counsel available to 
advise them on, and to draft, the contractual terms that Sec. 573.13 
would have required without this clarification. Without this change, 
small institutions may have needed to seek expensive outside legal 
advice to comply with the rule. This clarification will allow small 
institutions to outsource transaction processing without having to use 
unnecessarily burdensome and costly contractual language.
    Nonpublic Personal Information. Nonpublic personal information gets 
certain protections under this rule, but it is defined to exclude 
publicly available information. The proposed rule included two 
alternative definitions. Under proposed Alternative A, information 
would be considered publicly available if a financial institution were 
to actually obtain the information from a public source. Under proposed 
Alternative B, information would be considered publicly available if a 
financial institution could obtain it from a public source. Many 
commenters urged OTS to adopt Alternative B. They pointed out that 
Alternative A would require institutions to develop and maintain an 
information tracking system to determine whether particular information 
is publicly available. In response to these concerns, the final rule 
includes a definition of nonpublic personal information, discussed more 
fully above, that does not require financial institutions to create 
tracking systems for publicly available information.
    Plain language. Some commenters, including small institutions, 
complained that the proposed rule was complex. Institutions expressed 
concerns that they could be exposed to legal liability because they 
could not understand what the rule requires. OTS responded to these 
comments by revising the proposed rule to be more understandable. The 
final rule is reorganized, is broken down into more sections, and has 
similar sections grouped together in subparts. This makes provisions of 
the rule easier to find. Additionally, OTS reworded its final rule to 
use more direct and clear language.
    The OTS, along with the other Agencies, intends to publish a small 
entity compliance guide--separate from and in addition to the guidance 
for certain financial institutions included as part of this Federal 
Register notice--that will clarify the operation of and compliance with 
the rule.

C. Executive Order 12866

    OCC and OTS: The Comptroller of the Currency and Director of the 
Office of Thrift Supervision each has determined that this rule does 
not constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866. The rule follows closely the requirements of 
title V, subtitle A of the GLB Act. Since, the GLB Act establishes the 
minimum requirements for this activity, the OCC and OTS have little 
discretion to propose regulatory options that might significantly 
reduce costs or other burdens. However, even absent the requirements of 
the GLB Act, if the OCC and OTS issued the rule under its own 
authority, the rule would not constitute a ``significant regulatory 
action'' for the purposes of Executive Order 12866.

[[Page 35196]]

    For a financial institution that does not intend to disclose 
nonpublic personal information about its consumers or customers to 
nonaffiliated third parties, the burden created by the statute and 
implementing regulation is that of preparing and distributing an 
initial and annual notice of the institution's privacy policies and 
practices. The institution need not provide an opt out notice or 
establish a system for consumers to opt out. For institutions that do 
intend to make such disclosures, they will do so only after determining 
that the benefits of making the disclosures of nonpublic personal 
information outweigh the costs. Accordingly, the regulation's 
provisions governing opt outs impose no net burden on those 
institutions disclosing nonpublic personal information. The final rule 
makes a large number of significant changes to the requirements 
governing initial and annual notices that reduce burden while 
preserving the consumer protections created by the statute.

D. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
also requires the agency to identify and consider a reasonable number 
of regulatory alternatives before promulgating the rule. However, an 
agency is not required to assess the effects of its regulatory actions 
on the private sector to the extent that such regulations incorporate 
requirements specifically set forth in law. 2 U.S.C. 1531. Most of the 
rule's provisions are already mandated by the applicable provisions in 
Title V of the GLB Act, which would become effective and binding on the 
private sector even without a regulatory promulgation. Therefore, the 
OCC and OTS have determined that this regulation will not result in 
expenditures by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any one year. 
Accordingly, the OCC and OTS have not prepared a budgetary impact 
statement or specifically addressed the regulatory alternatives 
considered.

List of Subjects

12 CFR Part 40

    Banks, banking, Consumer protection, National banks, Privacy, 
Reporting and recordkeeping requirements.

12 CFR Part 216

    Banks, banking, Consumer protection, Federal Reserve System, 
Foreign banking, Holding companies, Information, Privacy, Reporting and 
recordkeeping requirements.

12 CFR Part 332

    Banks, banking, Consumer protection, Foreign banking, Privacy, 
Reporting and recordkeeping requirements.

12 CFR Part 573

    Consumer protection, Privacy, Savings associations.

Office of the Comptroller of the Currency

    12 CFR Chapter I

Authority and Issuance

    For the reasons set out in the joint preamble, the OCC amends 
chapter I of title 12 of the Code of Federal Regulations by adding a 
new part 40 to read as follows:

PART 40--PRIVACY OF CONSUMER FINANCIAL INFORMATION

Sec.
40.1   Purpose and scope.
40.2   Rule of construction.
40.3   Definitions.
Subpart A--Privacy and Opt Out Notices
40.4   Initial privacy notice to consumers required.
40.5   Annual privacy notice to customers required.
40.6   Information to be included in privacy notices.
40.7   Form of opt out notice to consumers; opt out methods.
40.8   Revised privacy notices.
40.9   Delivering privacy and opt out notices.
Subpart B--Limits on Disclosures
40.10   Limitation on disclosure of nonpublic personal information 
to nonaffiliated third parties.
40.11   Limits on redisclosure and reuse of information.
40.12   Limits on sharing account number information for marketing 
purposes.
Subpart C--Exceptions
40.13   Exception to opt out requirements for service providers and 
joint marketing.
40.14   Exceptions to notice and opt out requirements for processing 
and servicing transactions.
40.15   Other exceptions to notice and opt out requirements.
Subpart D--Relation to Other Laws; Effective Date
40.16   Protection of Fair Credit Reporting Act.
40.17   Relation to State laws.
40.18   Effective date; transition rule.

Appendix A to Part 40--Sample Clauses

    Authority: 12 U.S.C. 93a; 15 U.S.C. 6801 et seq.


Sec. 40.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the financial institutions listed in 
paragraph (b) of this section. This part:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution 
may disclose nonpublic personal information about consumers to 
nonaffiliated third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated 
third parties by ``opting out'' of that disclosure, subject to the 
exceptions in Secs. 40.13, 40.14, and 40.15.
    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
primarily for personal, family, or household purposes from the 
institutions listed below. This part does not apply to information 
about companies or about individuals who obtain financial products or 
services for business, commercial, or agricultural purposes. This part 
applies to United States offices of entities for which the Office of 
the Comptroller of the Currency has primary supervisory authority. They 
are referred to in this part as ``the bank.'' These are national banks, 
District of Columbia banks, Federal branches and Federal agencies of 
foreign banks, and any subsidiaries of such entities except a broker or 
dealer that is registered under the Securities Exchange Act of 1934, a 
registered investment adviser (with respect to the investment advisory 
activities of the adviser and activities incidental to those investment 
advisory activities), an investment company registered under the 
Investment Company Act of 1940, an insurance company that is subject to 
supervision by a State insurance regulator (with respect to insurance 
activities of the company and activities incidental to those insurance 
activities), and an entity that is subject to regulation by the 
Commodity Futures Trading Commission.
    (2) Nothing in this part modifies, limits, or supersedes the 
standards

[[Page 35197]]

governing individually identifiable health information promulgated by 
the Secretary of Health and Human Services under the authority of 
sections 262 and 264 of the Health Insurance Portability and 
Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).


Sec. 40.2  Rule of construction.

    The examples in this part and the sample clauses in appendix A of 
this part are not exclusive. Compliance with an example or use of a 
sample clause, to the extent applicable, constitutes compliance with 
this part.


Sec. 40.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company.
    (b)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples. (i) Reasonably understandable. A bank makes its 
notice reasonably understandable if it:
    (A) Presents the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Uses short explanatory sentences or bullet lists whenever 
possible;
    (C) Uses definite, concrete, everyday words and active voice 
whenever possible;
    (D) Avoids multiple negatives;
    (E) Avoids legal and highly technical business terminology whenever 
possible; and
    (F) Avoids explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. A bank designs its notice to call 
attention to the nature and significance of the information in it if 
the bank:
    (A) Uses a plain-language heading to call attention to the notice;
    (B) Uses a typeface and type size that are easy to read;
    (C) Provides wide margins and ample line spacing;
    (D) Uses boldface or italics for key words; and
    (E) In a form that combines the bank's notice with other 
information, uses distinctive type size, style, and graphic devices, 
such as shading or sidebars, when you combine your notice with other 
information.
    (iii) Notices on web sites. If a bank provides a notice on a web 
page, the bank designs its notice to call attention to the nature and 
significance of the information in it if the bank uses text or visual 
cues to encourage scrolling down the page if necessary to view the 
entire notice and ensure that other elements on the web site (such as 
text, graphics, hyperlinks, or sound) do not distract attention from 
the notice, and the bank either:
    (A) Places the notice on a screen that consumers frequently access, 
such as a page on which transactions are conducted; or
    (B) Places a link on a screen that consumers frequently access, 
such as a page on which transactions are conducted, that connects 
directly to the notice and is labeled appropriately to convey the 
importance, nature, and relevance of the notice.
    (c) Collect means to obtain information that the bank organizes or 
can retrieve by the name of an individual or by identifying number, 
symbol, or other identifying particular assigned to the individual, 
irrespective of the source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from a bank that is to be used primarily 
for personal, family, or household purposes, or that individual's legal 
representative.
    (2) Examples. (i) An individual who applies to a bank for credit 
for personal, family, or household purposes is a consumer of a 
financial service, regardless of whether the credit is extended.
    (ii) An individual who provides nonpublic personal information to a 
bank in order to obtain a determination about whether he or she may 
qualify for a loan to be used primarily for personal, family, or 
household purposes is a consumer of a financial service, regardless of 
whether the loan is extended.
    (iii) An individual who provides nonpublic personal information to 
a bank in connection with obtaining or seeking to obtain financial, 
investment, or economic advisory services is a consumer regardless of 
whether the bank establishes a continuing advisory relationship.
    (iv) If a bank holds ownership or servicing rights to an 
individual's loan that is used primarily for personal, family, or 
household purposes, the individual is the bank's consumer, even if the 
bank holds those rights in conjunction with one or more other 
institutions. (The individual is also a consumer with respect to the 
other financial institutions involved.) An individual who has a loan in 
which a bank has ownership or servicing rights is the bank's consumer, 
even if the bank, or another institution with those rights, hires an 
agent to collect on the loan.
    (v) An individual who is a consumer of another financial 
institution is not a bank's consumer solely because the bank acts as 
agent for, or provides processing or other services to, that financial 
institution.
    (vi) An individual is not a bank's consumer solely because he or 
she has designated the bank as trustee for a trust.
    (vii) An individual is not a bank's consumer solely because he or 
she is a beneficiary of a trust for which the bank is a trustee.
    (viii) An individual is not a bank's consumer solely because he or 
she is a participant or a beneficiary of an employee benefit plan that 
the bank sponsors or for which the bank acts as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company, as the OCC 
determines.
    (h) Customer means a consumer who has a customer relationship with 
a bank.
    (i)(1) Customer relationship means a continuing relationship 
between a consumer and a bank under which the bank provides one or more 
financial products or services to the consumer that are to be used 
primarily for personal, family, or household purposes.
    (2) Examples. (i) Continuing relationship. A consumer has a 
continuing relationship with a bank if the consumer:
    (A) Has a deposit or investment account with the bank;
    (B) Obtains a loan from the bank;
    (C) Has a loan for which you own the servicing rights;
    (D) Purchases an insurance product from the bank;
    (E) Holds an investment product through the bank, such as when the 
bank acts as a custodian for securities or for assets in an Individual 
Retirement Arrangement;

[[Page 35198]]

    (F) Enters into an agreement or understanding with the bank whereby 
the bank undertakes to arrange or broker a home mortgage loan for the 
consumer;
    (G) Enters into a lease of personal property with the bank; or
    (H) Obtains financial, investment, or economic advisory services 
from the bank for a fee.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with a bank if:
    (A) The consumer obtains a financial product or service only in 
isolated transactions, such as using the bank's ATM to withdraw cash 
from an account at another financial institution or purchasing a 
cashier's check or money order;
    (B) The bank sells the consumer's loan and does not retain the 
rights to service that loan; or
    (C) The bank sells the consumer airline tickets, travel insurance, 
or traveler's checks in isolated transactions.
    (j) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The Director of the Office of Thrift Supervision;
    (5) The National Credit Union Administration Board; and
    (6) The Securities and Exchange Commission.
    (k)(1) Financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Financial institution does not include:
    (i) Any person or entity with respect to any financial activity 
that is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.); or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a 
consumer, as long as such institutions do not sell or transfer 
nonpublic personal information to a nonaffiliated third party.
    (l)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Financial service includes a bank's evaluation or brokerage of 
information that the bank collects in connection with a request or an 
application from a consumer for a financial product or service.
    (m)(1) Nonaffiliated third party means any person except:
    (i) A bank's affiliate; or
    (ii) A person employed jointly by a bank and any company that is 
not the bank's affiliate (but nonaffiliated third party includes the 
other company that jointly employs the person).
    (2) Nonaffiliated third party includes any company that is an 
affiliate solely by virtue of a bank's (or its affiliate's) direct or 
indirect ownership or control of the company in conducting merchant 
banking or investment banking activities of the type described in 
section 4(k)(4)(H) or insurance company investment activities of the 
type described in section 4(k)(4)(I) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(k)(4)(H) and (I)).
    (n)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
using any personally identifiable financial information that is not 
publicly available.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (n)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available.
    (3) Examples of lists. (i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available, and 
is not disclosed in a manner that indicates that any of the individuals 
on the list is a consumer of a financial institution.
    (o)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to a bank to obtain a financial product or 
service from the bank;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between a bank and a consumer; or
    (iii) The bank otherwise obtains about a consumer in connection 
with providing a financial product or service to that consumer.
    (2) Examples. (i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to a bank on an application to 
obtain a loan, credit card, or other financial product or service;
    (B) Account balance information, payment history, overdraft 
history, and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of the bank's 
customers or has obtained a financial product or service from the bank;
    (D) Any information about the bank's consumer if it is disclosed in 
a manner that indicates that the individual is or has been the bank's 
consumer;
    (E) Any information that a consumer provides to a bank or that the 
bank or its agent otherwise obtains in connection with collecting on a 
loan or servicing a loan;
    (F) Any information the bank collects through an Internet 
``cookie'' (an information collecting device from a web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as 
aggregate information or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (p)(1) Publicly available information means any information that a 
bank has a reasonable basis to believe is lawfully made available to 
the general public from:
    (i) Federal, State, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be 
made by Federal, State, or local law.

[[Page 35199]]

    (2) Reasonable basis. A bank has a reasonable basis to believe that 
information is lawfully made available to the general public if the 
bank has taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that the bank's 
consumer has not done so.
    (3) Examples. (i) Government records. Publicly available 
information in government records includes information in government 
real estate records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a web site that is 
available to the general public on an unrestricted basis. A web site is 
not restricted merely because an Internet service provider or a site 
operator requires a fee or a password, so long as access is available 
to the general public.
    (iii) Reasonable basis. (A) A bank has a reasonable basis to 
believe that mortgage information is lawfully made available to the 
general public if the bank has determined that the information is of 
the type included on the public record in the jurisdiction where the 
mortgage would be recorded.
    (B) A bank has a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if 
the bank has located the telephone number in the telephone book or the 
consumer has informed you that the telephone number is not unlisted.

Subpart A--Privacy and Opt Out Notices


Sec. 40.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. A bank must provide a clear and 
conspicuous notice that accurately reflects its privacy policies and 
practices to:
    (1) Customer. An individual who becomes the bank's customer, not 
later than when the bank establishes a customer relationship, except as 
provided in paragraph (e) of this section; and
    (2) Consumer. A consumer, before the bank discloses any nonpublic 
personal information about the consumer to any nonaffiliated third 
party, if the bank makes such a disclosure other than as authorized by 
Secs. 40.14 and 40.15.
    (b) When initial notice to a consumer is not required. A bank is 
not required to provide an initial notice to a consumer under paragraph 
(a) of this section if:
    (1) The bank does not disclose any nonpublic personal information 
about the consumer to any nonaffiliated third party, other than as 
authorized by Secs. 40.14 and 40.15; and
    (2) The bank does not have a customer relationship with the 
consumer.
    (c) When the bank establishes a customer relationship. (1) General 
rule. A bank establishes a customer relationship when it and the 
consumer enter into a continuing relationship.
    (2) Special rule for loans. A bank establishes a customer 
relationship with a consumer when the bank originates a loan to the 
consumer for personal, family, or household purposes. If the bank 
subsequently transfers the servicing rights to that loan to another 
financial institution, the customer relationship transfers with the 
servicing rights.
    (3)(i) Examples of establishing customer relationship. A bank 
establishes a customer relationship when the consumer:
    (A) Opens a credit card account with the bank;
    (B) Executes the contract to open a deposit account with the bank, 
obtains credit from the bank, or purchases insurance from the bank;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from the bank for a fee; or
    (D) Becomes the bank's client for the purpose of the bank's 
providing credit counseling or tax preparation services.
    (ii) Examples of loan rule. A bank establishes a customer 
relationship with a consumer who obtains a loan for personal, family, 
or household purposes when the bank:
    (A) Originates the loan to the consumer; or
    (B) Purchases the servicing rights to the consumer's loan.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from a bank that is to be used primarily 
for personal, family, or household purposes, the bank satisfies the 
initial notice requirements of paragraph (a) of this section as 
follows:
    (1) The bank may provide a revised privacy notice, under Sec. 40.8, 
that covers the customer's new financial product or service; or
    (2) If the initial, revised, or annual notice that the bank most 
recently provided to that customer was accurate with respect to the new 
financial product or service, the bank does not need to provide a new 
privacy notice under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) A bank 
may provide the initial notice required by paragraph (a)(1) of this 
section within a reasonable time after the bank establishes a customer 
relationship if:
    (i) Establishing the customer relationship is not at the customer's 
election; or
    (ii) Providing notice not later than when the bank establishes a 
customer relationship would substantially delay the customer's 
transaction and the customer agrees to receive the notice at a later 
time.
    (2) Examples of exceptions. (i) Not at customer's election. 
Establishing a customer relationship is not at the customer's election 
if a bank acquires a customer's deposit liability or the servicing 
rights to a customer's loan from another financial institution and the 
customer does not have a choice about the bank's acquisition.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when a bank establishes a customer relationship would 
substantially delay the customer's transaction when:
    (A) The bank and the individual agree over the telephone to enter 
into a customer relationship involving prompt delivery of the financial 
product or service; or
    (B) The bank establishes a customer relationship with an individual 
under a program authorized by Title IV of the Higher Education Act of 
1965 (20 U.S.C. 1070 et seq.) or similar student loan programs where 
loan proceeds are disbursed promptly without prior communication 
between the bank and the customer.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when a bank establishes a customer relationship 
would not substantially delay the customer's transaction when the 
relationship is initiated in person at the bank's office or through 
other means by which the customer may view the notice, such as on a web 
site.
    (f) Delivery. When a bank is required to deliver an initial privacy 
notice by this section, the bank must deliver it according to 
Sec. 40.9. If the bank uses a short-form initial notice for non-
customers according to Sec. 40.6(d), the bank may deliver its privacy 
notice according to Sec. 40.6(d)(3).


Sec. 40.5  Annual privacy notice to customers required.

    (a)(1) General rule. A bank must provide a clear and conspicuous 
notice to customers that accurately reflects its privacy policies and 
practices not less

[[Page 35200]]

than annually during the continuation of the customer relationship. 
Annually means at least once in any period of 12 consecutive months 
during which that relationship exists. A bank may define the 12-
consecutive-month period, but the bank must apply it to the customer on 
a consistent basis.
    (2) Example. A bank provides a notice annually if it defines the 
12-consecutive-month period as a calendar year and provides the annual 
notice to the customer once in each calendar year following the 
calendar year in which the bank provided the initial notice. For 
example, if a customer opens an account on any day of year 1, the bank 
must provide an annual notice to that customer by December 31 of year 
2.
    (b)(1) Termination of customer relationship. A bank is not required 
to provide an annual notice to a former customer.
    (2) Examples. A bank's customer becomes a former customer when:
    (i) In the case of a deposit account, the account is inactive under 
the bank's policies;
    (ii) In the case of a closed-end loan, the customer pays the loan 
in full, the bank charges off the loan, or the bank sells the loan 
without retaining servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship, the bank no longer provides any statements or 
notices to the customer concerning that relationship or the bank sells 
the credit card receivables without retaining servicing rights; or
    (iv) The bank has not communicated with the customer about the 
relationship for a period of 12 consecutive months, other than to 
provide annual privacy notices or promotional material.
    (c) Special rule for loans. If a bank does not have a customer 
relationship with a consumer under the special rule for loans in 
Sec. 40.4(c)(2), then the bank need not provide an annual notice to 
that consumer under this section.
    (d) Delivery. When a bank is required to deliver an annual privacy 
notice by this section, the bank must deliver it according to 
Sec. 40.9.


Sec. 40.6  Information to be included in privacy notices.

    (a) General rule. The initial, annual, and revised privacy notices 
that a bank provides under Secs. 40.4, 40.5, and 40.8 must include each 
of the following items of information, in addition to any other 
information the bank wishes to provide, that applies to the bank and to 
the consumers to whom the bank sends its privacy notice:
    (1) The categories of nonpublic personal information that the bank 
collects;
    (2) The categories of nonpublic personal information that the bank 
discloses;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom the bank discloses nonpublic personal information, other than 
those parties to whom the bank discloses information under Secs. 40.14 
and 40.15;
    (4) The categories of nonpublic personal information about the 
bank's former customers that the bank discloses and the categories of 
affiliates and nonaffiliated third parties to whom the bank discloses 
nonpublic personal information about the bank's former customers, other 
than those parties to whom the bank discloses information under 
Secs. 40.14 and 40.15;
    (5) If a bank discloses nonpublic personal information to a 
nonaffiliated third party under Sec. 40.13 (and no other exception in 
Secs. 40.14 or 40.15 applies to that disclosure), a separate statement 
of the categories of information the bank discloses and the categories 
of third parties with whom the bank has contracted;
    (6) An explanation of the consumer's right under Sec. 40.10(a) to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that the bank makes under section 
603(d)(2)(A)(iii) of the Fair Credit Reporting Act (15 U.S.C. 
1681a(d)(2)(A)(iii)) (that is, notices regarding the ability to opt out 
of disclosures of information among affiliates);
    (8) The bank's policies and practices with respect to protecting 
the confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that the bank makes under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If a bank discloses nonpublic personal information to third 
parties as authorized under Secs. 40.14 and 40.15, the bank is not 
required to list those exceptions in the initial or annual privacy 
notices required by Secs. 40.4 and 40.5. When describing the categories 
with respect to those parties, the bank is required to state only that 
it makes disclosures to other nonaffiliated third parties as permitted 
by law.
    (c) Examples. (1) Categories of nonpublic personal information that 
the bank collects. A bank satisfies the requirement to categorize the 
nonpublic personal information that it collects if it lists the 
following categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with the bank or 
its affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information the bank 
discloses. (i) A bank satisfies the requirement to categorize the 
nonpublic personal information that it discloses if the bank lists the 
categories described in paragraph (e)(1) of this section, as 
applicable, and a few examples to illustrate the types of information 
in each category.
    (ii) If a bank reserves the right to disclose all of the nonpublic 
personal information about consumers that it collects, it may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information it discloses.
    (3) Categories of affiliates and nonaffiliated third parties to 
whom the bank discloses. A bank satisfies the requirement to categorize 
the affiliates and nonaffiliated third parties to whom it discloses 
nonpublic personal information if the bank lists the following 
categories, as applicable, and a few examples to illustrate the types 
of third parties in each category:
    (i) Financial service providers;
    (ii) Non-financial companies; and
    (iii) Others.
    (4) Disclosures under exception for service providers and joint 
marketers. If a bank discloses nonpublic personal information under the 
exception in Sec. 40.13 to a nonaffiliated third party to market 
products or services that it offers alone or jointly with another 
financial institution, the bank satisfies the disclosure requirement of 
paragraph (a)(5) of this section if it:
    (i) Lists the categories of nonpublic personal information it 
discloses, using the same categories and examples the bank used to meet 
the requirements of paragraph (a)(2) of this section, as applicable; 
and
    (ii) States whether the third party is:
    (A) A service provider that performs marketing services on the 
bank's behalf or on behalf of the bank and another financial 
institution; or
    (B) A financial institution with whom the bank has a joint 
marketing agreement.
    (5) Simplified notices. If a bank does not disclose, and does not 
wish to reserve the right to disclose, nonpublic

[[Page 35201]]

personal information about customers or former customers to affiliates 
or nonaffiliated third parties except as authorized under Secs. 40.14 
and 40.15, the bank may simply state that fact, in addition to the 
information it must provide under paragraphs (a)(1), (a)(8), (a)(9), 
and (b) of this section.
    (6) Confidentiality and security. A bank describes its policies and 
practices with respect to protecting the confidentiality and security 
of nonpublic personal information if it does both of the following:
    (i) Describes in general terms who is authorized to have access to 
the information; and
    (ii) States whether the bank has security practices and procedures 
in place to ensure the confidentiality of the information in accordance 
with the bank's policy. The bank is not required to describe technical 
information about the safeguards it uses.
    (d) Short-form initial notice with opt out notice for non-
customers. (1) A bank may satisfy the initial notice requirements in 
Secs. 40.4(a)(2), 40.7(b), and 40.7(c) for a consumer who is not a 
customer by providing a short-form initial notice at the same time as 
the bank delivers an opt out notice as required in Sec. 40.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that the bank's privacy notice is available upon 
request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) The bank must deliver its short-form initial notice according 
to Sec. 40.9. The bank is not required to deliver its privacy notice 
with its short-form initial notice. The bank instead may simply provide 
the consumer a reasonable means to obtain its privacy notice. If a 
consumer who receives the bank's short-form notice requests the bank's 
privacy notice, the bank must deliver its privacy notice according to 
Sec. 40.9.
    (4) Examples of obtaining privacy notice. The bank provides a 
reasonable means by which a consumer may obtain a copy of its privacy 
notice if the bank:
    (i) Provides a toll-free telephone number that the consumer may 
call to request the notice; or
    (ii) For a consumer who conducts business in person at the bank's 
office, maintain copies of the notice on hand that the bank provides to 
the consumer immediately upon request.
    (e) Future disclosures. The bank's notice may include:
    (1) Categories of nonpublic personal information that the bank 
reserves the right to disclose in the future, but do not currently 
disclose; and
    (2) Categories of affiliates or nonaffiliated third parties to whom 
the bank reserves the right in the future to disclose, but to whom the 
bank does not currently disclose, nonpublic personal information.
    (f) Sample clauses. Sample clauses illustrating some of the notice 
content required by this section are included in Appendix A of this 
part.


Sec. 40.7  Form of opt out notice to consumers; opt out methods.

    (a) (1) Form of opt out notice. If a bank is required to provide an 
opt out notice under Sec. 40.10(a), it must provide a clear and 
conspicuous notice to each of its consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That the bank discloses or reserves the right to disclose 
nonpublic personal information about its consumer to a nonaffiliated 
third party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples. (i) Adequate opt out notice. A bank provides adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if the bank:
    (A) Identifies all of the categories of nonpublic personal 
information that it discloses or reserves the right to disclose, and 
all of the categories of nonaffiliated third parties to which the bank 
discloses the information, as described in Sec. 40.6(a)(2) and (3), and 
states that the consumer can opt out of the disclosure of that 
information; and
    (B) Identifies the financial products or services that the consumer 
obtains from the bank, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. A bank provides a reasonable means 
to exercise an opt out right if it:
    (A) Designates check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Includes a reply form together with the opt out notice;
    (C) Provides an electronic means to opt out, such as a form that 
can be sent via electronic mail or a process at the bank's web site, if 
the consumer agrees to the electronic delivery of information; or
    (D) Provides a toll-free telephone number that consumers may call 
to opt out.
    (iii) Unreasonable opt out means. A bank does not provide a 
reasonable means of opting out if:
    (A) The only means of opting out is for the consumer to write his 
or her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that the 
bank provided with the initial notice but did not include with the 
subsequent notice.
    (iv) Specific opt out means. A bank may require each consumer to 
opt out through a specific means, as long as that means is reasonable 
for that consumer.
    (b) Same form as initial notice permitted. A bank may provide the 
opt out notice together with or on the same written or electronic form 
as the initial notice the bank provides in accordance with Sec. 40.4.
    (c) Initial notice required when opt out notice delivered 
subsequent to initial notice. If a bank provides the opt out notice 
later than required for the initial notice in accordance with 
Sec. 40.4, the bank must also include a copy of the initial notice with 
the opt out notice in writing or, if the consumer agrees, 
electronically.
    (d) Joint relationships. (1) If two or more consumers jointly 
obtain a financial product or service from a bank, the bank may provide 
a single opt out notice. The bank's opt out notice must explain how the 
bank will treat an opt out direction by a joint consumer (as explained 
in paragraph (d)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
The bank may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If a bank permits each joint consumer to opt out separately, 
the bank must permit one of the joint consumers to opt out on behalf of 
all of the joint consumers.
    (4) A bank may not require all joint consumers to opt out before it 
implements any opt out direction.
    (5) Example. If John and Mary have a joint checking account with a 
bank and arranges for the bank to send statements to John's address, 
the bank may do any of the following, but it must explain in its opt 
out notice which opt out policy the bank will follow:
    (i) Send a single opt out notice to John's address, but the bank 
must accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If the bank does so and John opts out, the bank 
may not require

[[Page 35202]]

Mary to opt out as well before implementing John's opt out direction.
    (iii) Permit John and Mary to make different opt out directions. If 
the bank does so:
    (A) It must permit John and Mary to opt out for each other;
    (B) If both opt out, the bank must permit both of them to notify it 
in a single response (such as on a form or through a telephone call); 
and
    (C) If John opts out and Mary does not, the bank may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Time to comply with opt out. A bank must comply with a 
consumer's opt out direction as soon as reasonably practicable after 
the bank receives it.
    (f) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (g) Duration of consumer's opt out direction. (1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
the bank collected during or related to that relationship. If the 
individual subsequently establishes a new customer relationship with 
the bank, the opt out direction that applied to the former relationship 
does not apply to the new relationship.
    (h) Delivery. When a bank is required to deliver an opt out notice 
by this section, the bank must deliver it according to Sec. 40.9.


Sec. 40.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, a 
bank must not, directly or through any affiliate, disclose any 
nonpublic personal information about a consumer to a nonaffiliated 
third party other than as described in the initial notice that the bank 
provided to that consumer under Sec. 40.4, unless:
    (1) The bank has provided to the consumer a clear and conspicuous 
revised notice that accurately describes its policies and practices;
    (2) The bank has provided to the consumer a new opt out notice;
    (3) The bank has given the consumer a reasonable opportunity, 
before the bank discloses the information to the nonaffiliated third 
party, to opt out of the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples. (1) Except as otherwise permitted by Secs. 40.13, 
40.14, and 40.15, a bank must provide a revised notice before it:
    (i) Discloses a new category of nonpublic personal information to 
any nonaffiliated third party;
    (ii) Discloses nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has 
not had the opportunity to exercise an opt out right regarding that 
disclosure.
    (2) A revised notice is not required if the bank discloses 
nonpublic personal information to a new nonaffiliated third party that 
the bank adequately described in its prior notice.
    (c) Delivery. When a bank is required to deliver a revised privacy 
notice by this section, the bank must deliver it according to 
Sec. 40.9.


Sec. 40.9  Delivering privacy and opt out notices.

    (a) How to provide notices. A bank must provide any privacy notices 
and opt out notices, including short-form initial notices, that this 
part requires so that each consumer can reasonably be expected to 
receive actual notice in writing or, if the consumer agrees, 
electronically.
    (b) (1) Examples of reasonable expectation of actual notice. A bank 
may reasonably expect that a consumer will receive actual notice if the 
bank:
    (i) Hand-delivers a printed copy of the notice to the consumer;
    (ii) Mails a printed copy of the notice to the last known address 
of the consumer;
    (iii) For the consumer who conducts transactions electronically, 
posts the notice on the electronic site and requires the consumer to 
acknowledge receipt of the notice as a necessary step to obtaining a 
particular financial product or service;
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, posts the notice on the ATM screen and requires the 
consumer to acknowledge receipt of the notice as a necessary step to 
obtaining the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. A bank 
may not, however, reasonably expect that a consumer will receive actual 
notice of its privacy policies and practices if it:
    (i) Only posts a sign in its branch or office or generally publish 
advertisements of its privacy policies and practices;
    (ii) Sends the notice via electronic mail to a consumer who does 
not obtain a financial product or service from the bank electronically.
    (c) Annual notices only. A bank may reasonably expect that a 
customer will receive actual notice of the bank's annual privacy notice 
if:
    (1) The customer uses the bank's web site to access financial 
products and services electronically and agrees to receive notices at 
the web site and the bank posts its current privacy notice continuously 
in a clear and conspicuous manner on the web site; or
    (2) The customer has requested that the bank refrain from sending 
any information regarding the customer relationship, and the bank's 
current privacy notice remains available to the customer upon request.
    (d) Oral description of notice insufficient. A bank may not provide 
any notice required by this part solely by orally explaining the 
notice, either in person or over the telephone.
    (e) Retention or accessibility of notices for customers. (1) For 
customers only, a bank must provide the initial notice required by 
Sec. 40.4(a)(1), the annual notice required by Sec. 40.5(a), and the 
revised notice required by Sec. 40.8 so that the customer can retain 
them or obtain them later in writing or, if the customer agrees, 
electronically.
    (2) Examples of retention or accessibility. A bank provides a 
privacy notice to the customer so that the customer can retain it or 
obtain it later if the bank:
    (i) Hand-delivers a printed copy of the notice to the customer;
    (ii) Mails a printed copy of the notice to the last known address 
of the customer; or
    (iii) Makes its current privacy notice available on a web site (or 
a link to another web site) for the customer who obtains a financial 
product or service electronically and agrees to receive the notice at 
the web site.
    (f) Joint notice with other financial institutions. A bank may 
provide a joint notice from it and one or more of its affiliates or 
other financial institutions, as identified in the notice, as long as 
the notice is accurate with respect to the bank and the other 
institutions.
    (g) Joint relationships. If two or more consumers jointly obtain a 
financial product or service from a bank, the bank may satisfy the 
initial, annual, and revised notice requirements of Secs. 40.4(a), 
40.5(a), and 40.8(a), respectively, by providing one notice to those 
consumers jointly.

Subpart B--Limits on Disclosures


Sec. 40.10  Limits on disclosure of non-public personal information to 
nonaffiliated third parties.

    (a)(1) Conditions for disclosure. Except as otherwise authorized in 
this

[[Page 35203]]

part, a bank may not, directly or through any affiliate, disclose any 
nonpublic personal information about a consumer to a nonaffiliated 
third party unless:
    (i) The bank has provided to the consumer an initial notice as 
required under Sec. 40.4;
    (ii) The bank has provided to the consumer an opt out notice as 
required in Sec. 40.7;
    (iii) The bank has given the consumer a reasonable opportunity, 
before it discloses the information to the nonaffiliated third party, 
to opt out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that the bank not disclose nonpublic personal information about that 
consumer to a nonaffiliated third party, other than as permitted by 
Secs. 40.13, 40.14, and 40.15.
    (3) Examples of reasonable opportunity to opt out. A bank provides 
a consumer with a reasonable opportunity to opt out if:
    (i) By mail. The bank mails the notices required in paragraph 
(a)(1) of this section to the consumer and allows the consumer to opt 
out by mailing a form, calling a toll-free telephone number, or any 
other reasonable means within 30 days from the date the bank mailed the 
notices.
    (ii) By electronic means. A customer opens an on-line account with 
a bank and agrees to receive the notices required in paragraph (a)(1) 
of this section electronically, and the bank allows the customer to opt 
out by any reasonable means within 30 days after the date that the 
customer acknowledges receipt of the notices in conjunction with 
opening the account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a cashier's check by a consumer, a 
bank provides the consumer with a reasonable opportunity to opt out if 
the bank provides the notices required in paragraph (a)(1) of this 
section at the time of the transaction and requests that the consumer 
decide, as a necessary part of the transaction, whether to opt out 
before completing the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information. (1) A bank must comply with this section, 
regardless of whether the bank and the consumer have established a 
customer relationship.
    (2) Unless a bank complies with this section, the bank may not, 
directly or through any affiliate, disclose any nonpublic personal 
information about a consumer that the bank has collected, regardless of 
whether the bank collected it before or after receiving the direction 
to opt out from the consumer.
    (c) Partial opt out. A bank may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.


Sec. 40.11  Limits on redisclosure and reuse of information.

    (a)(1) Information the bank receives under an exception. If a bank 
receives nonpublic personal information from a nonaffiliated financial 
institution under an exception in Secs. 40.14 or 40.15 of this part, 
the bank's disclosure and use of that information is limited as 
follows:
    (i) The bank may disclose the information to the affiliates of the 
financial institution from which the bank received the information;
    (ii) The bank may disclose the information to its affiliates, but 
the bank's affiliates may, in turn, disclose and use the information 
only to the extent that the bank may disclose and use the information; 
and
    (iii) The bank may disclose and use the information pursuant to an 
exception in Secs. 40.14 or 40.15 in the ordinary course of business to 
carry out the activity covered by the exception under which the bank 
received the information.
    (2) Example. If a bank receives a customer list from a 
nonaffiliated financial institution in order to provide account 
processing services under the exception in Sec. 40.14(a), the bank may 
disclose that information under any exception in Secs. 40.14 or 40.15 
in the ordinary course of business in order to provide those services. 
For example, the bank could disclose the information in response to a 
properly authorized subpoena or to its attorneys, accountants, and 
auditors. The bank could not disclose that information to a third party 
for marketing purposes or use that information for its own marketing 
purposes.
    (b)(1) Information a bank receives outside of an exception. If a 
bank receives nonpublic personal information from a nonaffiliated 
financial institution other than under an exception in Secs. 40.14 or 
40.15 of this part, the bank may disclose the information only:
    (i) To the affiliates of the financial institution from which the 
bank received the information;
    (ii) To its affiliates, but its affiliates may, in turn, disclose 
the information only to the extent that the bank can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if 
made directly to that person by the financial institution from which 
the bank received the information.
    (2) Example. If a bank obtains a customer list from a nonaffiliated 
financial institution outside of the exceptions in Secs. 40.14 and 
40.15:
    (i) The bank may use that list for its own purposes; and
    (ii) The bank may disclose that list to another nonaffiliated third 
party only if the financial institution from which the bank purchased 
the list could have lawfully disclosed the list to that third party. 
That is, the bank may disclose the list in accordance with the privacy 
policy of the financial institution from which the bank received the 
list, as limited by the opt out direction of each consumer whose 
nonpublic personal information the bank intends to disclose and the 
bank may disclose the list in accordance with an exception in 
Secs. 40.14 or 40.15, such as to the bank's attorneys or accountants.
    (c) Information a bank discloses under an exception. If a bank 
discloses nonpublic personal information to a nonaffiliated third party 
under an exception in Secs. 40.14 or 40.15 of this part, the third 
party may disclose and use that information only as follows:
    (1) The third party may disclose the information to the bank's 
affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the 
information; and
    (3) The third party may disclose and use the information pursuant 
to an exception in Secs. 40.14 or 40.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.
    (d) Information a bank discloses outside of an exception. If a bank 
discloses nonpublic personal information to a nonaffiliated third party 
other than under an exception in Secs. 40.14 or 40.15 of this part, the 
third party may disclose the information only:
    (1) To the bank's affiliates;
    (2) To the third party's affiliates, but the third party's 
affiliates, in turn, may disclose the information only to the extent 
the third party can disclose the information; and
    (3) To any other person, if the disclosure would be lawful if the 
bank made it directly to that person.


Sec. 40.12  Limits on sharing account number information for marketing 
purposes.

    (a) General prohibition on disclosure of account numbers. A bank 
must not, directly or through an affiliate, disclose, other than to a 
consumer reporting

[[Page 35204]]

agency, an account number or similar form of access number or access 
code for a consumer's credit card account, deposit account, or 
transaction account to any nonaffiliated third party for use in 
telemarketing, direct mail marketing, or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if a 
bank discloses an account number or similar form of access number or 
access code:
    (1) To the bank's agent or service provider solely in order to 
perform marketing for the bank's own products or services, as long as 
the agent or service provider is not authorized to directly initiate 
charges to the account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Examples. (1) Account number. An account number, or similar 
form of access number or access code, does not include a number or code 
in an encrypted form, as long as the bank does not provide the 
recipient with a means to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a deposit account or a credit card account. A transaction account 
does not include an account to which third parties cannot initiate 
charges.

Subpart C--Exceptions


Sec. 40.13  Exception to opt out requirements for service providers and 
joint marketing.

    (a) General rule. (1) The opt out requirements in Secs. 40.7 and 
40.10 do not apply when a bank provides nonpublic personal information 
to a nonaffiliated third party to perform services for the bank or 
functions on the bank's behalf, if the bank:
    (i) Provides the initial notice in accordance with Sec. 40.4; and
    (ii) Enters into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information 
other than to carry out the purposes for which the bank disclosed the 
information, including use under an exception in Sec. 40.14 or 40.15 in 
the ordinary course of business to carry out those purposes.
    (2) Example. If a bank discloses nonpublic personal information 
under this section to a financial institution with which the bank 
performs joint marketing, the bank's contractual agreement with that 
institution meets the requirements of paragraph (a)(1)(ii) of this 
section if it prohibits the institution from disclosing or using the 
nonpublic personal information except as necessary to carry out the 
joint marketing or under an exception in Secs. 40.14 or 40.15 in the 
ordinary course of business to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for a bank under paragraph (a) of 
this section may include marketing of the bank's own products or 
services or marketing of financial products or services offered 
pursuant to joint agreements between the bank and one or more financial 
institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which a bank and 
one or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.


Sec. 40.14  Exceptions to notice and opt out requirements for 
processing and servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec. 40.4(a)(2), the opt out in 
Secs. 40.7 and 40.10 and service providers and joint marketing in 
Sec. 40.13 do not apply if the bank discloses nonpublic personal 
information as necessary to effect, administer, or enforce a 
transaction that a consumer requests or authorizes, or in connection 
with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with a bank, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related 
to a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce the bank's rights or the rights of other persons engaged in 
carrying out the financial transaction or providing the product or 
service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain 
the consumer's account in the ordinary course of providing the 
financial service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by a bank or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities), 
participating in research projects, or as otherwise required or 
specifically permitted by Federal or State law;
    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card, check, or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.


Sec. 40.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for 
initial notice to consumers in Sec. 40.4(a)(2), the opt out in 
Secs. 40.7 and 40.10, and service providers and joint marketing in 
Sec. 40.13 do not apply when a bank discloses nonpublic personal 
information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2) (i) To protect the confidentiality or security of a bank's 
records pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;

[[Page 35205]]

    (3) To provide information to insurance rate advisory 
organizations, guaranty funds or agencies, agencies that are rating a 
bank, persons that are assessing the bank's compliance with industry 
standards, and the bank's attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.), to law enforcement agencies 
(including a federal functional regulator, the Secretary of the 
Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records 
and Reports on Monetary Instruments and Transactions) and 12 U.S.C. 
Chapter 21 (Financial Recordkeeping), a State insurance authority, with 
respect to any person domiciled in that insurance authority's State 
that is engaged in providing insurance, and the Federal Trade 
Commission), self-regulatory organizations, or for an investigation on 
a matter related to public safety;
    (5)(i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.); or
    (ii) From a consumer report reported by a consumer reporting 
agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7)(i) To comply with Federal, State, or local laws, rules and 
other applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons by Federal, State, or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over a bank for examination, 
compliance, or other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to a bank's disclosure to a nonaffiliated 
insurance company of the fact that the consumer has applied to the bank 
for a mortgage so that the insurance company can offer homeowner's 
insurance to the consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal 
information as permitted under Sec. 40.7(f).

Subpart D--Relation to Other Laws; Effective Date


Sec. 40.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 
1681 et seq.), and no inference shall be drawn on the basis of the 
provisions of this part regarding whether information is transaction or 
experience information under section 603 of that Act.


Sec. 40.17  Relation to State laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or 
interpretation in effect in any State, except to the extent that such 
State statute, regulation, order, or interpretation is inconsistent 
with the provisions of this part, and then only to the extent of the 
inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Federal Trade Commission, after consultation with the OCC, on the 
Federal Trade Commission's own motion, or upon the petition of any 
interested party.


Sec. 40.18  Effective date; transition rule.

    (a) Effective date. This part is effective November 13, 2000. In 
order to provide sufficient time for banks to establish policies and 
systems to comply with the requirements of this part, the OCC has 
extended the time for compliance with this part until July 1, 2001.
    (b)(1) Notice requirement for consumers who are the bank's 
customers on the compliance date. By July 1, 2001, a bank must have 
provided an initial notice, as required by Sec. 40.4, to consumers who 
are the bank's customers on July 1, 2001.
    (2) Example. A bank provides an initial notice to consumers who are 
its customers on July 1, 2001, if, by that date, the bank has 
established a system for providing an initial notice to all new 
customers and has mailed the initial notice to all the bank's existing 
customers.
    (c) Two-year grandfathering of service agreements. Until July 1, 
2002, a contract that a bank has entered into with a nonaffiliated 
third party to perform services for the bank or functions on the bank's 
behalf satisfies the provisions of Sec. 40.13(a)(1)(ii) of this part, 
even if the contract does not include a requirement that the third 
party maintain the confidentiality of nonpublic personal information, 
as long as the bank entered into the agreement on or before July 1, 
2000.

Appendix A to Part 40--Sample Clauses

    Financial institutions, including a group of financial holding 
company affiliates that use a common privacy notice, may use the 
following sample clauses, if the clause is accurate for each 
institution that uses the notice. (Note that disclosure of certain 
information, such as assets, income, and information from a consumer 
reporting agency, may give rise to obligations under the Fair Credit 
Reporting Act, such as a requirement to permit a consumer to opt out 
of disclosures to affiliates or designation as a consumer reporting 
agency if disclosures are made to nonaffiliated third parties.)

A-1--Categories of information a bank collects (all institutions)

    A bank may use this clause, as applicable, to meet the 
requirement of Sec. 40.6(a)(1) to describe the categories of 
nonpublic personal information the bank collects.
    Sample Clause A-1:
    We collect nonpublic personal information about you from the 
following sources:
     Information we receive from you on applications or 
other forms;
     Information about your transactions with us, our 
affiliates, or others; and
     Information we receive from a consumer reporting 
agency.

A-2--Categories of information a bank discloses (institutions that 
disclose outside of the exceptions)

    A bank may use one of these clauses, as applicable, to meet the 
requirement of Sec. 40.6(a)(2) to describe the categories of 
nonpublic personal information the bank discloses. The bank may use 
these clauses if it discloses nonpublic personal information other 
than as permitted by the exceptions in Secs. 40.13, 40.14, and 
40.15.
    Sample Clause A-2, Alternative 1:
    We may disclose the following kinds of nonpublic personal 
information about you:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-2, Alternative 2:
    We may disclose all of the information that we collect, as 
described [describe location in the notice, such as ``above'' or 
``below''].

[[Page 35206]]

A-3--Categories of information a bank discloses and parties to whom the 
bank discloses (institutions that do not disclose outside of the 
exceptions)

    A bank may use this clause, as applicable, to meet the 
requirements of Secs. 40.6(a)(2), (3), and (4) to describe the 
categories of nonpublic personal information about customers and 
former customers that the bank discloses and the categories of 
affiliates and nonaffiliated third parties to whom the bank 
discloses. A bank may use this clause if the bank does not disclose 
nonpublic personal information to any party, other than as permitted 
by the exceptions in Secs. 40.14, and 40.15.
    Sample Clause A-3:
    We do not disclose any nonpublic personal information about our 
customers or former customers to anyone, except as permitted by law.

A-4--Categories of parties to whom a bank discloses (institutions that 
disclose outside of the exceptions)

    A bank may use this clause, as applicable, to meet the 
requirement of Sec. 40.6(a)(3) to describe the categories of 
affiliates and nonaffiliated third parties to whom the bank 
discloses nonpublic personal information. The bank may use this 
clause if the bank discloses nonpublic personal information other 
than as permitted by the exceptions in Secs. 40.13, 40.14, and 
40.15, as well as when permitted by the exceptions in Secs. 40.14 
and 40.15.
    Sample Clause A-4:
    We may disclose nonpublic personal information about you to the 
following types of third parties:
     Financial service providers, such as [provide 
illustrative examples, such as ``mortgage bankers, securities 
broker-dealers, and insurance agents''];
     Non-financial companies, such as [provide illustrative 
examples, such as ``retailers, direct marketers, airlines, and 
publishers'']; and
     Others, such as [provide illustrative examples, such as 
``non-profit organizations''].
    We may also disclose nonpublic personal information about you to 
nonaffiliated third parties as permitted by law.

A-5--Service provider/joint marketing exception

    A bank may use one of these clauses, as applicable, to meet the 
requirements of Sec. 40.6(a)(5) related to the exception for service 
providers and joint marketers in Sec. 40.13. If a bank discloses 
nonpublic personal information under this exception, the bank must 
describe the categories of nonpublic personal information the bank 
discloses and the categories of third parties with whom the bank has 
contracted.
    Sample Clause A-5, Alternative 1:
    We may disclose the following information to companies that 
perform marketing services on our behalf or to other financial 
institutions with whom we have joint marketing agreements:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-5, Alternative 2:
    We may disclose all of the information we collect, as described 
[describe location in the notice, such as ``above'' or ``below''] to 
companies that perform marketing services on our behalf or to other 
financial institutions with whom we have joint marketing agreements.

A-6--Explanation of opt out right (institutions that disclose outside 
of the exceptions)

    A bank may use this clause, as applicable, to meet the 
requirement of Sec. 40.6(a)(6) to provide an explanation of the 
consumer's right to opt out of the disclosure of nonpublic personal 
information to nonaffiliated third parties, including the method(s) 
by which the consumer may exercise that right. The bank may use this 
clause if the bank discloses nonpublic personal information other 
than as permitted by the exceptions in Secs. 40.13, 40.14, and 
40.15.
    Sample Clause A-6:
    If you prefer that we not disclose nonpublic personal 
information about you to nonaffiliated third parties, you may opt 
out of those disclosures, that is, you may direct us not to make 
those disclosures (other than disclosures permitted by law). If you 
wish to opt out of disclosures to nonaffiliated third parties, you 
may [describe a reasonable means of opting out, such as ``call the 
following toll-free number: (insert number)].

A-7--Confidentiality and security (all institutions)

    A bank may use this clause, as applicable, to meet the 
requirement of Sec. 40.6(a)(8) to describe its policies and 
practices with respect to protecting the confidentiality and 
security of nonpublic personal information.
    Sample Clause A-7:
    We restrict access to nonpublic personal information about you 
to [provide an appropriate description, such as ``those employees 
who need to know that information to provide products or services to 
you'']. We maintain physical, electronic, and procedural safeguards 
that comply with federal standards to guard your nonpublic personal 
information.

    Dated: May 9, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.

Board of Governors of the Federal Reserve System

    12 CFR Chapter II

Authority and Issuance

    For the reasons set out in the joint preamble, Title 12, Chapter 
II, of the Code of Federal Regulations is amended by adding a new part 
216 to read as follows:

PART 216--PRIVACY OF CONSUMER FINANCIAL INFORMATION (REGULATION P)

Sec.
216.1   Purpose and scope.
216.2   Rule of construction.
216.3   Definitions.
Subpart A--Privacy and Opt Out Notices
216.4   Initial privacy notice to consumers required.
216.5   Annual privacy notice to customers required.
216.6   Information to be included in privacy notices.
216.7   Form of opt out notice to consumers; opt out methods.
216.8   Revised privacy notices.
216.9   Delivering privacy and opt out notices.
Subpart B--Limits on Disclosures
216.10   Limitation on disclosure of nonpublic personal information 
to nonaffiliated third parties.
216.11   Limits on redisclosure and reuse of information.
216.12   Limits on sharing account number information for marketing 
purposes.
Subpart C--Exceptions
216.13   Exception to opt out requirements for service providers and 
joint marketing.
216.14   Exceptions to notice and opt out requirements for 
processing and servicing transactions.
216.15   Other exceptions to notice and opt out requirements.
Subpart D--Relation to Other Laws; Effective Date
216.16   Protection of Fair Credit Reporting Act.
216.17   Relation to State laws.
216.18   Effective date; transition rule.

Appendix A to Part 216--Sample Clauses

    Authority: 15 U.S.C. 6801 et seq.


Sec. 216.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the financial institutions listed in 
paragraph (b) of this section. This part:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution 
may disclose nonpublic personal information about consumers to 
nonaffiliated third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated 
third parties by ``opting out'' of that disclosure, subject to the 
exceptions in Secs. 216.13, 216.14, and 216.15.

[[Page 35207]]

    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
primarily for personal, family, or household purposes from the 
institutions listed below. This part does not apply to information 
about companies or about individuals who obtain financial products or 
services for business, commercial, or agricultural purposes. This part 
applies to the U. S. offices of entities for which the Board has 
primary supervisory authority. They are referred to in this part as 
``you.'' These are: State member banks, bank holding companies and 
certain of their nonbank subsidiaries or affiliates, State uninsured 
branches and agencies of foreign banks, commercial lending companies 
owned or controlled by foreign banks, and Edge and Agreement 
corporations.
    (2) Nothing in this part modifies, limits, or supersedes the 
standards governing individually identifiable health information 
promulgated by the Secretary of Health and Human Services under the 
authority of sections 262 and 264 of the Health Insurance Portability 
and Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).


Sec. 216.2  Rule of construction.

    The examples in this part and the sample clauses in appendix A of 
this part are not exclusive. Compliance with an example or use of a 
sample clause, to the extent applicable, constitutes compliance with 
this part.


Sec. 216.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company.
    (b) (1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples--(i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Use short explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice 
whenever possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology whenever 
possible; and
    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) In a form that combines your notice with other information, use 
distinctive type size, style, and graphic devices, such as shading or 
sidebars, when you combine your notice with other information.
    (iii) Notices on web sites. If you provide a notice on a web page, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the web site (such as text, graphics, 
hyperlinks, or sound) do not distract attention from the notice, and 
you either:
    (A) Place the notice on a screen that consumers frequently access, 
such as a page on which transactions are conducted; or
    (B) Place a link on a screen that consumers frequently access, such 
as a page on which transactions are conducted, that connects directly 
to the notice and is labeled appropriately to convey the importance, 
nature, and relevance of the notice.
    (c) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other identifying particular assigned to the individual, 
irrespective of the source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, or that individual's legal 
representative.
    (2) Examples--(i) An individual who applies to you for credit for 
personal, family, or household purposes is a consumer of a financial 
service, regardless of whether the credit is extended.
    (ii) An individual who provides nonpublic personal information to 
you in order to obtain a determination about whether he or she may 
qualify for a loan to be used primarily for personal, family, or 
household purposes is a consumer of a financial service, regardless of 
whether the loan is extended.
    (iii) An individual who provides nonpublic personal information to 
you in connection with obtaining or seeking to obtain financial, 
investment, or economic advisory services is a consumer regardless of 
whether you establish a continuing advisory relationship.
    (iv) If you hold ownership or servicing rights to an individual's 
loan that is used primarily for personal, family, or household 
purposes, the individual is your consumer, even if you hold those 
rights in conjunction with one or more other institutions. (The 
individual is also a consumer with respect to the other financial 
institutions involved.) An individual who has a loan in which you have 
ownership or servicing rights is your consumer, even if you, or another 
institution with those rights, hire an agent to collect on the loan.
    (v) An individual who is a consumer of another financial 
institution is not your consumer solely because you act as agent for, 
or provide processing or other services to, that financial institution.
    (vi) An individual is not your consumer solely because he or she 
has designated you as trustee for a trust.
    (vii) An individual is not your consumer solely because he or she 
is a beneficiary of a trust for which you are a trustee.
    (viii) An individual is not your consumer solely because he or she 
is a participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company, as the Board 
determines.
    (h) Customer means a consumer who has a customer relationship with 
you.
    (i)(1) Customer relationship means a continuing relationship 
between a

[[Page 35208]]

consumer and you under which you provide one or more financial products 
or services to the consumer that are to be used primarily for personal, 
family, or household purposes.
    (2) Examples--(i) Continuing relationship. A consumer has a 
continuing relationship with you if the consumer:
    (A) Has a deposit or investment account with you;
    (B) Obtains a loan from you;
    (C) Has a loan for which you own the servicing rights;
    (D) Purchases an insurance product from you;
    (E) Holds an investment product through you, such as when you act 
as a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (F) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan for the consumer;
    (G) Enters into a lease of personal property with you; or
    (H) Obtains financial, investment, or economic advisory services 
from you for a fee.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service only in 
isolated transactions, such as using your ATM to withdraw cash from an 
account at another financial institution or purchasing a cashier's 
check or money order;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan; or
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions.
    (j) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The Director of the Office of Thrift Supervision;
    (5) The National Credit Union Administration Board; and
    (6) The Securities and Exchange Commission.
    (k)(1) Financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Financial institution does not include:
    (i) Any person or entity with respect to any financial activity 
that is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.); or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a 
consumer, as long as such institutions do not sell or transfer 
nonpublic personal information to a nonaffiliated third party.
    (l)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (m)(1) Nonaffiliated third party means any person except:
    (i) Your affiliate; or
    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other 
company that jointly employs the person).
    (2) Nonaffiliated third party includes any company that is an 
affiliate solely by virtue of your or your affiliate's direct or 
indirect ownership or control of the company in conducting merchant 
banking or investment banking activities of the type described in 
section 4(k)(4)(H) or insurance company investment activities of the 
type described in section 4(k)(4)(I) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(k)(4)(H) and (I)).
    (n)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
using any personally identifiable financial information that is not 
publicly available.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (n)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available.
    (3) Examples of lists--(i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available, and 
is not disclosed in a manner that indicates that any of the individuals 
on the list is a consumer of a financial institution.
    (o)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or
    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Examples--(i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain a loan, credit card, or other financial product or service;
    (B) Account balance information, payment history, overdraft 
history, and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your 
customers or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;
    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on a loan or 
servicing a loan;
    (F) Any information you collect through an Internet ``cookie'' (an 
information collecting device from a web server); and
    (G) Information from a consumer report.

[[Page 35209]]

    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as 
aggregate information or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (p)(1) Publicly available information means any information that 
you have a reasonable basis to believe is lawfully made available to 
the general public from:
    (i) Federal, State, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be 
made by Federal, State, or local law.
    (2) Reasonable basis. You have a reasonable basis to believe that 
information is lawfully made available to the general public if you 
have taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that your consumer has 
not done so.
    (3) Examples--(i) Government records. Publicly available 
information in government records includes information in government 
real estate records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a web site that is 
available to the general public on an unrestricted basis. A web site is 
not restricted merely because an Internet service provider or a site 
operator requires a fee or a password, so long as access is available 
to the general public.
    (iii) Reasonable basis--(A) You have a reasonable basis to believe 
that mortgage information is lawfully made available to the general 
public if you have determined that the information is of the type 
included on the public record in the jurisdiction where the mortgage 
would be recorded.
    (B) You have a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if 
you have located the telephone number in the telephone book or the 
consumer has informed you that the telephone number is not unlisted.
    (q) You means:
    (1) A State member bank, as defined in 12 CFR 208.3(g);
    (2) A bank holding company, as defined in 12 CFR 225.2(c);
    (3) A subsidiary (as defined in 12 CFR 225.2(o)) or affiliate of a 
bank holding company and a subsidiary of a State member bank, except 
for:
    (i) A national bank or a State bank that is not a member of the 
Federal Reserve System;
    (ii) A broker or dealer that is registered under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.);
    (iii) A registered investment adviser, properly registered by or on 
behalf of either the Securities Exchange Commission or any State, with 
respect to its investment advisory activities and its activities 
incidental to those investment advisory activities;
    (iv) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.); or
    (v) An insurance company, with respect to its insurance activities 
and its activities incidental to those insurance activities, that is 
subject to supervision by a State insurance regulator;
    (4) A State agency or State branch of a foreign bank, as those 
terms are defined in 12 U.S.C. 3101(b) (11) and (12), the deposits of 
which agency or branch are not insured by the Federal Deposit Insurance 
Corporation;
    (5) A commercial lending company, as defined in 12 CFR 211.21(f), 
that is owned or controlled by a foreign bank, as defined in 12 CFR 
211.21(m); or
    (6) A corporation organized under section 25A of the Federal 
Reserve Act (12 U.S.C. 611-631) or a corporation having an agreement or 
undertaking with the Board under section 25 of the Federal Reserve Act 
(12 U.S.C. 601-604a).

Subpart A--Privacy and Opt Out Notices


Sec. 216.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to:
    (1) Customer. An individual who becomes your customer, not later 
than when you establish a customer relationship, except as provided in 
paragraph (e) of this section; and
    (2) Consumer. A consumer, before you disclose any nonpublic 
personal information about the consumer to any nonaffiliated third 
party, if you make such a disclosure other than as authorized by 
Secs. 216.14 and 216.15.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about 
the consumer to any nonaffiliated third party, other than as authorized 
by Secs. 216.14 and 216.15; and
    (2) You do not have a customer relationship with the consumer.
    (c) When you establish a customer relationship--(1) General rule. 
You establish a customer relationship when you and the consumer enter 
into a continuing relationship.
    (2) Special rule for loans.--You establish a customer relationship 
with a consumer when you originate a loan to the consumer for personal, 
family, or household purposes. If you subsequently transfer the 
servicing rights to that loan to another financial institution, the 
customer relationship transfers with the servicing rights.
    (3)(i) Examples of establishing customer relationship. You 
establish a customer relationship when the consumer:
    (A) Opens a credit card account with you;
    (B) Executes the contract to open a deposit account with you, 
obtains credit from you, or purchases insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee; or
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services.
    (ii) Examples of loan rule. You establish a customer relationship 
with a consumer who obtains a loan for personal, family, or household 
purposes when you:
    (A) Originate the loan to the consumer; or
    (B) Purchase the servicing rights to the consumer's loan.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:
    (1) You may provide a revised privacy notice, under Sec. 216.8, 
that covers the customer's new financial product or service; or
    (2) If the initial, revised, or annual notice that you most 
recently provided to that customer was accurate with respect to the new 
financial product or service, you do not need to provide a new privacy 
notice under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide

[[Page 35210]]

the initial notice required by paragraph (a)(1) of this section within 
a reasonable time after you establish a customer relationship if:
    (i) Establishing the customer relationship is not at the customer's 
election; or
    (ii) Providing notice not later than when you establish a customer 
relationship would substantially delay the customer's transaction and 
the customer agrees to receive the notice at a later time.
    (2) Examples of exceptions--(i)
    Not at customer's election. Establishing a customer relationship is 
not at the customer's election if you acquire a customer's deposit 
liability or the servicing rights to a customer's loan from another 
financial institution and the customer does not have a choice about 
your acquisition.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when you establish a customer relationship would 
substantially delay the customer's transaction when:
    (A) You and the individual agree over the telephone to enter into a 
customer relationship involving prompt delivery of the financial 
product or service; or
    (B) You establish a customer relationship with an individual under 
a program authorized by Title IV of the Higher Education Act of 1965 
(20 U.S.C. 1070 et seq.) or similar student loan programs where loan 
proceeds are disbursed promptly without prior communication between you 
and the customer.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when you establish a customer relationship would 
not substantially delay the customer's transaction when the 
relationship is initiated in person at your office or through other 
means by which the customer may view the notice, such as on a web site.
    (f) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to Sec. 216.9. If 
you use a short-form initial notice for non-customers according to 
Sec. 216.6(d), you may deliver your privacy notice according to 
Sec. 216.6(d)(3).


Sec. 216.5  Annual privacy notice to customers required.

    (a)(1) General rule. You must provide a clear and conspicuous 
notice to customers that accurately reflects your privacy policies and 
practices not less than annually during the continuation of the 
customer relationship. Annually means at least once in any period of 12 
consecutive months during which that relationship exists. You may 
define the 12-consecutive-month period, but you must apply it to the 
customer on a consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the 
calendar year in which you provided the initial notice. For example, if 
a customer opens an account on any day of year 1, you must provide an 
annual notice to that customer by December 31 of year 2.
    (b)(1) Termination of customer relationship. You are not required 
to provide an annual notice to a former customer.
    (2) Examples. Your customer becomes a former customer when:
    (i) In the case of a deposit account, the account is inactive under 
your policies;
    (ii) In the case of a closed-end loan, the customer pays the loan 
in full, you charge off the loan, or you sell the loan without 
retaining servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship, you no longer provide any statements or notices to 
the customer concerning that relationship or you sell the credit card 
receivables without retaining servicing rights; or
    (iv) You have not communicated with the customer about the 
relationship for a period of 12 consecutive months, other than to 
provide annual privacy notices or promotional material.
    (c) Special rule for loans. If you do not have a customer 
relationship with a consumer under the special rule for loans in 
Sec. 216.4(c)(2), then you need not provide an annual notice to that 
consumer under this section.
    (d) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to Sec. 216.9.


Sec. 216.6  Information to be included in privacy notices.

    (a) General rule. The initial, annual, and revised privacy notices 
that you provide under Secs. 216.4, 216.5, and 216.8 must include each 
of the following items of information, in addition to any other 
information you wish to provide, that applies to you and to the 
consumers to whom you send your privacy notice:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom you disclose nonpublic personal information, other than those 
parties to whom you disclose information under Secs. 216.14 and 216.15;
    (4) The categories of nonpublic personal information about your 
former customers that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information about your former customers, other than those parties to 
whom you disclose information under Secs. 216.14 and 216.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec. 216.13 (and no other exception in 
Sec. 216.14 or 216.15 applies to that disclosure), a separate statement 
of the categories of information you disclose and the categories of 
third parties with whom you have contracted;
    (6) An explanation of the consumer's right under Sec. 216.10(a) to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) 
of the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that 
is, notices regarding the ability to opt out of disclosures of 
information among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that you make under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Secs. 216.14 and 216.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Secs. 216.4 and 216.5. When describing the 
categories with respect to those parties, you are required to state 
only that you make disclosures to other nonaffiliated third parties as 
permitted by law.
    (c) Examples--(1) Categories of nonpublic personal information that 
you collect. You satisfy the requirement to categorize the nonpublic 
personal information that you collect if you list the following 
categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information you disclose--(i) 
You satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories

[[Page 35211]]

described in paragraph (c)(1) of this section, as applicable, and a few 
examples to illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to 
whom you disclose. You satisfy the requirement to categorize the 
affiliates and nonaffiliated third parties to whom you disclose 
nonpublic personal information if you list the following categories, as 
applicable, and a few examples to illustrate the types of third parties 
in each category.
    (i) Financial service providers;
    (ii) Non-financial companies; and
    (iii) Others.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec. 216.13 to a nonaffiliated third party to market 
products or services that you offer alone or jointly with another 
financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraph (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with whom you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not wish to 
reserve the right to disclose, nonpublic personal information about 
customers or former customers to affiliates or nonaffiliated third 
parties except as authorized under Secs. 216.14 and 216.15, you may 
simply state that fact, in addition to the information you must provide 
under paragraphs (a)(1), (a)(8), (a)(9), and (b) of this section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security 
of nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information; and
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical 
information about the safeguards you use.
    (d) Short-form initial notice with opt out notice for non-
customers--(1) You may satisfy the initial notice requirements in 
Secs. 216.4(a)(2), 216.7(b), and 216.7(c) for a consumer who is not a 
customer by providing a short-form initial notice at the same time as 
you deliver an opt out notice as required in Sec. 216.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) You must deliver your short-form initial notice according to 
Sec. 216.9. You are not required to deliver your privacy notice with 
your short-form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a 
consumer who receives your short-form notice requests your privacy 
notice, you must deliver your privacy notice according to Sec. 216.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to the consumer 
immediately upon request.
    (e) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and
    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (f) Sample clauses. Sample clauses illustrating some of the notice 
content required by this section are included in appendix A of this 
part.


Sec. 216.7  Form of opt out notice to consumers; opt out methods.

    (a)(1) Form of opt out notice. If you are required to provide an 
opt out notice under Sec. 216.10(a), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third 
party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples--(i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal 
information that you disclose or reserve the right to disclose, and all 
of the categories of nonaffiliated third parties to which you disclose 
the information, as described in Sec. 216.6(a)(2) and (3), and state 
that the consumer can opt out of the disclosure of that information; 
and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his 
or her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that you 
provided with the initial notice but did not include with the 
subsequent notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial notice you provide in accordance with Sec. 216.4.
    (c) Initial notice required when opt out notice delivered 
subsequent to initial notice. If you provide the opt out

[[Page 35212]]

notice later than required for the initial notice in accordance with 
Sec. 216.4, you must also include a copy of the initial notice with the 
opt out notice in writing or, if the consumer agrees, electronically.
    (d) Joint relationships--(1) If two or more consumers jointly 
obtain a financial product or service from you, you may provide a 
single opt out notice. Your opt out notice must explain how you will 
treat an opt out direction by a joint consumer (as explained in 
paragraph (d)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint checking account with 
you and arrange for you to send statements to John's address, you may 
do any of the following, but you must explain in your opt out notice 
which opt out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Time to comply with opt out. You must comply with a consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (f) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (g) Duration of consumer's opt out direction--(1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to that relationship. If the individual 
subsequently establishes a new customer relationship with you, the opt 
out direction that applied to the former relationship does not apply to 
the new relationship.
    (h) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to Sec. 216.9.


Sec. 216.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, you 
must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec. 216.4, unless:
    (1) You have provided to the consumer a clear and conspicuous 
revised notice that accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples--(1) Except as otherwise permitted by Secs. 216.13, 
216.14, and 216.15, you must provide a revised notice before you:
    (i) Disclose a new category of nonpublic personal information to 
any nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has 
not had the opportunity to exercise an opt out right regarding that 
disclosure.
    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to Sec. 216.9.


Sec. 216.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices 
and opt out notices, including short-form initial notices, that this 
part requires so that each consumer can reasonably be expected to 
receive actual notice in writing or, if the consumer agrees, 
electronically.
    (b) (1) Examples of reasonable expectation of actual notice. You 
may reasonably expect that a consumer will receive actual notice if 
you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically, 
post the notice on the electronic site and require the consumer to 
acknowledge receipt of the notice as a necessary step to obtaining a 
particular financial product or service; or
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice of your privacy policies and practices if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices; or
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only. You may reasonably expect that a customer 
will receive actual notice of your annual privacy notice if:
    (1) The customer uses your web site to access financial products 
and services electronically and agrees to receive notices at the web 
site, and you post your current privacy notice continuously in a clear 
and conspicuous manner on the web site; or
    (2) The customer has requested that you refrain from sending any 
information regarding the customer relationship, and your current 
privacy notice remains available to the customer upon request.
    (d) Oral description of notice insufficient. You may not provide 
any notice required by this part solely by orally explaining the 
notice, either in person or over the telephone.
    (e) Retention or accessibility of notices for customers-(1) For 
customers only, you must provide the initial notice required by 
Sec. 216.4(a)(1), the annual

[[Page 35213]]

notice required by Sec. 216.5(a), and the revised notice required by 
Sec. 216.8 so that the customer can retain them or obtain them later in 
writing or, if the customer agrees, electronically.
    (2) Examples of retention or accessibility. You provide a privacy 
notice to the customer so that the customer can retain it or obtain it 
later if you:
    (i) Hand-deliver a printed copy of the notice to the customer;
    (ii) Mail a printed copy of the notice to the last known address of 
the customer; or
    (iii) Make your current privacy notice available on a web site (or 
a link to another web site) for the customer who obtains a financial 
product or service electronically and agrees to receive the notice at 
the web site.
    (f) Joint notice with other financial institutions. You may provide 
a joint notice from you and one or more of your affiliates or other 
financial institutions, as identified in the notice, as long as the 
notice is accurate with respect to you and the other institutions.
    (g) Joint relationships. If two or more consumers jointly obtain a 
financial product or service from you, you may satisfy the initial, 
annual, and revised notice requirements of Secs. 216.4(a), 216.5(a), 
and 216.8(a), respectively, by providing one notice to those consumers 
jointly.

Subpart B--Limits on Disclosures


Sec. 216.10  Limits on disclosure of non-public personal information to 
nonaffiliated third parties.

    (a) (1) Conditions for disclosure. Except as otherwise authorized 
in this part, you may not, directly or through any affiliate, disclose 
any nonpublic personal information about a consumer to a nonaffiliated 
third party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec. 216.4;
    (ii) You have provided to the consumer an opt out notice as 
required in Sec. 216.7;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not disclose nonpublic personal information about that 
consumer to a nonaffiliated third party, other than as permitted by 
Secs. 216.13, 216.14, and 216.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days from the date you mailed the notices.
    (ii) By electronic means. A customer opens an on-line account with 
you and agrees to receive the notices required in paragraph (a)(1) of 
this section electronically, and you allow the customer to opt out by 
any reasonable means within 30 days after the date that the customer 
acknowledges receipt of the notices in conjunction with opening the 
account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a cashier's check by a consumer, 
you provide the consumer with a reasonable opportunity to opt out if 
you provide the notices required in paragraph (a)(1) of this section at 
the time of the transaction and request that the consumer decide, as a 
necessary part of the transaction, whether to opt out before completing 
the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information--(1) You must comply with this section, regardless 
of whether you and the consumer have established a customer 
relationship.
    (2) Unless you comply with this section, you may not, directly or 
through any affiliate, disclose any nonpublic personal information 
about a consumer that you have collected, regardless of whether you 
collected it before or after receiving the direction to opt out from 
the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.


Sec. 216.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec. 216.14 or 216.15 of this part, 
your disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information;
    (ii) You may disclose the information to your affiliates, but your 
affiliates may, in turn, disclose and use the information only to the 
extent that you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec. 216.14 or 216.15 in the ordinary course of business 
to carry out the activity covered by the exception under which you 
received the information.
    (2) Example. If you receive a customer list from a nonaffiliated 
financial institution in order to provide account processing services 
under the exception in Sec. 216.14(a), you may disclose that 
information under any exception in Sec. 216.14 or 216.15 in the 
ordinary course of business in order to provide those services. For 
example, you could disclose the information in response to a properly 
authorized subpoena or to your attorneys, accountants, and auditors. 
You could not disclose that information to a third party for marketing 
purposes or use that information for your own marketing purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec. 216.14 or 216.15 of 
this part, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if 
made directly to that person by the financial institution from which 
you received the information.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. 216.14 and 
216.15:
    (i) You may use that list for your own purposes; and
    (ii) You may disclose that list to another nonaffiliated third 
party only if the financial institution from which you purchased the 
list could have lawfully disclosed the list to that third party. That 
is, you may disclose the list in accordance with the privacy policy of 
the financial institution from which you received the list, as limited 
by the opt out direction of each consumer whose nonpublic personal 
information you intend to disclose, and you may disclose the list in 
accordance with an exception in Sec. 216.14 or 216.15, such as to your 
attorneys or accountants.
    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in

[[Page 35214]]

Sec. 216.14 or 216.15 of this part, the third party may disclose and 
use that information only as follows:
    (1) The third party may disclose the information to your 
affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the 
information; and
    (3) The third party may disclose and use the information pursuant 
to an exception in Sec. 216.14 or 216.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.
    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec. 216.14 or 216.15 of this part, 
the third party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose 
the information only to the extent the third party can disclose the 
information; and
    (3) To any other person, if the disclosure would be lawful if you 
made it directly to that person.


Sec. 216.12  Limits on sharing account number information for marketing 
purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, deposit 
account, or transaction account to any nonaffiliated third party for 
use in telemarketing, direct mail marketing, or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose an account number or similar form of access number or access 
code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider is not authorized to directly initiate charges to the 
account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Examples--(1) Account number. An account number, or similar 
form of access number or access code, does not include a number or code 
in an encrypted form, as long as you do not provide the recipient with 
a means to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a deposit account or a credit card account. A transaction account 
does not include an account to which third parties cannot initiate 
charges.

Subpart C--Exceptions


Sec. 216.13  Exception to opt out requirements for service providers 
and joint marketing.

    (a) General rule. (1) The opt out requirements in Secs. 216.7 and 
216.10 do not apply when you provide nonpublic personal information to 
a nonaffiliated third party to perform services for you or functions on 
your behalf, if you:
    (i) Provide the initial notice in accordance with Sec. 216.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information 
other than to carry out the purposes for which you disclosed the 
information, including use under an exception in Sec. 216.14 or 216.15 
in the ordinary course of business to carry out those purposes.
    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits 
the institution from disclosing or using the nonpublic personal 
information except as necessary to carry out the joint marketing or 
under an exception in Sec. 216.14 or 216.15 in the ordinary course of 
business to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.


Sec. 216.14  Exceptions to notice and opt out requirements for 
processing and servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec. 216.4(a)(2), for the opt 
out in Secs. 216.7 and 216.10, and for service providers and joint 
marketing in Sec. 216.13 do not apply if you disclose nonpublic 
personal information as necessary to effect, administer, or enforce a 
transaction that a consumer requests or authorizes, or in connection 
with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related 
to a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain 
the consumer's account in the ordinary course of providing the 
financial service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities), 
participating in research projects, or as otherwise required or 
specifically permitted by Federal or State law; or
    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of

[[Page 35215]]

amounts charged, debited, or otherwise paid using a debit, credit, or 
other payment card, check, or account number, or by other payment 
means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.


Sec. 216.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for 
initial notice in Sec. 216.4(a)(2), for the opt out in Secs. 216.7 and 
216.10, and for service providers and joint marketing in Sec. 216.13 do 
not apply when you disclose nonpublic personal information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2)(i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory 
organizations, guaranty funds or agencies, agencies that are rating 
you, persons that are assessing your compliance with industry 
standards, and your attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.), to law enforcement agencies 
(including a federal functional regulator, the Secretary of the 
Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records 
and Reports on Monetary Instruments and Transactions) and 12 U.S.C. 
Chapter 21 (Financial Recordkeeping), a State insurance authority, with 
respect to any person domiciled in that insurance authority's State 
that is engaged in providing insurance, and the Federal Trade 
Commission), self-regulatory organizations, or for an investigation on 
a matter related to public safety;
    (5)(i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.), or
    (ii) From a consumer report reported by a consumer reporting 
agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7)(i) To comply with Federal, State, or local laws, rules and 
other applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons by Federal, State, or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance, 
or other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated 
insurance company of the fact that the consumer has applied to you for 
a mortgage so that the insurance company can offer homeowner's 
insurance to the consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal 
information as permitted under Sec. 216.7(f).

Subpart D--Relation to Other Laws; Effective Date


Sec. 216.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 
1681 et seq.), and no inference shall be drawn on the basis of the 
provisions of this part regarding whether information is transaction or 
experience information under section 603 of that Act.


Sec. 216.17  Relation to State laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or 
interpretation in effect in any State, except to the extent that such 
State statute, regulation, order, or interpretation is inconsistent 
with the provisions of this part, and then only to the extent of the 
inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Federal Trade Commission, after consultation with the Board, on the 
Federal Trade Commission's own motion, or upon the petition of any 
interested party.


Sec. 216.18  Effective date; transition rule.

    (a) Effective date. This part is effective November 13, 2000. In 
order to provide sufficient time for you to establish policies and 
systems to comply with the requirements of this part, the Board has 
extended the time for compliance with this part until July 1, 2001.
    (b)(1) Notice requirement for consumers who are your customers on 
the compliance date. By July 1, 2001, you must have provided an initial 
notice, as required by Sec. 216.4, to consumers who are your customers 
on July 1, 2001.
    (2) Example. You provide an initial notice to consumers who are 
your customers on July 1, 2001, if, by that date, you have established 
a system for providing an initial notice to all new customers and have 
mailed the initial notice to all your existing customers.
    (c) Two-year grandfathering of service agreements. Until July 1, 
2002, a contract that you have entered into with a nonaffiliated third 
party to perform services for you or functions on your behalf satisfies 
the provisions of Sec. 216.13(a)(1)(ii) of this part, even if the 
contract does not include a requirement that the third party maintain 
the confidentiality of nonpublic personal information, as long as you 
entered into the contract on or before July 1, 2000.

Appendix A to Part 216--Sample Clauses

    Financial institutions, including a group of financial holding 
company affiliates that use a common privacy notice, may use the 
following sample clauses, if the clause is accurate for each 
institution that uses the notice. (Note that disclosure of certain 
information, such as assets, income, and information from a consumer 
reporting agency, may give rise to obligations under the Fair Credit 
Reporting Act, such as a requirement to permit a consumer to opt out 
of disclosures to affiliates or designation as a consumer reporting 
agency if disclosures are made to nonaffiliated third parties.)

A-1--Categories of information you collect (all institutions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 216.6(a)(1) to describe the categories of nonpublic personal 
information you collect.
    Sample Clause A-1:
    We collect nonpublic personal information about you from the 
following sources:
     Information we receive from you on applications or 
other forms;
     Information about your transactions with us, our 
affiliates, or others; and

[[Page 35216]]

     Information we receive from a consumer reporting 
agency.

A-2--Categories of information you disclose (institutions that disclose 
outside of the exceptions)

    You may use one of these clauses, as applicable, to meet the 
requirement of Sec. 216.6(a)(2) to describe the categories of 
nonpublic personal information you disclose. You may use these 
clauses if you disclose nonpublic personal information other than as 
permitted by the exceptions in Secs. 216.13, 216.14, and 216.15.
    Sample Clause A-2, Alternative 1:
    We may disclose the following kinds of nonpublic personal 
information about you:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-2, Alternative 2:
    We may disclose all of the information that we collect, as 
described [describe location in the notice, such as ``above'' or 
``below''].

A-3--Categories of information you disclose and parties to whom you 
disclose (institutions that do not disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirements 
of Secs. 216.6(a)(2), (3), and (4) to describe the categories of 
nonpublic personal information about customers and former customers 
that you disclose and the categories of affiliates and nonaffiliated 
third parties to whom you disclose. You may use this clause if you 
do not disclose nonpublic personal information to any party, other 
than as permitted by the exceptions in Secs. 216.14, and 216.15.
    Sample Clause A-3:
    We do not disclose any nonpublic personal information about our 
customers or former customers to anyone, except as permitted by law.

A-4--Categories of parties to whom you disclose (institutions that 
disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 216.6(a)(3) to describe the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information. You may use this clause if you disclose nonpublic 
personal information other than as permitted by the exceptions in 
Secs. 216.13, 216.14, and 216.15, as well as when permitted by the 
exceptions in Secs. 216.14, and 216.15.
    Sample Clause A-4:
    We may disclose nonpublic personal information about you to the 
following types of third parties:
     Financial service providers, such as [provide 
illustrative examples, such as ``mortgage bankers, securities 
broker-dealers, and insurance agents''];
     Non-financial companies, such as [provide illustrative 
examples, such as ``retailers, direct marketers, airlines, and 
publishers'']; and
     Others, such as [provide illustrative examples, such as 
``non-profit organizations''].
    We may also disclose nonpublic personal information about you to 
nonaffiliated third parties as permitted by law.

A-5--Service provider/joint marketing exception

    You may use one of these clauses, as applicable, to meet the 
requirements of Sec. 216.6(a)(5) related to the exception for 
service providers and joint marketers in Sec. 216.13. If you 
disclose nonpublic personal information under this exception, you 
must describe the categories of nonpublic personal information you 
disclose and the categories of third parties with whom you have 
contracted.
    Sample Clause A-5, Alternative 1:
    We may disclose the following information to companies that 
perform marketing services on our behalf or to other financial 
institutions with whom we have joint marketing agreements:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-5, Alternative 2:
    We may disclose all of the information we collect, as described 
[describe location in the notice, such as ``above'' or ``below''] to 
companies that perform marketing services on our behalf or to other 
financial institutions with whom we have joint marketing agreements.

A-6--Explanation of opt out right (institutions that disclose outside 
of the exceptions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 216.6(a)(6) to provide an explanation of the consumer's 
right to opt out of the disclosure of nonpublic personal information 
to nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right. You may use this clause if you 
disclose nonpublic personal information other than as permitted by 
the exceptions in Secs. 216.13, 216.14, and 216.15.
    Sample Clause A-6:
    If you prefer that we not disclose nonpublic personal 
information about you to nonaffiliated third parties, you may opt 
out of those disclosures, that is, you may direct us not to make 
those disclosures (other than disclosures permitted by law). If you 
wish to opt out of disclosures to nonaffiliated third parties, you 
may [describe a reasonable means of opting out, such as ``call the 
following toll-free number: (insert number)''].

A-7--Confidentiality and security (all institutions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 216.6(a)(8) to describe your policies and practices with 
respect to protecting the confidentiality and security of nonpublic 
personal information.
    Sample Clause A-7:
    We restrict access to nonpublic personal information about you 
to [provide an appropriate description, such as ``those employees 
who need to know that information to provide products or services to 
you'']. We maintain physical, electronic, and procedural safeguards 
that comply with federal standards to guard your nonpublic personal 
information.

    By order of the Board of Governors of the Federal Reserve 
System, May 17, 2000.
Jennifer J. Johnson,
Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

    For the reasons set out in the joint preamble, the Federal Deposit 
Insurance Corporation amends Title 12, Chapter III of the Code of 
Federal Regulations by adding a new part 332 to read as follows.

PART 332--PRIVACY OF CONSUMER FINANCIAL INFORMATION

Sec.
332.1  Purpose and scope.
332.2  Rule of construction.
332.3  Definitions.
Subpart A--Privacy and Opt Out Notices
332.4  Initial privacy notice to consumers required.
332.5  Annual privacy notice to customers required.
332.6  Information to be included in privacy notices.
332.7  Form of opt out notice to consumers; opt out methods.
332.8  Revised privacy notices.
332.9  Delivering privacy and opt out notices.
Subpart B--Limits on Disclosures
332.10  Limitation on disclosure of nonpublic personal information 
to nonaffiliated third parties.
332.11  Limits on redisclosure and reuse of information.
332.12  Limits on sharing account number information for marketing 
purposes.
Subpart C--Exceptions
332.13  Exception to opt out requirements for service providers and 
joint marketing.
332.14   Exceptions to notice and opt out requirements for 
processing and servicing transactions.
332.15   Other exceptions to notice and opt out requirements.

[[Page 35217]]

Subpart D--Relation to Other Laws; Effective Date
332.16  Protection of Fair Credit Reporting Act.
332.17   Relation to State laws.
332.18   Effective date; transition rule.

Appendix A to Part 332--Sample Clauses

    Authority: 12 U.S.C. 1819 (Seventh and Tenth); 15 U.S.C. 6801 et 
seq.


Sec. 332.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the financial institutions listed in 
paragraph (b) of this section. This part:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution 
may disclose nonpublic personal information about consumers to 
nonaffiliated third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated 
third parties by ``opting out'' of that disclosure, subject to the 
exceptions in Secs. 332.13, 332.14, and 332.15.
    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
primarily for personal, family, or household purposes from the 
institutions listed below. This part does not apply to information 
about companies or about individuals who obtain financial products or 
services for business, commercial, or agricultural purposes. This part 
applies to the United States offices of entities for which the Federal 
Deposit Insurance Corporation (FDIC) has primary federal supervisory 
authority. They are referred to in this part as ``you.'' These are: 
banks insured by the FDIC (other than members of the Federal Reserve 
System), insured state branches of foreign banks, and certain 
subsidiaries of such entities.
    (2) Nothing in this part modifies, limits, or supersedes the 
standards governing individually identifiable health information 
promulgated by the Secretary of Health and Human Services under the 
authority of sections 262 and 264 of the Health Insurance Portability 
and Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).


Sec. 332.2  Rule of construction.

    The examples in this part and the sample clauses in Appendix A of 
this part are not exclusive. Compliance with an example or use of a 
sample clause, to the extent applicable, constitutes compliance with 
this part.


Sec. 332.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company.
    (b)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples--(i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Use short explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice 
whenever possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology whenever 
possible; and
    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) In a form that combines your notice with other information, use 
distinctive type size, style, and graphic devices, such as shading or 
sidebars, when you combine your notice with other information.
    (iii) Notices on web sites. If you provide a notice on a web page, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the web site (such as text, graphics, 
hyperlinks, or sound) do not distract attention from the notice, and 
you either:
    (A) Place the notice on a screen that consumers frequently access, 
such as a page on which transactions are conducted; or
    (B) Place a link on a screen that consumers frequently access, such 
as a page on which transactions are conducted, that connects directly 
to the notice and is labeled appropriately to convey the importance, 
nature, and relevance of the notice.
    (c) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other identifying particular assigned to the individual, 
irrespective of the source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, or that individual's legal 
representative.
    (2) Examples--(i) An individual who applies to you for credit for 
personal, family, or household purposes is a consumer of a financial 
service, regardless of whether the credit is extended.
    (ii) An individual who provides nonpublic personal information to 
you in order to obtain a determination about whether he or she may 
qualify for a loan to be used primarily for personal, family, or 
household purposes is a consumer of a financial service, regardless of 
whether the loan is extended.
    (iii) An individual who provides nonpublic personal information to 
you in connection with obtaining or seeking to obtain financial, 
investment, or economic advisory services is a consumer regardless of 
whether you establish a continuing advisory relationship.
    (iv) If you hold ownership or servicing rights to an individual's 
loan that is used primarily for personal, family, or household 
purposes, the individual is your consumer, even if you hold those 
rights in conjunction with one or more other institutions. (The 
individual is also a consumer with respect to the other financial 
institutions involved.) An individual who has a loan in which you have 
ownership or servicing rights is your consumer, even if you, or another 
institution with those rights, hire an agent to collect on the loan.
    (v) An individual who is a consumer of another financial 
institution is not your consumer solely because you act as agent for, 
or provide processing or other services to, that financial institution.
    (vi) An individual is not your consumer solely because he or she 
has designated you as trustee for a trust.
    (vii) An individual is not your consumer solely because he or she 
is a beneficiary of a trust for which you are a trustee.
    (viii) An individual is not your consumer solely because he or she 
is a

[[Page 35218]]

participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company, as the FDIC 
determines.
    (h) Customer means a consumer who has a customer relationship with 
you.
    (i)(1) Customer relationship means a continuing relationship 
between a consumer and you under which you provide one or more 
financial products or services to the consumer that are to be used 
primarily for personal, family, or household purposes.
    (2) Examples--(i) Continuing relationship. A consumer has a 
continuing relationship with you if the consumer:
    (A) Has a deposit or investment account with you;
    (B) Obtains a loan from you;
    (C) Has a loan for which you own the servicing rights;
    (D) Purchases an insurance product from you;
    (E) Holds an investment product through you, such as when you act 
as a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (F) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan for the consumer;
    (G) Enters into a lease of personal property with you; or
    (H) Obtains financial, investment, or economic advisory services 
from you for a fee.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service only in 
isolated transactions, such as using your ATM to withdraw cash from an 
account at another financial institution or purchasing a cashier's 
check or money order;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan; or
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions.
    (j) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The Director of the Office of Thrift Supervision;
    (5) The National Credit Union Administration Board; and
    (6) The Securities and Exchange Commission.
    (k)(1) Financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Financial institution does not include:
    (i) Any person or entity with respect to any financial activity 
that is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.); or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a 
consumer, as long as such institutions do not sell or transfer 
nonpublic personal information to a nonaffiliated third party.
    (l)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (m)(1) Nonaffiliated third party means any person except:
    (i) Your affiliate; or
    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other 
company that jointly employs the person).
    (2) Nonaffiliated third party includes any company that is an 
affiliate solely by virtue of your or your affiliate's direct or 
indirect ownership or control of the company in conducting merchant 
banking or investment banking activities of the type described in 
section 4(k)(4)(H) or insurance company investment activities of the 
type described in section 4(k)(4)(I) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(k)(4)(H) and (I)).
    (n)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
using any personally identifiable financial information that is not 
publicly available.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (n)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available.
    (3) Examples of lists--(i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available, and 
is not disclosed in a manner that indicates that any of the individuals 
on the list is a consumer of a financial institution.
    (o)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or
    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Examples--(i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain a

[[Page 35219]]

loan, credit card, or other financial product or service;
    (B) Account balance information, payment history, overdraft 
history, and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your 
customers or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;
    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on a loan or 
servicing a loan;
    (F) Any information you collect through an Internet ``cookie'' (an 
information collecting device from a web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as 
aggregate information or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (p)(1) Publicly available information means any information that 
you have a reasonable basis to believe is lawfully made available to 
the general public from:
    (i) Federal, State, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be 
made by Federal, State, or local law.
    (2) Reasonable basis. You have a reasonable basis to believe that 
information is lawfully made available to the general public if you 
have taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that your consumer has 
not done so.
    (3) Examples--(i) Government records. Publicly available 
information in government records includes information in government 
real estate records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a web site that is 
available to the general public on an unrestricted basis. A web site is 
not restricted merely because an Internet service provider or a site 
operator requires a fee or a password, so long as access is available 
to the general public.
    (iii) Reasonable basis-- (A) You have a reasonable basis to believe 
that mortgage information is lawfully made available to the general 
public if you have determined that the information is of the type 
included on the public record in the jurisdiction where the mortgage 
would be recorded.
    (B) You have a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if 
you have located the telephone number in the telephone book or the 
consumer has informed you that the telephone number is not unlisted.
    (q) You means:
    (1) A bank insured by the FDIC (other than a member of the Federal 
Reserve System);
    (2) An insured state branch of a foreign bank; and
    (3) A subsidiary of either such entity except:
    (i) A broker or dealer that is registered under the Securities and 
Exchange Act of 1934 (15 U.S.C. 78a et seq.);
    (ii) A registered investment adviser, properly registered by or on 
behalf of either the Securities Exchange Commission or any State, with 
respect to its investment advisory activities and its activities 
incidental to those investment advisory activities;
    (iii) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.); or
    (iv) An insurance company, with respect to its insurance activities 
and its activities incidental to those insurance activities, that is 
subject to supervision by a State insurance regulator.

Subpart A--Privacy and Opt Out Notices


Sec. 332.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to:
    (1) Customer. An individual who becomes your customer, not later 
than when you establish a customer relationship, except as provided in 
paragraph (e) of this section; and
    (2) Consumer. A consumer, before you disclose any nonpublic 
personal information about the consumer to any nonaffiliated third 
party, if you make such a disclosure other than as authorized by 
Secs. 332.14 and 332.15.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about 
the consumer to any nonaffiliated third party, other than as authorized 
by Secs. 332.14 and 332.15; and
    (2) You do not have a customer relationship with the consumer.
    (c) When you establish a customer relationship--(1) General rule. 
You establish a customer relationship when you and the consumer enter 
into a continuing relationship.
    (2) Special rule for loans.--You establish a customer relationship 
with a consumer when you originate a loan to the consumer for personal, 
family, or household purposes. If you subsequently transfer the 
servicing rights to that loan to another financial institution, the 
customer relationship transfers with the servicing rights.
    (3)(i) Examples of establishing customer relationship. You 
establish a customer relationship when the consumer:
    (A) Opens a credit card account with you;
    (B) Executes the contract to open a deposit account with you, 
obtains credit from you, or purchases insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee; or
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services.
    (ii) Examples of loan rule. You establish a customer relationship 
with a consumer who obtains a loan for personal, family, or household 
purposes when you:
    (A) Originate the loan to the consumer; or
    (B) Purchase the servicing rights to the consumer's loan.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:
    (1) You may provide a revised privacy notice, under Sec. 332.8, 
that covers the customer's new financial product or service; or
    (2) If the initial, revised, or annual notice that you most 
recently provided to that customer was accurate with respect to the new 
financial product or service, you do not need to provide a new privacy 
notice under paragraph (a) of this section.

[[Page 35220]]

    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide the initial notice required by paragraph (a)(1) of this section 
within a reasonable time after you establish a customer relationship 
if:
    (i) Establishing the customer relationship is not at the customer's 
election; or
    (ii) Providing notice not later than when you establish a customer 
relationship would substantially delay the customer's transaction and 
the customer agrees to receive the notice at a later time.
    (2) Examples of exceptions--(i) Not at customer's election. 
Establishing a customer relationship is not at the customer's election 
if you acquire a customer's deposit liability or the servicing rights 
to a customer's loan from another financial institution and the 
customer does not have a choice about your acquisition.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when you establish a customer relationship would 
substantially delay the customer's transaction when:
    (A) You and the individual agree over the telephone to enter into a 
customer relationship involving prompt delivery of the financial 
product or service; or
    (B) You establish a customer relationship with an individual under 
a program authorized by Title IV of the Higher Education Act of 1965 
(20 U.S.C. 1070 et seq.) or similar student loan programs where loan 
proceeds are disbursed promptly without prior communication between you 
and the customer.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when you establish a customer relationship would 
not substantially delay the customer's transaction when the 
relationship is initiated in person at your office or through other 
means by which the customer may view the notice, such as on a web site.
    (f) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to Sec. 332.9. If 
you use a short-form initial notice for non-customers according to 
Sec. 332.6(d), you may deliver your privacy notice according to 
Sec. 332.6(d)(3).


Sec. 332.5  Annual privacy notice to customers required.

    (a)(1) General rule. You must provide a clear and conspicuous 
notice to customers that accurately reflects your privacy policies and 
practices not less than annually during the continuation of the 
customer relationship. Annually means at least once in any period of 12 
consecutive months during which that relationship exists. You may 
define the 12-consecutive-month period, but you must apply it to the 
customer on a consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the 
calendar year in which you provided the initial notice. For example, if 
a customer opens an account on any day of year 1, you must provide an 
annual notice to that customer by December 31 of year 2.
    (b)(1) Termination of customer relationship. You are not required 
to provide an annual notice to a former customer.
    (2) Examples. Your customer becomes a former customer when:
    (i) In the case of a deposit account, the account is inactive under 
your policies;
    (ii) In the case of a closed-end loan, the customer pays the loan 
in full, you charge off the loan, or you sell the loan without 
retaining servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship, you no longer provide any statements or notices to 
the customer concerning that relationship or you sell the credit card 
receivables without retaining servicing rights; or
    (iv) You have not communicated with the customer about the 
relationship for a period of 12 consecutive months, other than to 
provide annual privacy notices or promotional material.
    (c) Special rule for loans. If you do not have a customer 
relationship with a consumer under the special rule for loans in 
Sec. 332.4(c)(2), then you need not provide an annual notice to that 
consumer under this section.
    (d) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to Sec. 332.9.


Sec. 332.6  Information to be included in privacy notices.

    (a) General rule. The initial, annual and revised privacy notices 
that you provide under Secs. 332.4, 332.5, and 332.8 must include each 
of the following items of information, in addition to any other 
information you wish to provide, that applies to you and to the 
consumers to whom you send your privacy notice:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom you disclose nonpublic personal information, other than those 
parties to whom you disclose information under Secs. 332.14 and 332.15;
    (4) The categories of nonpublic personal information about your 
former customers that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information about your former customers, other than those parties to 
whom you disclose information under Secs. 332.14 and 332.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec. 332.13 (and no other exception in 
Sec. 332.14 or 332.15 applies to that disclosure), a separate statement 
of the categories of information you disclose and the categories of 
third parties with whom you have contracted;
    (6) An explanation of the consumer's right under Sec. 332.10(a) to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) 
of the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that 
is, notices regarding the ability to opt out of disclosures of 
information among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that you make under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Secs. 332.14 and 332.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Secs. 332.4 and 332.5. When describing the 
categories with respect to those parties, you are required to state 
only that you make disclosures to other nonaffiliated third parties as 
permitted by law.
    (c) Examples--(1) Categories of nonpublic personal information that 
you collect. You satisfy the requirement to categorize the nonpublic 
personal information that you collect if you list the following 
categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information you disclose--(i) 
You

[[Page 35221]]

satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories described in 
paragraph (c)(1) of this section, as applicable, and a few examples to 
illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to 
whom you disclose. You satisfy the requirement to categorize the 
affiliates and nonaffiliated third parties to whom you disclose 
nonpublic personal information if you list the following categories, as 
applicable, and a few examples to illustrate the types of third parties 
in each category.
    (i) Financial service providers;
    (ii) Non-financial companies; and
    (iii) Others.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec. 332.13 to a nonaffiliated third party to market 
products or services that you offer alone or jointly with another 
financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraph (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with whom you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not wish to 
reserve the right to disclose, nonpublic personal information about 
customers or former customers to affiliates or nonaffiliated third 
parties except as authorized under Secs. 332.14 and 332.15, you may 
simply state that fact, in addition to the information you must provide 
under paragraphs (a)(1), (a)(8), (a)(9), and (b) of this section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security 
of nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information; and
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical 
information about the safeguards you use.
    (d) Short-form initial notice with opt out notice for non-
customers--(1) You may satisfy the initial notice requirements in 
Secs. 332.4(a)(2), 332.7(b), and 332.7(c) for a consumer who is not a 
customer by providing a short-form initial notice at the same time as 
you deliver an opt out notice as required in Sec. 332.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) You must deliver your short-form initial notice according to 
Sec. 332.9. You are not required to deliver your privacy notice with 
your short-form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a 
consumer who receives your short-form notice requests your privacy 
notice, you must deliver your privacy notice according to Sec. 332.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to the consumer 
immediately upon request.
    (e) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and
    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (f) Sample clauses. Sample clauses illustrating some of the notice 
content required by this section are included in appendix A of this 
part.


Sec. 332.7  Form of opt out notice to consumers; opt out methods.

    (a) (1) Form of opt out notice. If you are required to provide an 
opt out notice under Sec. 332.10(a), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third 
party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples--(i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal 
information that you disclose or reserve the right to disclose, and all 
of the categories of nonaffiliated third parties to which you disclose 
the information, as described in Sec. 332.6(a)(2) and (3), and state 
that the consumer can opt out of the disclosure of that information; 
and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his 
or her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that you 
provide with the initial notice but did not include with the subsequent 
notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial

[[Page 35222]]

notice you provide in accordance with Sec. 332.4.
    (c) Initial notice required when opt out notice delivered 
subsequent to initial notice. If you provide the opt out notice later 
than required for the initial notice in accordance with Sec. 332.4, you 
must also include a copy of the initial notice with the opt out notice 
in writing or, if the consumer agrees, electronically.
    (d) Joint relationships--(1) If two or more consumers jointly 
obtain a financial product or service from you, you may provide a 
single opt out notice. Your opt out notice must explain how you will 
treat an opt out direction by a joint consumer (as explained in 
paragraph (d)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint checking account with 
you and arrange for you to send statements to John's address, you may 
do any of the following, but you must explain in your opt out notice 
which opt out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Time to comply with opt out. You must comply with a consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (f) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (g) Duration of consumer's opt out direction--(1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to that relationship. If the individual 
subsequently establishes a new customer relationship with you, the opt 
out direction that applied to the former relationship does not apply to 
the new relationship.
    (h) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to Sec. 332.9.


Sec. 332.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, you 
must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec. 332.4, unless:
    (1) You have provided to the consumer a clear and conspicuous 
revised notice that accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples--(1) Except as otherwise permitted by Secs. 332.13, 
332.14, and 332.15, you must provide a revised notice before you:
    (i) Disclose a new category of nonpublic personal information to 
any nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has 
not had the opportunity to exercise an opt out right regarding that 
disclosure.
    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to Sec. 332.9.


Sec. 332.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices 
and opt out notices, including short-form initial notices, that this 
part requires so that each consumer can reasonably be expected to 
receive actual notice in writing or, if the consumer agrees, 
electronically.
    (b) (1) Examples of reasonable expectation of actual notice. You 
may reasonably expect that a consumer will receive actual notice if 
you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically, 
post the notice on the electronic site and require the consumer to 
acknowledge receipt of the notice as a necessary step to obtaining a 
particular financial product or service; or
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice of your privacy policies and practices if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices; or
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only. You may reasonably expect that a customer 
will receive actual notice of your annual privacy notice if:
    (1) The customer uses your web site to access financial products 
and services electronically and agrees to receive notices at the web 
site, and you post your current privacy notice continuously in a clear 
and conspicuous manner on the web site; or
    (2) The customer has requested that you refrain from sending any 
information regarding the customer relationship, and your current 
privacy notice remains available to the customer upon request.
    (d) Oral description of notice insufficient. You may not provide 
any notice required by this part solely by orally explaining the 
notice, either in person or over the telephone.

[[Page 35223]]

    (e) Retention or accessibility of notices for customers--(1) For 
customers only, you must provide the initial notice required by 
Sec. 332.4(a)(1), the annual notice required by Sec. 332.5(a), and the 
revised notice required by Sec. 332.8 so that the customer can retain 
them or obtain them later in writing or, if the customer agrees, 
electronically.
    (2) Examples of retention or accessibility. You provide a privacy 
notice to the customer so that the customer can retain it or obtain it 
later if you:
    (i) Hand-deliver a printed copy of the notice to the customer;
    (ii) Mail a printed copy of the notice to the last known address of 
the customer; or
    (iii) Make your current privacy notice available on a web site (or 
a link to another web site) for the customer who obtains a financial 
product or service electronically and agrees to receive the notice at 
the web site.
    (f) Joint notice with other financial institutions. You may provide 
a joint notice from you and one or more of your affiliates or other 
financial institutions, as identified in the notice, as long as the 
notice is accurate with respect to you and the other institutions.
    (g) Joint relationships. If two or more consumers jointly obtain a 
financial product or service from you, you may satisfy the initial, 
annual, and revised notice requirements of Secs. 332.4(a), 332.5(a), 
and 332.8(a), respectively, by providing one notice to those consumers 
jointly.

Subpart B--Limits on Disclosures


Sec. 332.10  Limits on disclosure of non-public personal information to 
nonaffiliated third parties.

    (a) (1) Conditions for disclosure. Except as otherwise authorized 
in this part, you may not, directly or through any affiliate, disclose 
any nonpublic personal information about a consumer to a nonaffiliated 
third party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec. 332.4;
    (ii) You have provided to the consumer an opt out notice as 
required in Sec. 332.7;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not disclose nonpublic personal information about that 
consumer to a nonaffiliated third party, other than as permitted by 
Secs. 332.13, 332.14, and 332.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days from the date you mailed the notices.
    (ii) By electronic means. A customer opens an on-line account with 
you and agrees to receive the notices required in paragraph (a)(1) of 
this section electronically, and you allow the customer to opt out by 
any reasonable means within 30 days after the date that the customer 
acknowledges receipt of the notices in conjunction with opening the 
account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a cashier's check by a consumer, 
you provide the consumer with a reasonable opportunity to opt out if 
you provide the notices required in paragraph (a)(1) of this section at 
the time of the transaction and request that the consumer decide, as a 
necessary part of the transaction, whether to opt out before completing 
the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information--(1) You must comply with this section, regardless 
of whether you and the consumer have established a customer 
relationship.
    (2) Unless you comply with this section, you may not, directly or 
through any affiliate, disclose any nonpublic personal information 
about a consumer that you have collected, regardless of whether you 
collected it before or after receiving the direction to opt out from 
the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.


Sec. 332.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec. 332.14 or 332.15 of this part, 
your disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information;
    (ii) You may disclose the information to your affiliates, but your 
affiliates may, in turn, disclose and use the information only to the 
extent that you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec. 332.14 or 332.15 in the ordinary course of business 
to carry out the activity covered by the exception under which you 
received the information.
    (2) Example. If you receive a customer list from a nonaffiliated 
financial institution in order to provide account processing services 
under the exception in Sec. 332.14(a), you may disclose that 
information under any exception in Sec. 332.14 or 332.15 in the 
ordinary course of business in order to provide those services. For 
example, you could disclose the information in response to a properly 
authorized subpoena or to your attorneys, accountants, and auditors. 
You could not disclose that information to a third party for marketing 
purposes or use that information for your own marketing purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec. 332.14 or 332.15 of 
this part, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if 
made directly to that person by the financial institution from which 
you received the information.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. 332.14 and 
332.15:
    (i) You may use that list for your own purposes; and
    (ii) You may disclose that list to another nonaffiliated third 
party only if the financial institution from which you purchased the 
list could have lawfully disclosed the list to that third party. That 
is, you may disclose the list in accordance with the privacy policy of 
the financial institution from which you received the list, as limited 
by the opt out direction of each consumer whose nonpublic personal 
information you intend to disclose, and you may disclose the list in 
accordance with an exception in Sec. 332.14 or 332.15, such as to your 
attorneys or accountants.

[[Page 35224]]

    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in Sec. 332.14 or 332.15 of this part, the third party may 
disclose and use that information only as follows:
    (1) The third party may disclose the information to your 
affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the 
information; and
    (3) The third party may disclose and use the information pursuant 
to an exception in Sec. 332.14 or 332.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.
    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec. 332.14 or 332.15 of this part, 
the third party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose 
the information only to the extent the third party can disclose the 
information; and
    (3) To any other person, if the disclosure would be lawful if you 
made it directly to that person.


Sec. 332.12  Limits on sharing account number information for marketing 
purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, deposit 
account, or transaction account to any nonaffiliated third party for 
use in telemarketing, direct mail marketing, or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose an account number or similar form of access number or access 
code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider is not authorized to directly initiate charges to the 
account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Examples--(1) Account number. An account number, or similar 
form of access number or access code, does not include a number or code 
in an encrypted form, as long as you do not provide the recipient with 
a means to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a deposit account or a credit card account. A transaction account 
does not include an account to which third parties cannot initiate 
charges.

Subpart C--Exceptions


Sec. 332.13  Exception to opt out requirements for service providers 
and joint marketing.

    (a) General rule. (1) The opt out requirements in Secs. 332.7 and 
332.10 do not apply when you provide nonpublic personal information to 
a nonaffiliated third party to perform services for you or functions on 
your behalf, if you:
    (i) Provide the initial notice in accordance with Sec. 332.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information 
other than to carry out the purposes for which you disclosed the 
information, including use under an exception in Sec. 332.14 or 332.15 
in the ordinary course of business to carry out those purposes.
    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits 
the institution from disclosing or using the nonpublic personal 
information except as necessary to carry out the joint marketing or 
under an exception in Sec. 332.14 or 332.15 in the ordinary course of 
business to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.


Sec. 332.14  Exceptions to notice and opt out requirements for 
processing and servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec. 332.4(a)(2), for the opt 
out in Secs. 332.7 and 332.10 and for service providers and joint 
marketing in Sec. 332.13 do not apply if you disclose nonpublic 
personal information as necessary to effect, administer, or enforce a 
transaction that a consumer requests or authorizes, or in connection 
with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related 
to a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain 
the consumer's account in the ordinary course of providing the 
financial service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities),

[[Page 35225]]

participating in research projects, or as otherwise required or 
specifically permitted by Federal or State law; or
    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card, check, or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.


Sec. 332.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for 
initial notice in Sec. 332.4(a)(2), for the opt out in Secs. 332.7 and 
332.10, and for service providers and joint marketing in Sec. 332.13 do 
not apply when you disclose nonpublic personal information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2) (i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory 
organizations, guaranty funds or agencies, agencies that are rating 
you, persons that are assessing your compliance with industry 
standards, and your attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.), to law enforcement agencies 
(including a federal functional regulator, the Secretary of the 
Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records 
and Reports on Monetary Instruments and Transactions) and 12 U.S.C. 
Chapter 21 (Financial Recordkeeping), a State insurance authority, with 
respect to any person domiciled in that insurance authority's State 
that is engaged in providing insurance, and the Federal Trade 
Commission), self-regulatory organizations, or for an investigation on 
a matter related to public safety;
    (5) (i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.), or
    (ii) From a consumer report reported by a consumer reporting 
agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7) (i) To comply with Federal, State, or local laws, rules and 
other applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons by Federal, State, or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance, 
or other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated 
insurance company of the fact that the consumer has applied to you for 
a mortgage so that the insurance company can offer homeowner's 
insurance to the consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal 
information as permitted under Sec. 332.7(f).

Subpart D--Relation to Other Laws; Effective Date


Sec. 332.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 
1681 et seq.), and no inference shall be drawn on the basis of the 
provisions of this part regarding whether information is transaction or 
experience information under section 603 of that Act.


Sec. 332.17  Relation to State laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or 
interpretation in effect in any State, except to the extent that such 
State statute, regulation, order, or interpretation is inconsistent 
with the provisions of this part, and then only to the extent of the 
inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Federal Trade Commission, after consultation with the FDIC, on the 
Federal Trade Commission's own motion, or upon the petition of any 
interested party.


Sec. 332.18  Effective date; transition rule.

    (a) Effective date. This part is effective November 13, 2000. In 
order to provide sufficient time for you to establish policies and 
systems to comply with the requirements of this part, the FDIC has 
extended the time for compliance with this part until July 1, 2001.
    (b)(1) Notice requirement for consumers who are your customers on 
the compliance date. By July 1, 2001, you must have provided an initial 
notice, as required by Sec. 332.4, to consumers who are your customers 
on July 1, 2001.
    (2) Example. You provide an initial notice to consumers who are 
your customers on July 1, 2001, if, by that date, you have established 
a system for providing an initial notice to all new customers and have 
mailed the initial notice to all your existing customers.
    (c) Two-year grandfathering of service agreements. Until July 1, 
2002, a contract that you have entered into with a nonaffiliated third 
party to perform services for you or functions on your behalf satisfies 
the provisions of Sec. 332.13(a)(1)(ii) of this part, even if the 
contract does not include a requirement that the third party maintain 
the confidentiality of nonpublic personal information, as long as you 
entered into the contract on or before July 1, 2000.

Appendix A to Part 332--Sample Clauses

    Financial institutions, including a group of financial holding 
company affiliates that use a common privacy notice, may use the 
following sample clauses, if the clause is accurate for each 
institution that uses the notice. (Note that disclosure of certain 
information, such as assets and income, and information from a 
consumer reporting agency, may give rise to obligations under the 
Fair Credit Reporting Act, such as a requirement to permit a 
consumer to opt out of disclosures to affiliates or designation as a 
consumer reporting agency if disclosures are made to nonaffiliated 
third parties.)

A-1--Categories of information you collect (all institutions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 332.6(a)(1) to

[[Page 35226]]

describe the categories of nonpublic personal information you 
collect.
    Sample Clause A-1:
    We collect nonpublic personal information about you from the 
following sources:
     Information we receive from you on applications or 
other forms;
     Information about your transactions with us, our 
affiliates, or others; and
     Information we receive from a consumer reporting 
agency.

A-2--Categories of information you disclose (institutions that disclose 
outside of the exceptions)

    You may use one of these clauses, as applicable, to meet the 
requirement of Sec. 332.6(a)(2) to describe the categories of 
nonpublic personal information you disclose. You may use these 
clauses if you disclose nonpublic personal information other than as 
permitted by the exceptions in Secs. 332.13, 332.14, and 332.15.
    Sample Clause A-2, Alternative 1:
    We may disclose the following kinds of nonpublic personal 
information about you:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-2, Alternative 2:
    We may disclose all of the information that we collect, as 
described [describe location in the notice, such as ``above'' or 
``below''].

A-3--Categories of information you disclose and parties to whom you 
disclose (institutions that do not disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirements 
of Secs. 332.6(a) (2), (3), and (4) to describe the categories of 
nonpublic personal information about customers and former customers 
that you disclose and the categories of affiliates and nonaffiliated 
third parties to whom you disclose. You may use this clause if you 
do not disclose nonpublic personal information to any party, other 
than as permitted by the exceptions in Secs. 332.14 and 332.15.
    Sample Clause A-3:
    We do not disclose any nonpublic personal information about our 
customers or former customers to anyone, except as permitted by law.

A-4--Categories of parties to whom you disclose (institutions that 
disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 332.6(a)(3) to describe the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information. You may use this clause if you disclose nonpublic 
personal information other than as permitted by the exceptions in 
Secs. 332.13, 332.14, and 332.15, as well as when permitted by the 
exceptions in Secs. 332.14 and 332.15.
    Sample Clause A-4:
    We may disclose nonpublic personal information about you to the 
following types of third parties:
     Financial service providers, such as [provide 
illustrative examples, such as ``mortgage bankers, securities 
broker-dealers, and insurance agents''];
     Non-financial companies, such as [provide illustrative 
examples, such as ``retailers, direct marketers, airlines, and 
publishers'']; and
     Others, such as [provide illustrative examples, such as 
``non-profit organizations''].
    We may also disclose nonpublic personal information about you to 
nonaffiliated third parties as permitted by law.

A-5--Service provider/joint marketing exception

    You may use one of these clauses, as applicable, to meet the 
requirements of Sec. 332.6(a)(5) related to the exception for 
service providers and joint marketers in Sec. 332.13. If you 
disclose nonpublic personal information under this exception, you 
must describe the categories of nonpublic personal information you 
disclose and the categories of third parties with whom you have 
contracted.
    Sample Clause A-5, Alternative 1:
    We may disclose the following information to companies that 
perform marketing services on our behalf or to other financial 
institutions with whom we have joint marketing agreements:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-5, Alternative 2:
    We may disclose all of the information we collect, as described 
[describe location in the notice, such as ``above'' or ``below''] to 
companies that perform marketing services on our behalf or to other 
financial institutions with whom we have joint marketing agreements.

A-6--Explanation of opt out right (institutions that disclose outside 
of the exceptions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 332.6(a)(6) to provide an explanation of the consumer's 
right to opt out of the disclosure of nonpublic personal information 
to nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right. You may use this clause if you 
disclose nonpublic personal information other than as permitted by 
the exceptions in Secs. 332.13, 332.14, and 332.15.
    Sample Clause A-6:
    If you prefer that we not disclose nonpublic personal 
information about you to nonaffiliated third parties, you may opt 
out of those disclosures, that is, you may direct us not to make 
those disclosures (other than disclosures permitted by law). If you 
wish to opt out of disclosures to nonaffiliated third parties, you 
may [describe a reasonable means of opting out, such as ``call the 
following toll-free number: (insert number)].

A-7--Confidentiality and security (all institutions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 332.6(a)(8) to describe your policies and practices with 
respect to protecting the confidentiality and security of nonpublic 
personal information.
    Sample Clause A-7:
    We restrict access to nonpublic personal information about you 
to [provide an appropriate description, such as ``those employees 
who need to know that information to provide products or services to 
you'']. We maintain physical, electronic, and procedural safeguards 
that comply with federal standards to guard your nonpublic personal 
information.

    By order of the Board of Directors.

    Federal Deposit Insurance Corporation.

    Dated at Washington, DC, this 10th day of May, 2000.
Robert E. Feldman,
Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

    For the reasons set out in the joint preamble, OTS amends Chapter 
V, Title 12 of the Code of Federal Regulations by adding part 573 to 
read as follows:

PART 573--PRIVACY OF CONSUMER FINANCIAL INFORMATION

Sec.
573.1   Purpose and scope.
573.2   Rule of construction.
573.3   Definitions.
Subpart A--Privacy and Opt Out Notices
573.4   Initial privacy notice to consumers required.
573.5   Annual privacy notice to customers required.
573.6   Information to be included in privacy notices.
573.7   Form of opt out notice to consumers; opt out methods.
573.8   Revised privacy notices.
573.9   Delivering privacy and opt out notices.
Subpart B--Limits on Disclosures
573.10   Limitation on disclosure of nonpublic personal information 
to nonaffiliated third parties.
573.11   Limits on redisclosure and reuse of information.
573.12   Limits on sharing account number information for marketing 
purposes.

[[Page 35227]]

Subpart C--Exceptions
573.13   Exception to opt out requirements for service providers and 
joint marketing.
573.14   Exceptions to notice and opt out requirements for 
processing and servicing transactions.
573.15   Other exceptions to notice and opt out requirements.
Subpart D--Relation to Other Laws; Effective Date
573.16   Protection of Fair Credit Reporting Act.
573.17   Relation to State laws.
573.18   Effective date; transition rule.

Appendix A to Part 573--Sample Clauses

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1828; 15 U.S.C. 6801 et 
seq.


Sec. 573.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the financial institutions listed in 
paragraph (b) of this section. This part:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution 
may disclose nonpublic personal information about consumers to 
nonaffiliated third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated 
third parties by ``opting out'' of that disclosure, subject to the 
exceptions in Secs. 573.13, 573.14, and 573.15.
    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
primarily for personal, family, or household purposes from the 
institutions listed below. This part does not apply to information 
about companies or about individuals who obtain financial products or 
services for business, commercial, or agricultural purposes. This part 
applies to savings associations whose deposits are insured by the 
Federal Deposit Insurance Corporation, and any subsidiaries of such 
savings associations, but not subsidiaries that are brokers, dealers, 
persons providing insurance, investment companies, or investment 
advisers. This part refers to these entities as ``you.''
    (2) Nothing in this part modifies, limits, or supersedes the 
standards governing individually identifiable health information 
promulgated by the Secretary of Health and Human Services under the 
authority of sections 262 and 264 of the Health Insurance Portability 
and Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).


Sec. 573.2  Rule of construction.

    The examples in this part and the sample clauses in appendix A of 
this part are not exclusive. Compliance with an example or use of a 
sample clause, to the extent applicable, constitutes compliance with 
this part.


Sec. 573.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company.
    (b)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples--(i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Use short explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice 
whenever possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology whenever 
possible; and
    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) In a form that combines your notice with other information, use 
distinctive type size, style, and graphic devices, such as shading or 
sidebars, when you combine your notice with other information.
    (iii) Notices on web sites. If you provide a notice on a web page, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the web site (such as text, graphics, 
hyperlinks, or sound) do not distract attention from the notice, and 
you either:
    (A) Place the notice on a screen that consumers frequently access, 
such as a page on which transactions are conducted; or
    (B) Place a link on a screen that consumers frequently access, such 
as a page on which transactions are conducted, that connects directly 
to the notice and is labeled appropriately to convey the importance, 
nature, and relevance of the notice.
    (c) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other identifying particular assigned to the individual, 
irrespective of the source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, or that individual's legal 
representative.
    (2) Examples--(i) An individual who applies to you for credit for 
personal, family, or household purposes is a consumer of a financial 
service, regardless of whether the credit is extended.
    (ii) An individual who provides nonpublic personal information to 
you in order to obtain a determination about whether he or she may 
qualify for a loan to be used primarily for personal, family, or 
household purposes is a consumer of a financial service, regardless of 
whether the loan is extended.
    (iii) An individual who provides nonpublic personal information to 
you in connection with obtaining or seeking to obtain financial, 
investment, or economic advisory services is a consumer regardless of 
whether you establish a continuing advisory relationship.
    (iv) If you hold ownership or servicing rights to an individual's 
loan that is used primarily for personal, family, or household 
purposes, the individual is your consumer, even if you hold those 
rights in conjunction with one or more other institutions. (The 
individual is also a consumer with respect to the other financial 
institutions involved.) An individual who has a loan in which you have 
ownership or servicing rights is your consumer, even if you, or another 
institution with those rights, hire an agent to collect on the loan.
    (v) An individual who is a consumer of another financial 
institution is not your consumer solely because you act as agent for, 
or provide processing or other services to, that financial institution.

[[Page 35228]]

    (vi) An individual is not your consumer solely because he or she 
has designated you as trustee for a trust.
    (vii) An individual is not your consumer solely because he or she 
is a beneficiary of a trust for which you are a trustee.
    (viii) An individual is not your consumer solely because he or she 
is a participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company, as the OTS 
determines.
    (h) Customer means a consumer who has a customer relationship with 
you.
    (i)(1) Customer relationship means a continuing relationship 
between a consumer and you under which you provide one or more 
financial products or services to the consumer that are to be used 
primarily for personal, family, or household purposes.
    (2) Examples--(i) Continuing relationship. A consumer has a 
continuing relationship with you if the consumer:
    (A) Has a deposit or investment account with you;
    (B) Obtains a loan from you;
    (C) Has a loan for which you own the servicing rights;
    (D) Purchases an insurance product from you;
    (E) Holds an investment product through you, such as when you act 
as a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (F) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan for the consumer;
    (G) Enters into a lease of personal property with you; or
    (H) Obtains financial, investment, or economic advisory services 
from you for a fee.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service only in 
isolated transactions, such as using your ATM to withdraw cash from an 
account at another financial institution or purchasing a cashier's 
check or money order;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan; or
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions.
    (j) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The Director of the Office of Thrift Supervision;
    (5) The National Credit Union Administration Board; and
    (6) The Securities and Exchange Commission.
    (k)(1) Financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Financial institution does not include:
    (i) Any person or entity with respect to any financial activity 
that is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.); or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a 
consumer, as long as such institutions do not sell or transfer 
nonpublic personal information to a nonaffiliated third party.
    (l)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (m)(1) Nonaffiliated third party means any person except:
    (i) Your affiliate; or
    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other 
company that jointly employs the person).
    (2) Nonaffiliated third party includes any company that is an 
affiliate solely by virtue of your or your affiliate's direct or 
indirect ownership or control of the company in conducting merchant 
banking or investment banking activities of the type described in 
section 4(k)(4)(H) or insurance company investment activities of the 
type described in section 4(k)(4)(I) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(k)(4)(H) and (I)).
    (n)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
using any personally identifiable financial information that is not 
publicly available.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (n)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available.
    (3) Examples of lists--(i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available, and 
is not disclosed in a manner that indicates that any of the individuals 
on the list is a consumer of a financial institution.
    (o)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or

[[Page 35229]]

    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Examples--(i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain a loan, credit card, or other financial product or service;
    (B) Account balance information, payment history, overdraft 
history, and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your 
customers or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;
    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on a loan or 
servicing a loan;
    (F) Any information you collect through an Internet ``cookie'' (an 
information collecting device from a web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as 
aggregate information or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (p)(1) Publicly available information means any information that 
you have a reasonable basis to believe is lawfully made available to 
the general public from:
    (i) Federal, State, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be 
made by Federal, State, or local law.
    (2) Reasonable basis. You have a reasonable basis to believe that 
information is lawfully made available to the general public if you 
have taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that your consumer has 
not done so.
    (3) Examples--(i) Government records. Publicly available 
information in government records includes information in government 
real estate records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a web site that is 
available to the general public on an unrestricted basis. A web site is 
not restricted merely because an Internet service provider or a site 
operator requires a fee or a password, so long as access is available 
to the general public.
    (iii) Reasonable basis--(A) You have a reasonable basis to believe 
that mortgage information is lawfully made available to the general 
public if you have determined that the information is of the type 
included on the public record in the jurisdiction where the mortgage 
would be recorded.
    (B) You have a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if 
you have located the telephone number in the telephone book or the 
consumer has informed you that the telephone number is not unlisted.

Subpart A--Privacy and Opt Out Notices


Sec. 573.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to:
    (1) Customer. An individual who becomes your customer, not later 
than when you establish a customer relationship, except as provided in 
paragraph (e) of this section; and
    (2) Consumer. A consumer, before you disclose any nonpublic 
personal information about the consumer to any nonaffiliated third 
party, if you make such a disclosure other than as authorized by 
Secs. 573.14 and 573.15.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about 
the consumer to any nonaffiliated third party, other than as authorized 
by Secs. 573.14 and 573.15; and
    (2) You do not have a customer relationship with the consumer.
    (c) When you establish a customer relationship--(1) General rule. 
You establish a customer relationship when you and the consumer enter 
into a continuing relationship.
    (2) Special rule for loans.--You establish a customer relationship 
with a consumer when you originate a loan to the consumer for personal, 
family, or household purposes. If you subsequently transfer the 
servicing rights to that loan to another financial institution, the 
customer relationship transfers with the servicing rights.
    (3)(i) Examples of establishing customer relationship. You 
establish a customer relationship when the consumer:
    (A) Opens a credit card account with you;
    (B) Executes the contract to open a deposit account with you, 
obtains credit from you, or purchases insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee; or
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services.
    (ii) Examples of loan rule. You establish a customer relationship 
with a consumer who obtains a loan for personal, family, or household 
purposes when you:
    (A) Originate the loan to the consumer; or
    (B) Purchase the servicing rights to the consumer's loan.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:
    (1) You may provide a revised privacy notice, under Sec. 573.8, 
that covers the customer's new financial product or service; or
    (2) If the initial, revised, or annual notice that you most 
recently provided to that customer was accurate with respect to the new 
financial product or service, you do not need to provide a new privacy 
notice under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide the initial notice required by paragraph (a)(1) of this section 
within a reasonable time after you establish a customer relationship 
if:
    (i) Establishing the customer relationship is not at the customer's 
election; or
    (ii) Providing notice not later than when you establish a customer 
relationship would substantially delay the customer's transaction and 
the customer agrees to receive the notice at a later time.
    (2) Examples of exceptions--(i) Not at customer's election. 
Establishing a customer relationship is not at the customer's election 
if you acquire a

[[Page 35230]]

customer's deposit liability or the servicing rights to a customer's 
loan from another financial institution and the customer does not have 
a choice about your acquisition.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when you establish a customer relationship would 
substantially delay the customer's transaction when:
    (A) You and the individual agree over the telephone to enter into a 
customer relationship involving prompt delivery of the financial 
product or service; or
    (B) You establish a customer relationship with an individual under 
a program authorized by Title IV of the Higher Education Act of 1965 
(20 U.S.C. 1070 et seq.) or similar student loan programs where loan 
proceeds are disbursed promptly without prior communication between you 
and the customer.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when you establish a customer relationship would 
not substantially delay the customer's transaction when the 
relationship is initiated in person at your office or through other 
means by which the customer may view the notice, such as on a web site.
    (f) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to Sec. 573.9. If 
you use a short-form initial notice for non-customers according to 
Sec. 573.6(d), you may deliver your privacy notice according to 
Sec. 573.6(d)(3).


Sec. 573.5  Annual privacy notice to customers required.

    (a)(1) General rule. You must provide a clear and conspicuous 
notice to customers that accurately reflects your privacy policies and 
practices not less than annually during the continuation of the 
customer relationship. Annually means at least once in any period of 12 
consecutive months during which that relationship exists. You may 
define the 12-consecutive-month period, but you must apply it to the 
customer on a consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the 
calendar year in which you provided the initial notice. For example, if 
a customer opens an account on any day of year 1, you must provide an 
annual notice to that customer by December 31 of year 2.
    (b)(1) Termination of customer relationship. You are not required 
to provide an annual notice to a former customer.
    (2) Examples. Your customer becomes a former customer when:
    (i) In the case of a deposit account, the account is inactive under 
your policies;
    (ii) In the case of a closed-end loan, the customer pays the loan 
in full, you charge off the loan, or you sell the loan without 
retaining servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship, you no longer provide any statements or notices to 
the customer concerning that relationship or you sell the credit card 
receivables without retaining servicing rights; or
    (iv) You have not communicated with the customer about the 
relationship for a period of 12 consecutive months, other than to 
provide annual privacy notices or promotional material.
    (c) Special rule for loans. If you do not have a customer 
relationship with a consumer under the special rule for loans in 
Sec. 573.4(c)(2), then you need not provide an annual notice to that 
consumer under this section.
    (d) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to Sec. 573.9.


Sec. 573.6  Information to be included privacy notices.

    (a) General rule. The initial, annual, and revised privacy notices 
that you provide under Secs. 573.4, 573.5, 573.8 must include each of 
the following items of information, in addition to any other 
information you wish to provide, that applies to you and to the 
consumers to whom you send your privacy notice:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom you disclose nonpublic personal information, other than those 
parties to whom you disclose information under Secs. 573.14 and 573.15;
    (4) The categories of nonpublic personal information about your 
former customers that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information about your former customers, other than those parties to 
whom you disclose information under Secs. 573.14 and 573.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec. 573.13 (and no other exception in 
Sec. 573.14 or 573.15 applies to that disclosure), a separate statement 
of the categories of information you disclose and the categories of 
third parties with whom you have contracted;
    (6) An explanation of the consumer's right under Sec. 573.10(a) to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) 
of the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that 
is, notices regarding the ability to opt out of disclosures of 
information among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that you make under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Secs. 573.14 and 573.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Secs. 573.4 and 573.5. When describing the 
categories with respect to those parties, you are required to state 
only that you make disclosures to other nonaffiliated third parties as 
permitted by law.
    (c) Examples--(1) Categories of nonpublic personal information that 
you collect. You satisfy the requirement to categorize the nonpublic 
personal information that you collect if you list the following 
categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information you disclose--(i) 
You satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories described in 
paragraph (c)(1) of this section, as applicable, and a few examples to 
illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to 
whom you disclose. You satisfy the requirement to categorize the 
affiliates and nonaffiliated third parties to whom you disclose 
nonpublic personal information

[[Page 35231]]

if you list the following categories, as applicable, and a few examples 
to illustrate the types of third parties in each category.
    (i) Financial service providers;
    (ii) Non-financial companies; and
    (iii) Others.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec. 573.13 to a nonaffiliated third party to market 
products or services that you offer alone or jointly with another 
financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraph (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with whom you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not wish to 
reserve the right to disclose, nonpublic personal information about 
customers or former customers to affiliates or nonaffiliated third 
parties except as authorized under Secs. 573.14 and 573.15, you may 
simply state that fact, in addition to the information you must provide 
under paragraphs (a)(1), (a)(8), (a)(9), and (b) of this section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security 
of nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information; and
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical 
information about the safeguards you use.
    (d) Short-form initial notice with opt out notice for non-
customers--(1) You may satisfy the initial notice requirements in 
Secs. 573.4(a)(2), 573.7(b), and 573.7(c) for a consumer who is not a 
customer by providing a short-form initial notice at the same time as 
you deliver an opt out notice as required in Sec. 573.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) You must deliver your short-form initial notice according to 
Sec. 573.9. You are not required to deliver your privacy notice with 
your short-form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a 
consumer who receives your short-form notice requests your privacy 
notice, you must deliver your privacy notice according to Sec. 573.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to the consumer 
immediately upon request.
    (e) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and
    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (f) Sample clauses. Sample clauses illustrating some of the notice 
content required by this section are included in appendix A of this 
part.


Sec. 573.7  Form of opt out notice to consumers; opt out methods.

    (a)(1) Form of opt out notice. If you are required to provide an 
opt out notice under Sec. 573.10(a), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third 
party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples--(i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal 
information that you disclose or reserve the right to disclose, and all 
of the categories of nonaffiliated third parties to which you disclose 
the information, as described in Sec. 573.6(a)(2) and (3), and state 
that the consumer can opt out of the disclosure of that information; 
and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his 
or her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that you 
provided with the initial notice but did not include with the 
subsequent notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial notice you provide in accordance with Sec. 573.4.
    (c) Initial notice required when opt out notice delivered 
subsequent to initial notice. If you provide the opt out notice later 
than required for the initial notice in accordance with Sec. 573.4, you 
must also include a copy of the initial notice with the opt out notice 
in writing or, if the consumer agrees, electronically.
    (d) Joint relationships-(1) If two or more consumers jointly obtain 
a financial product or service from you, you may provide a single opt 
out notice. Your opt out notice must explain how you will treat an opt 
out direction by a joint consumer (as explained in paragraph (d)(5) of 
this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:

[[Page 35232]]

    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint checking account with 
you and arrange for you to send statements to John's address, you may 
do any of the following, but you must explain in your opt out notice 
which opt out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Time to comply with opt out. You must comply with a consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (f) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (g) Duration of consumer's opt out direction-(1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to that relationship. If the individual 
subsequently establishes a new customer relationship with you, the opt 
out direction that applied to the former relationship does not apply to 
the new relationship.
    (h) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to Sec. 573.9.


Sec. 573.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, you 
must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec. 573.4, unless:
    (1) You have provided to the consumer a clear and conspicuous 
revised notice that accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples--(1) Except as otherwise permitted by Secs. 573.13, 
573.14, and 573.15, you must provide a revised notice before you:
    (i) Disclose a new category of nonpublic personal information to 
any nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has 
not had the opportunity to exercise an opt out right regarding that 
disclosure.
    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to Sec. 573.9.


Sec. 573.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices 
and opt out notices, including short-form initial notices, that this 
part requires so that each consumer can reasonably be expected to 
receive actual notice in writing or, if the consumer agrees, 
electronically.
    (b) (1) Examples of reasonable expectation of actual notice. You 
may reasonably expect that a consumer will receive actual notice if 
you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically, 
post the notice on the electronic site and require the consumer to 
acknowledge receipt of the notice as a necessary step to obtaining a 
particular financial product or service;
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice of your privacy policies and practices if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices;
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only. You may reasonably expect that a customer 
will receive actual notice of your annual privacy notice if:
    (1) The customer uses your web site to access financial products 
and services electronically and agrees to receive notices at the web 
site, and you post your current privacy notice continuously in a clear 
and conspicuous manner on the web site; or
    (2) The customer has requested that you refrain from sending any 
information regarding the customer relationship, and your current 
privacy notice remains available to the customer upon request.
    (d) Oral description of notice insufficient. You may not provide 
any notice required by this part solely by orally explaining the 
notice, either in person or over the telephone.
    (e) Retention or accessibility of notices for customers-(1) For 
customers only, you must provide the initial notice required by 
Sec. 573.4(a)(1), the annual notice required by Sec. 573.5(a), and the 
revised notice required by Sec. 573.8 so that the customer can retain 
them or obtain them later in writing or, if the customer agrees, 
electronically.
    (2) Examples of retention or accessibility. You provide a privacy 
notice to the customer so that the customer can retain it or obtain it 
later if you:
    (i) Hand-deliver a printed copy of the notice to the customer;
    (ii) Mail a printed copy of the notice to the last known address of 
the customer; or
    (iii) Make your current privacy notice available on a web site (or 
a link to another web site) for the customer who

[[Page 35233]]

obtains a financial product or service electronically and agrees to 
receive the notice at the web site.
    (f) Joint notice with other financial institutions. You may provide 
a joint notice from you and one or more of your affiliates or other 
financial institutions, as identified in the notice, as long as the 
notice is accurate with respect to you and the other institutions.
    (g) Joint relationships. If two or more consumers jointly obtain a 
financial product or service from you, you may satisfy the initial, 
annual, and revised notice requirements of Secs. 573.4(a), 573.5(a), 
and 573.8(a), respectively, by providing one notice to those consumers 
jointly.

Subpart B--Limits on Disclosures


Sec. 573.10  Limits on disclosure of non-public personal information to 
nonaffiliated third parties.

    (a)(1) Conditions for disclosure. Except as otherwise authorized in 
this part, you may not, directly or through any affiliate, disclose any 
nonpublic personal information about a consumer to a nonaffiliated 
third party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec. 573.4;
    (ii) You have provided to the consumer an opt out notice as 
required in Sec. 573.7;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not disclose nonpublic personal information about that 
consumer to a nonaffiliated third party, other than as permitted by 
Secs. 573.13, 573.14, and 573.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days from the date you mailed the notices.
    (ii) By electronic means. A customer opens an on-line account with 
you and agrees to receive the notices required in paragraph (a)(1) of 
this section electronically, and you allow the customer to opt out by 
any reasonable means within 30 days after the date that the customer 
acknowledges receipt of the notices in conjunction with opening the 
account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a cashier's check by a consumer, 
you provide the consumer with a reasonable opportunity to opt out if 
you provide the notices required in paragraph (a)(1) of this section at 
the time of the transaction and request that the consumer decide, as a 
necessary part of the transaction, whether to opt out before completing 
the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information--(1) You must comply with this section, regardless 
of whether you and the consumer have established a customer 
relationship.
    (2) Unless you comply with this section, you may not, directly or 
through any affiliate, disclose any nonpublic personal information 
about a consumer that you have collected, regardless of whether you 
collected it before or after receiving the direction to opt out from 
the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.


Sec. 573.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec. 573.14 or 573.15 of this part, 
your disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information;
    (ii) You may disclose the information to your affiliates, but your 
affiliates may, in turn, disclose and use the information only to the 
extent that you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec. 573.14 or 573.15 in the ordinary course of business 
to carry out the activity covered by the exception under which you 
received the information.
    (2) Example. If you receive a customer list from a nonaffiliated 
financial institution in order to provide account processing services 
under the exception in Sec. 573.14(a), you may disclose that 
information under any exception in Sec. 573.14 or 573.15 in the 
ordinary course of business in order to provide those services. For 
example, you could disclose the information in response to a properly 
authorized subpoena or to your attorneys, accountants, and auditors. 
You could not disclose that information to a third party for marketing 
purposes or use that information for your own marketing purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec. 573.14 or 573.15 of 
this part, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if 
made directly to that person by the financial institution from which 
you received the information.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. 573.14 and 
573.15:
    (i) You may use that list for your own purposes; and
    (ii) You may disclose that list to another nonaffiliated third 
party only if the financial institution from which you purchased the 
list could have lawfully disclosed the list to that third party. That 
is, you may disclose the list in accordance with the privacy policy of 
the financial institution from which you received the list, as limited 
by the opt out direction of each consumer whose nonpublic personal 
information you intend to disclose, and you may disclose the list in 
accordance with an exception in Sec. 573.14 or 573.15, such as to your 
attorneys or accountants.
    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in Sec. 573.14 or 573.15 of this part, the third party may 
disclose and use that information only as follows:
    (1) The third party may disclose the information to your 
affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the 
information; and
    (3) The third party may disclose and use the information pursuant 
to an exception in Sec. 573.14 or 573.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.

[[Page 35234]]

    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec. 573.14 or 573.15 of this part, 
the third party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose 
the information only to the extent the third party can disclose the 
information; and
    (3) To any other person, if the disclosure would be lawful if you 
made it directly to that person.


Sec. 573.12  Limits on sharing account number information for marketing 
purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, deposit 
account, or transaction account to any nonaffiliated third party for 
use in telemarketing, direct mail marketing, or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose an account number or similar form of access number or access 
code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider is not authorized to directly initiate charges to the 
account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Examples--(1) Account number. An account number, or similar 
form of access number or access code, does not include a number or code 
in an encrypted form, as long as you do not provide the recipient with 
a means to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a deposit account or a credit card account. A transaction account 
does not include an account to which third parties cannot initiate 
charges.

Subpart C--Exceptions


Sec. 573.13  Exception to opt out requirements for service providers 
and joint marketing.

    (a) General rule. (1) The opt out requirements in Secs. 573.7 and 
573.10 do not apply when you provide nonpublic personal information to 
a nonaffiliated third party to perform services for you or functions on 
your behalf, if you:
    (i) Provide the initial notice in accordance with Sec. 573.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information 
other than to carry out the purposes for which you disclosed the 
information, including use under an exception in Sec. 573.14 or 573.15 
in the ordinary course of business to carry out those purposes.
    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits 
the institution from disclosing or using the nonpublic personal 
information except as necessary to carry out the joint marketing or 
under an exception in Sec. 573.14 or 573.15 in the ordinary course of 
business to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.


Sec. 573.14  Exceptions to notice and opt out requirements for 
processing and servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec. 573.4(a)(2), for the opt 
out in Secs. 573.7 and 573.10, and for service providers and joint 
marketing in Sec. 573.13 do not apply if you disclose nonpublic 
personal information as necessary to effect, administer, or enforce a 
transaction that a consumer requests or authorizes, or in connection 
with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related 
to a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain 
the consumer's account in the ordinary course of providing the 
financial service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities), 
participating in research projects, or as otherwise required or 
specifically permitted by Federal or State law;
    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card, check, or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.


Sec. 573.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for 
initial notice in Sec. 573.4(a)(2), for the opt out in Secs. 573.7 and 
573.10, and for service providers and joint marketing in Sec. 573.13 do 
not apply when you disclose nonpublic personal information:

[[Page 35235]]

    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2)(i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory 
organizations, guaranty funds or agencies, agencies that are rating 
you, persons that are assessing your compliance with industry 
standards, and your attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.), to law enforcement agencies 
(including a federal functional regulator, the Secretary of the 
Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records 
and Reports on Monetary Instruments and Transactions) and 12 U.S.C. 
Chapter 21 (Financial Recordkeeping), a State insurance authority, with 
respect to any person domiciled in that insurance authority's State 
that is engaged in providing insurance, and the Federal Trade 
Commission), self-regulatory organizations, or for an investigation on 
a matter related to public safety;
    (5)(i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.), or
    (ii) From a consumer report reported by a consumer reporting 
agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7)(i) To comply with Federal, State, or local laws, rules and 
other applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons by Federal, State, or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance, 
or other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated 
insurance company of the fact that the consumer has applied to you for 
a mortgage so that the insurance company can offer homeowner's 
insurance to the consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal 
information as permitted under Sec. 573.7(f).

Subpart D--Relation to Other Laws; Effective Date


Sec. 573.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 
1681 et seq.), and no inference shall be drawn on the basis of the 
provisions of this part regarding whether information is transaction or 
experience information under section 603 of that Act.


Sec. 573.17  Relation to State laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or 
interpretation in effect in any State, except to the extent that such 
State statute, regulation, order, or interpretation is inconsistent 
with the provisions of this part, and then only to the extent of the 
inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Federal Trade Commission, after consultation with the OTS, on the 
Federal Trade Commission's own motion, or upon the petition of any 
interested party.


Sec. 573.18  Effective date; transition rule.

    (a) Effective date. This part is effective November 13, 2000. In 
order to provide sufficient time for you to establish policies and 
systems to comply with the requirements of this part, the OTS has 
extended the time for compliance with this part until July 1, 2001.
    (b)(1) Notice requirement for consumers who are your customers on 
the compliance date. By July 1, 2001, you must have provided an initial 
notice, as required by Sec. 573.4, to consumers who are your customers 
on July 1, 2001.
    (2) Example. You provide an initial notice to consumers who are 
your customers on July 1, 2001, if, by that date, you have established 
a system for providing an initial notice to all new customers and have 
mailed the initial notice to all your existing customers.
    (c) Two-year grandfathering of service agreements. Until July 1, 
2002, a contract that you have entered into with a nonaffiliated third 
party to perform services for you or functions on your behalf satisfies 
the provisions of Sec. 573.13(a)(1)(ii) of this part, even if the 
contract does not include a requirement that the third party maintain 
the confidentiality of nonpublic personal information, as long as you 
entered into the contract on or before July 1, 2000.

Appendix A to Part 573--Sample Clauses

    Financial institutions, including a group of financial holding 
company affiliates that use a common privacy notice, may use the 
following sample clauses, if the clause is accurate for each 
institution that uses the notice. (Note that disclosure of certain 
information, such as assets, income, and information from a consumer 
reporting agency, may give rise to obligations under the Fair Credit 
Reporting Act, such as a requirement to permit a consumer to opt out 
of disclosures to affiliates or designation as a consumer reporting 
agency if disclosures are made to nonaffiliated third parties.)

A-1--Categories of information you collect (all institutions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 573.6(a)(1) to describe the categories of nonpublic personal 
information you collect.
    Sample Clause A-1:
    We collect nonpublic personal information about you from the 
following sources:
     Information we receive from you on applications or 
other forms;
     Information about your transactions with us, our 
affiliates, or others; and
     Information we receive from a consumer reporting 
agency.

A-2--Categories of information you disclose (institutions that disclose 
outside of the exceptions)

    You may use one of these clauses, as applicable, to meet the 
requirement of Sec. 573.6(a)(2) to describe the categories of 
nonpublic personal information you disclose. You may use these 
clauses if you disclose nonpublic personal information other than as 
permitted by the exceptions in Secs. 573.13, 573.14, and 573.15.
    Sample Clause A-2, Alternative 1:
    We may disclose the following kinds of nonpublic personal 
information about you:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name,

[[Page 35236]]

address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-2, Alternative 2:
    We may disclose all of the information that we collect, as 
described [describe location in the notice, such as ``above'' or 
``below''].

A-3--Categories of information you disclose and parties to whom you 
disclose (institutions that do not disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirements 
of Secs. 573.6(a)(2), (3), and (4) to describe the categories of 
nonpublic personal information about customers and former customers 
that you disclose and the categories of affiliates and nonaffiliated 
third parties to whom you disclose. You may use this clause if you 
do not disclose nonpublic personal information to any party, other 
than as permitted by the exceptions in Secs. 573.14, and 573.15.
    Sample Clause A-3:
    We do not disclose any nonpublic personal information about our 
customers or former customers to anyone, except as permitted by law.

A-4--Categories of parties to whom you disclose (institutions that 
disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 573.6(a)(3) to describe the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information. You may use this clause if you disclose nonpublic 
personal information other than as permitted by the exceptions in 
Secs. 573.13, 573.14, and 573.15, as well as when permitted by the 
exceptions in Secs. 573.14, and 573.15.
    Sample Clause A-4:
    We may disclose nonpublic personal information about you to the 
following types of third parties:
     Financial service providers, such as [provide 
illustrative examples, such as ``mortgage bankers, securities 
broker-dealers, and insurance agents''];
     Non-financial companies, such as [provide illustrative 
examples, such as ``retailers, direct marketers, airlines, and 
publishers'']; and
     Others, such as [provide illustrative examples, such as 
``non-profit organizations;''].
    We may also disclose nonpublic personal information about you to 
nonaffiliated third parties as permitted by law.

A-5--Service provider/joint marketing exception

    You may use one of these clauses, as applicable, to meet the 
requirements of Sec. 573.6(a)(5) related to the exception for 
service providers and joint marketers in Sec. 573.13. If you 
disclose nonpublic personal information under this exception, you 
must describe the categories of nonpublic personal information you 
disclose and the categories of third parties with whom you have 
contracted.
    Sample Clause A-5, Alternative 1:
    We may disclose the following information to companies that 
perform marketing services on our behalf or to other financial 
institutions with whom we have joint marketing agreements:
     Information we receive from you on applications or 
other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such 
as ``your account balance, payment history, parties to transactions, 
and credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-5, Alternative 2:
    We may disclose all of the information we collect, as described 
[describe location in the notice, such as ``above'' or ``below''] to 
companies that perform marketing services on our behalf or to other 
financial institutions with whom we have joint marketing agreements.

A-6--Explanation of opt out right (institutions that disclose outside 
of the exceptions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 573.6(a)(6) to provide an explanation of the consumer's 
right to opt out of the disclosure of nonpublic personal information 
to nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right. You may use this clause if you 
disclose nonpublic personal information other than as permitted by 
the exceptions in Secs. 573.13, 573.14, and 573.15.
    Sample Clause A-6:
    If you prefer that we not disclose nonpublic personal 
information about you to nonaffiliated third parties, you may opt 
out of those disclosures, that is, you may direct us not to make 
those disclosures (other than disclosures permitted by law). If you 
wish to opt out of disclosures to nonaffiliated third parties, you 
may [describe a reasonable means of opting out, such as ``call the 
following toll-free number: (insert number)''].

A-7--Confidentiality and security (all institutions)

    You may use this clause, as applicable, to meet the requirement 
of Sec. 573.6(a)(8) to describe your policies and practices with 
respect to protecting the confidentiality and security of nonpublic 
personal information.
    Sample Clause A-7:
    We restrict access to nonpublic personal information about you 
to [provide an appropriate description, such as ``those employees 
who need to know that information to provide products or services to 
you'']. We maintain physical, electronic, and procedural safeguards 
that comply with federal standards to guard your nonpublic personal 
information.

    Dated: May 10, 2000.
    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 00-13124 Filed 5-31-00; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P

Last Updated 06/05/2000 communications@fdic.gov