Each depositor insured to at least $250,000 per insured bank



Home > Regulation & Examinations > Laws & Regulations > FDIC Federal Register Citations




FDIC Federal Register Citations

[Federal Register: March 29, 2005 (Volume 70, Number 59)]
[Rules and Regulations]
[Page 15736-15754]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29mr05-2]

=======================================================================

Correction - 2/3/06

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 30

[Docket No. 05-07]
RIN 1557-AC92

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 225

[Docket No. OP-1155]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 364

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 568 and 570

[No. 2005-11]
RIN 1550-AB97


Interagency Guidance on Response Programs for Unauthorized Access
to Customer Information and Customer Notice

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

ACTION: Interpretive guidance and OTS final rule.

-----------------------------------------------------------------------

SUMMARY: The OCC, Board, FDIC, and OTS (the Agencies) are publishing an
interpretation of the Gramm-Leach-Bliley Act (GLBA) and the Interagency
Guidelines Establishing Information Security Standards (Security
Guidelines).\1\ This interpretive guidance, titled ``Interagency
Guidance on Response Programs for Unauthorized Access to Customer
Information and Customer Notice'' (final Guidance), is being published
as a supplement to the Security Guidelines in the Code of Federal
Regulations in order to make the interpretation more accessible to
financial institutions and to the general public. The final Guidance
will clarify the responsibilities of financial institutions under
applicable Federal law. OTS is also making a conforming, technical
change to its Security Procedures Rule.
---------------------------------------------------------------------------

\1\ This document renames the ``Interagency Guidelines
Establishing Standards for Safeguarding Customer Information'' as
the ``Interagency Guidelines Establishing Information Security
Standards.'' Therefore, all other references in the Agencies'
regulations to the former title of the Security Guidelines shall be
read to refer to the new title.

---------------------------------------------------------------------------
DATES: Effective March 29, 2005.

FOR FURTHER INFORMATION CONTACT: OCC: Aida Plaza Carter, Director, Bank
Information Technology, (202) 874-4740; Amy Friend, Assistant Chief
Counsel, (202) 874-5200; or Deborah Katz, Senior Counsel, Legislative
and Regulatory Activities Division, (202) 874-5090, at 250 E Street,
SW., Washington, DC 20219.
Board: Donna L. Parker, Supervisory Financial Analyst, Division of
Banking Supervision & Regulation, (202) 452-2614; or Joshua H. Kaplan,
Attorney, Legal Division, (202) 452-2249, at 20th and C Streets, NW.,
Washington, DC 20551.
FDIC: Jeffrey M. Kopchik, Senior Policy Analyst, Division of
Supervision and Consumer Protection, (202) 898-3872; Kathryn M.
Weatherby, Examiner Specialist, Division of Supervision and Consumer
Protection, (202) 898-6793; or Robert A. Patrick, Counsel, Legal
Division, (202) 898-3757, at 550 17th Street, NW., Washington, DC
20429.
OTS: Lewis C. Angel, Program Manager, (202) 906-5645; Glenn Gimble,
Senior Project Manager, Consumer Protection and Specialized Programs,
(202) 906-7158; or Richard Bennett, Counsel, Regulations and
Legislation Division, (202) 906-7409, at 1700 G Street, NW.,
Washington, DC 20552.

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

I. Introduction
II. Overview of Comments Received
III. Overview of Final Guidance
IV. Section-by-Section Analysis of the Comments Received
A. The ``Background'' Section
B. The ``Response Program'' Section
C. The ``Customer Notice'' Section
V. Effective Date
VI. OTS Conforming and Technical Change
VII. Impact of Guidance
VIII. Regulatory Analysis
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Executive Order 12866
D. Unfunded Mandates Reform Act of 1995

I. Introduction

The Agencies are jointly issuing final Guidance that interprets the
requirements of section 501(b) of the GLBA, 15 U.S.C. 6801, and the
Security Guidelines \2\ to include the development

[[Page 15737]]

and implementation of a response program to address unauthorized access
to, or use of customer information that could result in substantial
harm or inconvenience to a customer. The Guidance describes the
appropriate elements of a financial institution's response program,
including customer notification procedures.
---------------------------------------------------------------------------

\2\ 12 CFR part 30, app. B (OCC); 12 CFR part 208, app. D-2, and
part 225, app. F (Board); 12 CFR part 364, app. B (FDIC); and 12 CFR
part 570, app. B (OTS). In this Guidance, citations to the Agencies'
Security Guidelines refer only to the appropriate paragraph number,
as these numbers are common to each of the Guidelines.
---------------------------------------------------------------------------

Section 501(b) required the Agencies to establish standards for
financial institutions relating to administrative, technical, and
physical safeguards to: (1) Ensure the security and confidentiality of
customer information; (2) protect against any anticipated threats or
hazards to the security or integrity of such information; and (3)
protect against unauthorized access to or use of such information that
could result in substantial harm or inconvenience to any customer.
On February 1, 2001, the Agencies issued the Security Guidelines as
required by section 501(b) (66 FR 8616). Among other things, the
Security Guidelines direct financial institutions to: (1) Identify
reasonably foreseeable internal and external threats that could result
in unauthorized disclosure, misuse, alteration, or destruction of
customer information or customer information systems; (2) assess the
likelihood and potential damage of these threats, taking into
consideration the sensitivity of customer information; and (3) assess
the sufficiency of policies, procedures, customer information systems,
and other arrangements in place to control risks.\3\
---------------------------------------------------------------------------

\3\ Security Guidelines, III.B.2.
---------------------------------------------------------------------------

To address the need for additional interpretive guidance regarding
section 501(b) and the Security Guidelines, on August 12, 2003, the
Agencies published proposed Interagency Guidance on Response Programs
for Unauthorized Access to Customer Information and Customer Notice
(proposed Guidance) in the Federal Register (68 FR 47954). This
proposed Guidance made clear that the Agencies expect a financial
institution's information security program, required under the Security
Guidelines, to include a response program.
The Agencies were interested in the public's views on the proposed
Guidance and accordingly published it for comment.\4\ The Agencies have
used these comments to assess the impact of the proposed Guidance, and
to address the requirements of the Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.).
---------------------------------------------------------------------------

\4\ Under the Administrative Procedure Act (APA), an agency may
dispense with public notice and an opportunity to comment for
general statements of policy. 5 U.S.C. 553(b)(A). Therefore, notice
and comment were not required under the APA for this final Guidance.
OTS has concluded that notice and comment were also not required
under the APA for its conforming and technical change as discussed
in part VI of this SUPPLEMENTARY INFORMATION.
---------------------------------------------------------------------------

II. Overview of Comments Received

The Agencies invited comment on all aspects of the proposed
Guidance and collectively received 65 comments on the proposed
Guidance. In some instances, several commenters joined in filing a
single comment. The commenters included 10 bank holding companies,
eight financial institution trade associations, 25 financial
institutions (including three Federal Reserve Banks), five consumer
groups, three payment systems, three software companies, three non-
financial institution business associations, three service providers,
two credit unions, a member of Congress, a state office, a compliance
officer, a security and risk consultant, a trademark protection
service, and a trade association representing consumer reporting
agencies.
Commenters generally agreed that financial institutions should have
response programs. Indeed, many financial institutions said that they
have such programs in place. Comments from consumer groups and the
Congressman commended the Agencies for providing guidance on response
programs and customer notification. However, most industry commenters
thought that the proposed Guidance was too prescriptive. These
commenters stated that the proposed approach would stifle innovation
and retard the effective evolution of response programs. Industry
commenters raised concerns that the proposed Guidance would not permit
a financial institution to assess different situations from its own
business perspective, specific to its size, operational and system
structure, and risk tolerances. These industry commenters suggested
modifying the proposed Guidance to give financial institutions greater
discretion to determine how to respond to incidents of unauthorized
access to or use of customer information.
Two commenters also requested that the Agencies include a
transition period allowing adequate time for financial institutions to
implement the final Guidance. Some commenters asked for a transition
period only for the aspects of the final Guidance that address service
provider arrangements.

III. Overview of Final Guidance

The final Guidance states that every financial institution should
develop and implement a response program designed to address incidents
of unauthorized access to customer information maintained by the
institution or its service provider. The final Guidance provides each
financial institution with greater flexibility to design a risk-based
response program tailored to the size, complexity and nature of its
operations.
The final Guidance continues to highlight customer notice as a key
feature of an institution's response program. However, in response to
the comments received, the final Guidance modifies the standard
describing when notice should be given and provides for a delay at the
request of law enforcement. It also modifies which customers should be
given notice, what a notice should contain, and how it should be
delivered.
A more detailed discussion of the final Guidance and the manner in
which it incorporates comments the Agencies received follows.

IV. Section-by-Section Analysis of the Comments Received

A. The ``Background'' Section

Legal Authority
Section I of the proposed Guidance described the legal authority
for the Agencies' position that every financial institution should have
a response program that includes measures to protect customer
information maintained by the institution or its service providers. The
proposed Guidance also stated that the Agencies expect customer
notification to be a component of the response program.
One commenter questioned the Agencies' legal authority to issue the
proposed Guidance. This commenter asserted that section 501(b) only
authorizes the Agencies to establish standards requiring financial
institutions to safeguard the confidentiality and integrity of customer
information and to protect that information from unauthorized access,
but does not authorize standards that would require a response to
incidents where the security of customer information actually has been
breached.
The final Guidance interprets those provisions of the Security
Guidelines issued under the authority of section 501(b)(3) of the GLBA,
which states specifically that the standards to be established by the
Agencies must include various safeguards to protect against not only
``unauthorized access to,'' but also the ``use of,'' customer

[[Page 15738]]

information that could result in ``substantial harm or inconvenience to
any customer.'' This language authorizes standards that include
response programs to address incidents of unauthorized access to
customer information. A response program is the principal means for a
financial institution to protect against unauthorized ``use'' of
customer information that could lead to ``substantial harm or
inconvenience'' to the institution's customer. For example, customer
notification is an important tool that enables a customer to take steps
to prevent identity theft, such as by arranging to have a fraud alert
placed in his or her credit file. Accordingly, when evaluating the
adequacy of an institution's information security program required by
the Security Guidelines, the Agencies will consider whether the
institution has developed and implemented a response program as
described in the final Guidance.
Scope of Guidance
In a number of places throughout the proposed Guidance, the
Agencies referenced definitions in the Security Guidelines. However,
the Agencies did not specifically address the scope of the proposed
Guidance. Commenters had questions and suggestions regarding the scope
of the proposed Guidance and the meaning of terms used.
Entities and Information Covered
Some commenters had questions about the entities and information
covered by the proposed Guidance. One commenter suggested that the
Agencies clarify that foreign offices, branches, and affiliates of
United States banks are not subject to the final Guidance. Some
commenters recommended that the Agencies clarify that the final
Guidance applies only to unauthorized access to sensitive information
within the control of the financial institution. One commenter thought
that the final Guidance should be broad and cover frauds committed
against bank customers through the Internet, such as through the misuse
of online corporate identities to defraud online banking customers
through fake web sites (commonly known as ``phishing''). Several
commenters requested confirmation in the final Guidance that it applies
to consumer accounts and not to business and other commercial accounts.
For greater clarity, the Agencies have revised the Background
section of the final Guidance to state that the scope and definitions
of terms used in the Guidance are identical to those in section 501(b)
of the GLBA and the Security Guidelines which largely cross-reference
definitions used in the Agencies' Privacy Rules.\5\ Therefore,
consistent with section 501(b) and the Security Guidelines, this final
Guidance applies to the entities enumerated in section 505(a) of the
GLBA.\6\ This final Guidance does not apply to a financial
institution's foreign offices, branches, or affiliates. However, a
financial institution subject to the Security Guidelines is responsible
for the security of its customer information, whether the information
is maintained within or outside of the United States, such as by a
service provider located outside of the United States.
---------------------------------------------------------------------------

\5\ 12 CFR part 40 (OCC); 12 CFR part 216 (Board); 12 CFR part
332 (FDIC); and 12 CFR part 573 (OTS). In this final Guidance,
citations to the Agencies' Privacy Rules refer only to the
appropriate section number that is common to each of these rules.
\6\ National banks, Federal branches and Federal agencies of
foreign banks and any subsidiaries of these entities (except
brokers, dealers, persons providing insurance, investment companies,
and investment advisers) (OCC); member banks (other than national
banks), branches and agencies of foreign banks (other than Federal
branches, Federal agencies, and insured State branches of foreign
banks), commercial lending companies owned or controlled by foreign
banks, Edge and Agreement Act Corporations, bank holding companies
and their nonbank subsidiaries or affiliates (except brokers,
dealers, persons providing insurance, investment companies, and
investment advisers) (Board); state non-member banks, insured State
branches of foreign banks, and any subsidiaries of such entities
(except brokers, dealers, persons providing insurance, investment
companies, and investment advisers) (FDIC); and insured savings
associations and any subsidiaries of such savings associations
(except brokers, dealers, persons providing insurance, investment
companies, and investment advisers) (OTS).
---------------------------------------------------------------------------

This final Guidance also applies to ``customer information,''
meaning any record containing ``nonpublic personal information'' (as
that term is defined in Sec. ----.3(n) of the Agencies' Privacy Rules)
about a financial institution's customer, whether in paper, electronic,
or other form, that is maintained by or on behalf of the
institution.\7\ Consequently, the final Guidance applies only to
information that is within the control of the institution and its
service providers, and would not apply to information directly
disclosed by a customer to a third party, for example, through a
fraudulent Web site.
---------------------------------------------------------------------------

\7\ See Security Guidelines, I.C.2.c.
---------------------------------------------------------------------------

Moreover, this final Guidance does not apply to information
involving business or commercial accounts. Instead, the final Guidance
applies to nonpublic personal information about a ``customer'' within
the meaning of the Security Guidelines, namely, a consumer who obtains
a financial product or service from a financial institution to be used
primarily for personal, family, or household purposes, and who has a
continuing relationship with the institution.\8\
---------------------------------------------------------------------------

\8\ See Security Guidelines, I.C.2.b.; Privacy Rules, Sec. --
--.3(h).
---------------------------------------------------------------------------

Effect of Other Laws
Several commenters requested that the Agencies explain how the
final Guidance interacts with additional and possibly conflicting state
law requirements. Most of these commenters urged that the final
Guidance expressly preempt state law. By contrast, one commenter asked
the Agencies to clarify that a financial institution must also comply
with additional state law requirements. In addition, some commenters
asked that the final Guidance provide a safe harbor defense against
class action suits. They suggested that the safe harbor should cover
any financial institution that takes reasonable steps that regulators
require to protect customer information, but, nonetheless, experiences
an event beyond its control that leads to the disclosure of customer
information.
These issues do not fall within the scope of this final Guidance.
The extent to which section 501(b) of the GLBA, the Security
Guidelines, and any related Agency interpretations, such as this final
Guidance, preempt state law is governed by Federal law, including the
procedures set forth in section 507 of GLBA, 15 U.S.C. 6807.\9\
Moreover, there is nothing in Title V of the GLBA that authorizes the
Agencies to provide institutions with a safe harbor defense. Therefore,
the final Guidance does not address these issues.
---------------------------------------------------------------------------

\9\ Section 507 provides that state laws that are
``inconsistent'' with the provisions of Title V, Subtitle A of the
GLBA are preempted ``only to the extent of the inconsistency.''
State laws are ``not inconsistent'' if they offer greater protection
than Subtitle A, as determined by the Federal Trade Commission,
after consultation with the agency or authority with jurisdiction
under section 505(a) of either the person that initiated the
complaint or that is the subject of the complaint. See 15 U.S.C.
6807.
---------------------------------------------------------------------------

Organizational Changes in the ``Background'' Section
For the reasons described earlier, the Background section is
adopted essentially as proposed, except that the latter part of the
paragraph on ``Service Providers'' and the entire paragraph on
``Response Programs'' are incorporated into the introductory discussion
of section II. The Agencies believe that the Background section is now
clearer, as it focuses solely on the statutory and regulatory framework
upon which the final Guidance is based. Comments and changes with
respect to the paragraphs that were relocated are discussed in the next
section.

[[Page 15739]]

B. The ``Response Program'' Section

The Security Guidelines enumerate a number of security measures
that each financial institution must consider and adopt, if
appropriate, to control risks stemming from reasonably foreseeable
internal and external threats to an institution's customer
information.\10\ The introductory paragraph of section II of the final
Guidance specifically states that a financial institution should
implement those security measures designed to prevent unauthorized
access to or use of customer information, such as by placing access
controls on customer information systems and conducting background
checks for employees \11\ who are authorized to access customer
information. The introductory paragraph also states that every
financial institution should develop and implement security measures
designed to address incidents of unauthorized access to customer
information that occur despite measures to prevent security breaches.
---------------------------------------------------------------------------

\10\ Security Guidelines, III.B. and III.C.
\11\ A footnote has been added to this section to make clear
that institutions should also conduct background checks of employees
to ensure that the institution does not violate 12 U.S.C. 1829,
which prohibits an institution from hiring an individual convicted
of certain criminal offenses or who is subject to a prohibition
order under 12 U.S.C. 1818(e)(6).
---------------------------------------------------------------------------

The measures enumerated in the Security Guidelines include
``response programs that specify actions to be taken when the bank
suspects or detects that unauthorized individuals have gained access to
customer information systems, including appropriate reports to
regulatory and law enforcement agencies.''\12\ Prompt action by both
the institution and the customer following the unauthorized access to
customer information is crucial to limit identity theft. As a result,
every financial institution should develop and implement a response
program appropriate to the size and complexity of the institution and
the nature and scope of its activities, designed to address incidents
of unauthorized access to customer information.
---------------------------------------------------------------------------

\12\ Security Guidelines, III.C.1.g.
---------------------------------------------------------------------------

The introductory language in section II of the final Guidance
states that a response program should be a key part of an institution's
information security program. It also emphasizes that a financial
institution's response program should be risk-based and describes the
components of a response program in a less prescriptive manner.
Service Provider Contracts
The Background section of the proposed Guidance elaborated on the
specific provisions that a financial institution's contracts with its
service providers should contain. The proposed Guidance stated that a
financial institution's contract with its service provider should
require the service provider to disclose fully to the institution
information related to any breach in security resulting in an
unauthorized intrusion into the institution's customer information
systems maintained by the service provider. It stated that this
disclosure would permit an institution to expeditiously implement its
response program.
Several commenters on the proposed Guidance agreed that a financial
institution's contracts with its service providers should require the
service provider to disclose fully to the institution information
related to any breach in security resulting in an unauthorized
intrusion into the institution's customer information systems
maintained by the service provider. However, many commenters suggested
modifications to this section.
The discussion of this aspect of a financial institution's
contracts with its service providers is in section II of the final
Guidance. It has been revised as follows in response to the comments
received.
Timing of Service Provider Notification
The Agencies received a number of comments regarding the timing of
a service provider's notice to a financial institution. One commenter
suggested requiring service providers to report incidents of
unauthorized access to financial institutions within 24 hours after
discovery of the incident.
In response to comments on the timing of a service provider's
notice to a financial institution, the final Guidance adds that a
financial institution's contract with its service provider should
require the service provider to take appropriate action to address
incidents of unauthorized access to the institution's customer
information, including by notifying the institution as soon as possible
of any such incident, to enable the institution to expeditiously
implement its response program. The Agencies determined that requiring
notice within 24 hours of an incident may not be practicable or
appropriate in every situation, particularly where, for example, it
takes a service provider time to investigate a breach in security.
Therefore, the final Guidance does not specify a number of hours or
days by which the service provider must give notice to the financial
institution.
Existing Contracts With Service Providers
Some commenters expressed concerns that they would have to rewrite
their contracts with service providers to require the disclosure
described in this provision. These commenters asked the Agencies to
grandfather existing contracts and to apply this provision only
prospectively to new contracts. Many commenters also suggested that the
final Guidance contain a transition period to permit financial
institutions to modify their existing contracts.
The Agencies have decided not to grandfather existing contracts or
to add a transition period to the final Guidance because, as stated in
the proposed Guidance, this disclosure provision is consistent with the
obligations in the Security Guidelines that relate to service provider
arrangements and with existing guidance on this topic previously issued
by the Agencies.\13\ In order to ensure the safeguarding of customer
information, financial institutions that use service providers likely
have already arranged to receive notification from the service
providers when customer information is accessed in an unauthorized
manner. In light of the comments received, however, the Agencies
recognize that there are institutions that have not formally included
such a disclosure requirement in their contracts. Where this is the
case, the institution should exercise its best efforts to add a
disclosure requirement to its contracts and any new contracts should
include such a provision.
---------------------------------------------------------------------------

\13\ See FFIEC Information Technology Examination Handbook,
Outsourcing Technology Services Booklet, Jun. 2004; Federal Reserve
SR Ltr. 00-04, Outsourcing of Information and Transaction
Processing, Feb. 9, 2000; OCC Bulletin 2001-47, ``Third-party
Relationships Risk Management Principles,'' Nov. 1, 2001; FDIC FIL
68-99, Risk Assessment Tools and Practices for Information System
Security, July 7, 1999; OTS Thrift Bulletin 82a, Third Party
Arrangements, Sept. 1, 2004.
---------------------------------------------------------------------------

Thus, the final Guidance adopts the discussion on service provider
arrangements largely as proposed. To eliminate any ambiguity regarding
the application of this section to foreign-based service providers,
however, the final Guidance now makes clear that a covered financial
institution \14\ should be capable of addressing incidents of
unauthorized access to customer information in customer information
systems maintained by its domestic and foreign service providers.\15\
---------------------------------------------------------------------------

\14\ See footnote 6, supra.
\15\ See, e.g., FFIEC Information Technology Examination
Handbook, Outsourcing Technology Services Booklet, Jun. 2004; OCC
Bulletin 2002-16 (national banks); OTS Thrift Bulletin 82a, Third
Party Arrangements, Sept. 1, 2004 (savings associations).

---------------------------------------------------------------------------

[[Page 15740]]

Components of a Response Program
As described earlier, commenters criticized the prescriptive nature
of proposed section II that described the four components a response
program should contain. The proposed Guidance instructed institutions
to design programs to respond to incidents of unauthorized access to
customer information by: (1) Assessing the situation; (2) notifying
regulatory and law enforcement agencies; (3) containing and controlling
the situation; and (4) taking corrective measures. The proposed
Guidance contained detailed information about each of these four
components.
The introductory discussion in this section of the final Guidance
now makes clear that, as a general matter, an institution's response
program should be risk-based. It applies this principle by modifying
the discussion of a number of these components. The Agencies determined
that the detailed instructions in these components of the proposed
Guidance, especially in the ``Corrective Measures'' section, would not
always be relevant or appropriate. Therefore, the final Guidance
describes, through brief bulleted points, the elements of a response
program, giving financial institutions greater discretion to address
incidents of unauthorized access to or use of customer information that
could result in substantial harm or inconvenience to a customer.
At a minimum, an institution's response program should contain
procedures for: (1) Assessing the nature and scope of an incident, and
identifying what customer information systems and types of customer
information have been accessed or misused; (2) notifying its primary
Federal regulator as soon as possible when the institution becomes
aware of an incident involving unauthorized access to or use of
sensitive customer information, as defined later in the final Guidance;
(3) immediately notifying law enforcement in situations involving
Federal criminal violations requiring immediate attention; (4) taking
appropriate steps to contain and control the incident to prevent
further unauthorized access to or use of customer information, such as
by monitoring, freezing, or closing affected accounts, while preserving
records and other evidence; and (5) notifying customers when warranted.
Assess the Situation. The proposed Guidance stated that an
institution should assess the nature and scope of the incident and
identify what customer information systems and types of customer
information have been accessed or misused.
Some commenters stated that the Agencies should retain this
provision in the final Guidance. One commenter suggested that an
institution should focus its entire response program primarily on
addressing unauthorized access to sensitive customer information.
The Agencies have concluded that a financial institution's response
program should begin with a risk assessment that allows an institution
to establish the nature of any information improperly accessed. This
will allow the institution to determine whether and how to respond to
an incident. Accordingly, the Agencies have not changed this provision.
Notify Regulatory and Law Enforcement Agencies. The proposed
Guidance provided that an institution should promptly notify its
primary Federal regulator when it becomes aware of an incident
involving unauthorized access to or use of customer information that
could result in substantial harm or inconvenience to customers. In
addition, the proposed Guidance stated that an institution should file
a Suspicious Activity Report (SAR), if required, in accordance with the
applicable SAR regulations \16\ and various Agency issuances.\17\ The
proposed Guidance stated that, consistent with the Agencies' SAR
regulations, in situations involving Federal criminal violations
requiring immediate attention, the institution immediately should
notify, by telephone, the appropriate law enforcement authorities and
its primary regulator, in addition to filing a timely SAR. For the sake
of clarity, the final Guidance discusses notice to regulators and
notice to law enforcement in two separate bulleted items.
---------------------------------------------------------------------------

\16\ 12 CFR 21.11 (national banks, Federal branches and
agencies); 12 CFR 208.62 (State member banks); 12 CFR 211.5(k) (Edge
and agreement corporations); 12 CFR 211.24(f) (uninsured State
branches and agencies of foreign banks); 12 CFR 225.4(f) (bank
holding companies and their nonbank subsidiaries); 12 CFR part 353
(State non-member banks); and 12 CFR 563.180 (savings associations).
\17\ For example, national banks must file SARs in connection
with computer intrusions and other computer crimes. See OCC Bulletin
2000-14, ``Infrastructure Threats--Intrusion Risks'' (May 15, 2000);
OCC AL 97-9, ``Reporting Computer Related Crimes'' (November 19,
1997) (general guidance still applicable though instructions for new
SAR form published in 65 FR 1229, 1230 (January 7, 2000)). See also
OCC AL 2001-4, Identity Theft and Pretext Calling, April 30, 2001;
Federal Reserve SR 01-11, Identity Theft and Pretext Calling, Apr.
26, 2001; SR 97-28, Guidance Concerning Reporting of Computer
Related Crimes by Financial Institutions, Nov. 6, 1997; FDIC FIL 48-
2000, Suspicious Activity Reports, July 14, 2000; FIL 47-97,
Preparation of Suspicious Activity Reports, May 6, 1997; OTS CEO
Memorandum 139, Identity Theft and Pretext Calling, May 4, 2001;
http://www.ots.treas.gov/BSA (for the latest SAR form and filing

instructions required by OTS as of July 1, 2003).
---------------------------------------------------------------------------

Standard for Notice to Regulators
The provision regarding notice to regulators in the proposed
Guidance prompted numerous comments. Many commenters suggested that the
Agencies adopt a narrow standard for notifying regulators. These
commenters were concerned that notice to regulators, provided under the
circumstances described in the proposed Guidance, would be unduly
burdensome for institutions, service providers, and regulators, alike.
Some of these commenters suggested that the Agencies adopt the same
standard for notifying regulators and customers. These commenters
recommended that notification occur when an institution becomes aware
of an incident involving unauthorized access to or use of ``sensitive
customer information,'' a defined term in the proposed Guidance that
specified a subset of customer information deemed by the Agencies as
most likely to be misused.
Other commenters recommended that the Agencies narrow this
provision so that a financial institution would inform a regulator only
in connection with an incident that poses a significant risk of
substantial harm to a significant number of its customers, or only in a
situation where substantial harm to customers has occurred or is likely
to occur, instead of when it could occur.
Other commenters who advocated the adoption of a narrower standard
asked the Agencies to take the position that filing a SAR constitutes
sufficient notice and that notification of other regulatory and law
enforcement agencies is at the sole discretion of the institution. One
commenter stated that it is difficult to imagine any scenario that
would trigger the response program without requiring a SAR filing. Some
commenters asserted that if the Agencies believe a lower threshold is
advisable for security breaches, the Agencies should amend the SAR
regulations.
By contrast, some commenters recommended that the standard for
notification of regulators remain broad. One commenter advocated that
any event that triggers an internal investigation by the institution
should require notice to the appropriate regulator. Another commenter
similarly suggested that notification of all security events to Federal
regulators is critical, not only those involving unauthorized access to
or use of customer information

[[Page 15741]]

that could result in substantial harm or inconvenience to its
customers.
The Agencies have concluded that the standard for notification to
regulators should provide an early warning to allow an institution's
regulator to assess the effectiveness of an institution's response
plan, and, where appropriate, to direct that notice be given to
customers if the institution has not already done so. Thus, the
standard in the final Guidance states that an institution should notify
its primary Federal regulator as soon as possible when the institution
becomes aware of an incident involving unauthorized access to or use of
``sensitive customer information.''
``Sensitive customer information'' is defined in section III of the
final Guidance and means a customer's name, address, or telephone
number, in conjunction with the customer's social security number,
driver's license number, account number, credit or debit card number,
or a personal identification number or password that would permit
access to the customer's account. ``Sensitive customer information''
also includes any combination of components of customer information
that would allow someone to log onto or access the customer's account,
such as user name and password or password and account number.
This standard is narrower than that in the proposed Guidance
because a financial institution will need to notify its regulator only
if it becomes aware of an incident involving ``sensitive customer
information.'' Therefore, under the final Guidance, there will be fewer
occasions when a financial institution should need to notify its
regulators. However, under this standard, a financial institution will
need to notify its regulator at the time that the institution initiates
its investigation to determine the likelihood that the information has
been or will be misused, so that the regulator will be able to take
appropriate action, if necessary.
Method of Providing Notice to Regulators
Commenters on the proposed Guidance also questioned how a financial
institution should provide notice to its regulator. One commenter
suggested that the Agencies should standardize the notice that
financial institutions provide to their regulators. The commenter
suggested that the Agencies use these notices to track institutions'
compliance with the Security Guidelines, gather comprehensive details
regarding each incident, and track other statistical data regarding
security. The statistical data could include the number of security
incidents reported annually and the number of times the incidents
warranted customer notice.
The Agencies do not wish to create another SAR-like process that
requires the completion of detailed forms. Instead, the Agencies
contemplate that a financial institution will notify regulators as
quickly as possible, by telephone, or in some other expeditious manner
when the institution becomes aware of an incident involving
unauthorized access to or use of sensitive customer information. The
Agencies believe that the extent to which they will gather statistics
on security incidents and customer notice is beyond the scope of the
final Guidance. Whether or not an Agency will track the number of
incidents reported is left to the discretion of individual Agencies.
Notice to Regulators by Service Providers
Commenters on the proposed Guidance questioned whether a financial
institution or its service provider should give notice to a regulator
when a security incident involves an unauthorized intrusion into the
institution's customer information systems maintained by the service
provider. One commenter noted that if a security event occurs at a
large service provider, regulators could receive thousands of notices
from institutions relating to the same event. The commenter suggested
that if a service provider is examined by one of the Agencies the most
efficient means of providing regulatory notice of such a security event
would be to allow the servicer to notify its primary Agency contact.
The primary Agency contact then could disseminate the information to
the other regulatory agencies as appropriate.
The Agencies believe that it is the responsibility of the financial
institution and not the service provider to notify the institution's
regulator. Therefore, the final Guidance states that a financial
institution should notify its primary Federal regulator as soon as
possible when the institution becomes aware of an incident involving
unauthorized access to or use of sensitive customer information.
Nonetheless, a security incident at a service provider could have an
impact on multiple financial institutions that are supervised by
different Federal regulators. Therefore, in the interest of efficiency
and burden reduction, the last paragraph in section II of the final
Guidance makes clear that an institution may authorize or contract with
its service provider to notify the institution's regulator on the
institution's behalf when a security incident involves an unauthorized
intrusion into the institution's customer information systems
maintained by the service provider.
Notice to Law Enforcement
Some commenters took issue with the provision in the proposed
Guidance regarding notification of law enforcement by telephone. One
commenter asked the Agencies to clarify how notification of law
enforcement by telephone would work since in many cases it is unclear
what telephone number should be used. This commenter maintained that
size and sophistication of law enforcement authorities may differ from
state to state and this requirement may create confusion and
unwarranted action by the law enforcement authority.
The final Guidance adopts this provision as proposed. The Agencies
note that the provision stating that an institution should notify law
enforcement by telephone in situations involving Federal criminal
violations requiring immediate attention is consistent with the
Agencies' existing SAR regulations.\18\
---------------------------------------------------------------------------

\18\ See footnote 16, supra.
---------------------------------------------------------------------------

Contain and Control the Situation. The proposed Guidance stated
that the financial institution should take measures to contain and
control a security incident to prevent further unauthorized access to
or use of customer information while preserving records and other
evidence.\19\ It also stated that, depending upon the particular facts
and circumstances of the incident, measures in connection with computer
intrusions could include: (1) Shutting down applications or third party
connections; (2) reconfiguring firewalls in cases of unauthorized
electronic intrusion; (3) ensuring that all known vulnerabilities in
the financial institution's computer systems have been addressed; (4)
changing computer access codes; (5) modifying physical access controls;
and (6) placing additional controls on service provider arrangements.
---------------------------------------------------------------------------

\19\ See FFIEC Information Technology Examination Handbook,
Information Security Booklet, Dec. 2002, pp. 68-74 available at:
http://www.ffiec.gov/ffiecinfobase/html_pages/infosec_book_frame.htm
.

---------------------------------------------------------------------------

Few comments were received on this section. One commenter suggested
that the Agencies adopt this section unchanged in the final Guidance.
Another commenter had questions about the meaning of the phrase

[[Page 15742]]

``known vulnerabilities.'' Commenters did, however, note the overlap
between proposed section II.C., and the corrective measures in proposed
section II.D., described as ``flagging accounts'' and ``securing
accounts.''
The Agencies agree that some sections in the proposed Guidance
overlapped. Therefore, the Agencies modified this section by
incorporating concepts from the proposed Corrective Measures component,
and removing the more specific examples in this section, including the
terms that confused commenters. This section in the final Guidance
gives an institution greater discretion to determine the measures it
will take to contain and control a security incident. It states that
institutions should take appropriate steps to contain and control the
incident to prevent further unauthorized access to or use of customer
information, such as by monitoring, freezing, or closing affected
accounts, while preserving records and other evidence.
Preserving Evidence
One commenter stated that the final Guidance should require
financial institutions, as part of the response process, to have an
effective computer forensics capability in order to investigate and
mitigate computer security incidents as discussed in principle fourteen
of the Basel Committee's ``Risk Management for Electronic Banking''
\20\ and the International Organization for Standardization's ISO
17799.\21\
---------------------------------------------------------------------------

\20\ http://www.bis.org/publ/bcbs35.htm \21\ http://www.iso.org/iso/en/prods-services/popstds/informationsecurity.html._____________________________________-.

The Agencies note that the final Guidance addresses not only
computer security incidents, but also all other incidents of
unauthorized access to customer information. Thus, it is not
appropriate to include more detail about steps an institution should
take to investigate and mitigate computer security incidents. However,
the Agencies believe that institutions should be mindful of industry
standards when investigating an incident. Therefore, the final Guidance
contains a reference to forensics by generally noting that an
institution should take appropriate steps to contain and control an
incident, while preserving records and other evidence.
Corrective Measures. The proposed Guidance stated that once a
financial institution understands the scope of the incident and has
taken steps to contain and control the situation, it should take
measures to address and mitigate the harm to individual customers. It
then described three corrective measures that a financial institution
should include as a part of its response program in order to
effectively address and mitigate harm to individual customers: (1)
Flagging accounts; (2) securing accounts; and (3) notifying customers.
The Agencies removed the first two corrective measures for the reasons
that follow.
Flagging and Securing Accounts. The first corrective measure in the
proposed Guidance directed financial institutions to ``flag accounts.''
It stated that an institution should immediately begin identifying and
monitoring the accounts of those customers whose information may have
been accessed or misused. It also stated that an institution should
provide staff with instructions regarding the recording and reporting
of any unusual activity, and if indicated given the facts of a
particular incident, implement controls to prevent the unauthorized
withdrawal or transfer of funds from customer accounts.
The second corrective measure directed institutions to ``secure
accounts.'' The proposed Guidance stated that when a checking, savings,
or other deposit account number, debit or credit card account number,
personal identification number (PIN), password, or other unique
identifier has been accessed or misused, the financial institution
should secure the account and all other accounts and services that can
be accessed using the same account number or name and password
combination. The proposed Guidance stated that accounts should be
secured until such time as the financial institution and the customer
agree on a course of action.
Commenters were critical of these proposed measures. Several
commenters asserted that the final Guidance should not prescribe
responses to security incidents with this level of detail. Other
commenters recommended that if the Agencies chose to retain references
to ``flagging'' or ``securing'' accounts, they should include the words
``where appropriate'' in order to give institutions the flexibility to
choose the most effective solutions to problems.
Commenters also stated that the decision to flag accounts, the
nature of that flag, and the duration of the flag, should be left to an
individual financial institution's risk-based procedures developed
under the Security Guidelines. These commenters asked the Agencies to
recognize that regular, ongoing fraud prevention and detection methods
employed by an institution may be sufficient.
Commenters representing small institutions stated that they do not
have the technology or other resources to monitor individual accounts.
They stated that the financial impact of having to monitor accounts for
unusual activity would be enormous, as each institution would have to
purchase expensive technology, hire more personnel, or both. These
commenters asked the Agencies to provide institutions with the
flexibility to close an account if the institution detects unusual
activity.
With respect to ``securing accounts,'' several commenters stated
that if ``secure'' means close or freeze, either action would be
extreme and would have significant adverse consequences for customers.
Other commenters stated that the requirement that the institution and
the customer ``agree on a course of action'' is unrealistic, unworkable
and should be eliminated. Some commenters explained that if a customer
is traveling and the financial institution cannot contact the customer
to obtain the customer's consent, freezing or closing a customer's
account could strand the customer with no means of taking care of
expenses. They stated that, in the typical case, the institution would
monitor such an account for suspicious transactions.
As described earlier, the Agencies are adopting an approach in the
final Guidance that is more flexible and risk-based than that in the
proposed Guidance. The final Guidance incorporates the general concepts
described in the first two corrective measures into the brief bullets
describing components of a response program enumerated in section II.C.
Therefore, the first and second corrective measures no longer appear in
the final Guidance.
Customer Notice and Assistance. The third corrective measure in the
proposed Guidance was titled ``Customer Notice and Assistance.'' This
proposed measure stated that a financial institution should notify and
offer assistance to customers whose information was the subject of an
incident of unauthorized access or use under the circumstances
described in section III of the proposed Guidance. The proposed
Guidance also described which customers should be notified. In
addition, this corrective measure contained provisions discussing
delivery and contents of the customer notice.
The final Guidance now states that an institution's response
program should contain procedures for notifying customers when
warranted. For clarity's sake, the discussion of which customers should
be notified, and the delivery and contents of customer notice, is now
in new section III, titled ``Customer

[[Page 15743]]

Notice.'' Comments and changes with respect to the paragraphs that were
relocated are discussed under the section titled ``Customer Notice''
that follows.
Responsibility for Notice to Customers
Some commenters were confused by the discussion in the proposed
Guidance stating that a financial institution's contract with its
service provider should require the service provider to disclose fully
to the institution information related to any breach in security
resulting in an unauthorized intrusion into the institution's customer
information systems maintained by the service provider. Commenters
stated that this provision appears to create an obligation for both
financial institutions and their service providers to provide notice of
security incidents to the institution's customers. These commenters
recommended that the service provider notify its financial institution
customer so that the financial institution could provide appropriate
notice to its customers. Thus, customers would avoid receiving multiple
notices relating to a single security incident.
Other commenters asserted that a financial institution should not
have to notify its customers if an incident has occurred because of the
negligence of its service provider. These commenters recommended that
in this situation, the service provider should be responsible for
providing notice to the financial institution's customers.
As discussed above in connection with notice to regulators, the
Agencies believe that it is the responsibility of the institution, and
not of the service provider, to notify the institution's customers in
connection with an unauthorized intrusion into an institution's
customer information systems maintained by the service provider. The
responsibility to notify customers remains with the institution whether
the incident is inadvertent or due to the service provider's
negligence. The Agencies note that the costs of providing notice to the
institution's customers as a result of negligence on the part of the
service provider may be addressed in the financial institution's
contract with its service provider.
The last paragraph in section II of the final Guidance, therefore,
states that it is the responsibility of the financial institution to
notify the institution's customers. It also states that the institution
may authorize or contract with its service provider to notify customers
on the institution's behalf, when a security incident involves an
unauthorized intrusion into the institution's customer information
systems maintained by the service provider.

C. The ``Customer Notice'' Section

Section III of the proposed Guidance described the standard for
providing notice to customers and defined the term ``sensitive customer
information'' used in that standard. This section also gave examples of
circumstances when a financial institution should give notice and when
the Agencies do not expect a financial institution to give notice. It
also discussed contents of the notice and proper delivery.
Section III of the final Guidance similarly describes the standard
for providing notice to customers and defines both the terms
``sensitive customer information'' and ``affected customers.'' It also
discusses the contents of the notice and proper delivery.
Standard for Providing Notice
A key feature of the proposed Guidance was the description of when
a financial institution should provide customer notice. The proposed
Guidance stated that an institution should notify affected customers
whenever it becomes aware of unauthorized access to ``sensitive
customer information'' unless the institution, after an appropriate
investigation, reasonably concludes that misuse of the information is
unlikely to occur and takes appropriate steps to safeguard the
interests of affected customers, including by monitoring affected
customers' accounts for unusual or suspicious activity.
The Agencies believed that this proposed standard would strike a
balance between notification to customers every time the mere
possibility of misuse of customer information arises from unauthorized
access and a situation where the financial institution knows with
certainty that information is being misused. However, the Agencies
specifically requested comment on whether this is the appropriate
standard and invited commenters to offer alternative thresholds for
customer notification.
Some commenters stated that the proposed standard was reasonable
and sufficiently flexible. However, many commenters recommended that
the Agencies provide financial institutions with greater discretion to
determine when a financial institution should notify its customers.
Some of these commenters asserted that a financial institution should
not have to give notice unless the institution believes it ``to be
reasonably likely,'' or if circumstances indicated ``a significant
risk'' that the information will be misused.
Commenters maintained that because the proposed standard states
that a financial institution should give notice when fraud or identity
theft is merely possible, notification under these circumstances would
needlessly alarm customers where little likelihood of harm exists.
Commenters claimed that, eventually, frequent notices in non-
threatening situations would be perceived by customers as routine and
commonplace, and therefore reduce their effectiveness.
The Agencies believe that articulating as part of the guidance a
standard that sets forth when notice to customers is warranted is both
helpful and appropriate. However, the Agencies agree with commenters
and are concerned that the proposed threshold inappropriately required
institutions to prove a negative proposition, namely, that misuse of
the information accessed is unlikely to occur. In addition, the
Agencies do not want customers of financial institutions to receive
notices that would not be useful to them. Therefore, the Agencies have
revised the standard for customer notification.
The final Guidance provides that when an institution becomes aware
of an incident of unauthorized access to sensitive customer
information, the institution should conduct a reasonable investigation
to determine promptly the likelihood that the information has been or
will be misused. If the institution determines that misuse of the
information has occurred or is reasonably possible, it should notify
affected customers as soon as possible.
An investigation is an integral part of the standard in the final
Guidance. A financial institution should not forego conducting an
investigation to avoid reaching a conclusion regarding the likelihood
that customer information has been or will be misused and cannot
unreasonably limit the scope of the investigation. However, the
Agencies acknowledge that a full-scale investigation may not be
necessary in all cases, such as where the facts readily indicate that
information will or will not be misused.
Monitoring for Suspicious Activity
The proposed Guidance stated that an institution need not notify
customers if it reasonably concludes that misuse of the information is
unlikely to occur and takes appropriate steps to safeguard the
interests of affected customers, including by monitoring affected
customers' accounts for unusual or

[[Page 15744]]

suspicious activity. A number of comments addressed the standard in the
proposed Guidance on monitoring affected customers' accounts for
unusual or suspicious activity.
Some commenters stated that the final Guidance should grant
institutions the discretion to monitor the affected customer accounts
for a period of time and to the extent warranted by the particular
circumstances. Some commenters suggested that monitoring occur during
the investigation. One commenter noted that an institution's
investigation may reveal that monitoring is unnecessary. One commenter
noted that monitoring the customer's accounts at the institution may
not protect the customer, because unauthorized access to customer
information may result in identity theft beyond the accounts held at
the specific financial institution.
The Agencies agree that under certain circumstances, monitoring may
be unnecessary, for example when, on the basis of a reasonable
investigation, an institution determines that information was not
misused. The Agencies also agree that the monitoring requirement may
not protect the customer. Indeed, an identity thief with unauthorized
access to certain sensitive customer information likely will open
accounts at other financial institutions in the customer's name.
Accordingly, the Agencies conclude that monitoring under the
circumstances described in the standard for notice would be burdensome
for financial institutions without a commensurate benefit to customers.
For these reasons, the Agencies have removed the reference to
monitoring in the final Guidance.
Timing of Notice
The proposed Guidance did not include specific language on the
timing of notice to customers and the Agencies received many comments
on this issue. Some commenters requested clarification of the time
frame for customer notice. One commenter recommended that the Agencies
adopt the approach in the proposed Guidance because it did not set
forth any circumstances that may delay notification of the affected
customers. Yet another commenter maintained that, in light of a
customer's need to act expeditiously against identity theft, an outside
limit of 48 hours after the financial institution learns of the breach
is a reasonable and timely requirement for notice to customers. Many
commenters, however, recommended that the Agencies make clear that an
institution may take the time it reasonably needs to conduct an
investigation to assess the risk resulting from a security incident.
The Agencies have responded to these various comments on the timing
of notice by providing that a financial institution notify an affected
customer ``as soon as possible'' after concluding that misuse of the
customer's information has occurred or is reasonably possible. As the
scope and timing of a financial institution's investigation is dictated
by the facts and circumstances of a particular case, the Agencies have
not designated a specific number of hours or days by which financial
institutions should provide notice to customers. The Agencies believe
that doing so may inhibit an institution's ability to investigate
adequately a particular incident or may result in notice that is not
timely.
Delay for Law Enforcement Investigation
The proposed Guidance did not address delay of notice to customers
while a law enforcement investigation is conducted. Many commenters
recommended permitting an institution to delay notification to
customers to avoid compromising a law enforcement investigation. These
commenters noted that the California Database Protection Act of 2003
(CDPA) requires notification of California residents whose unencrypted
personal information was, or is reasonably believed to have been,
acquired by an unauthorized person.\22\ However, the CDPA permits a
delay in notification if a law enforcement agency determines that the
notification will impede a criminal investigation.\23\ Another
commenter suggested that an institution should not have to obtain a
formal determination from a law enforcement agency before it is able to
delay notice.
---------------------------------------------------------------------------

\22\ See CAL. CIV. CODE Sec. 1798.82 (West 2005).
\23\ See CAL. CIV. CODE Sec. 1798.82(c) (West 2005).
---------------------------------------------------------------------------

The Agencies agree that it is appropriate to delay customer notice
if such notice will jeopardize a law enforcement investigation.
However, to ensure that such a delay is necessary and justifiable, the
final Guidance states that customer notice may be delayed if an
appropriate law enforcement agency determines that notification will
interfere with a criminal investigation and provides the institution
with a written request for the delay.\24\
---------------------------------------------------------------------------

\24\ This includes circumstances when an institution confirms
that an oral request for delay from law enforcement will be followed
by a written request.
---------------------------------------------------------------------------

The Agencies are concerned that a delay of notification for a law
enforcement investigation could interfere with the ability of customers
to protect themselves from identity theft and other misuse of their
sensitive information. Thus, the final Guidance also provides that a
financial institution should notify its customers as soon as
notification will no longer interfere with the investigation and should
maintain contact with the law enforcement agency that has requested a
delay, in order to learn, in a timely manner, when customer notice will
no longer interfere with the investigation.

Sensitive Customer Information

Scope of Standard
The Agencies received many comments on the limitation of notice in
the proposed Guidance to incidents involving unauthorized access to
sensitive customer information. The Agencies invited comment on whether
to modify the proposed standard for notice to apply to other
circumstances that compel an institution to conclude that unauthorized
access to information, other than sensitive customer information,
likely will result in substantial harm or inconvenience to the affected
customers.
Most commenters recommended that the standard remain as proposed
rather than covering other types of information. One commenter
suggested that the Agencies continue to allow a financial institution
the discretion to notify affected customers in any other extraordinary
circumstances that compel it to conclude that unauthorized access to
information other than sensitive customer information likely will
result in substantial harm or inconvenience to those affected. However,
the commenter did not provide any examples of such extraordinary
circumstances.
The Agencies continue to believe that the rationale for limiting
the standard to sensitive customer information expressed in the
proposed Guidance is correct. The proposed Guidance explained that,
under the Security Guidelines, an institution must protect against
unauthorized access to or use of customer information that could result
in substantial harm or inconvenience to a customer. Substantial harm or
inconvenience is most likely to result from improper access to
sensitive customer information because this type of information is most
likely to be misused, as in the commission of identity theft.
The Agencies have not identified any other circumstances that
should prompt customer notice and continue to believe that it is not
likely that a customer will suffer substantial harm or inconvenience
from unauthorized

[[Page 15745]]

access to other types of information. Therefore, the standard in the
final Guidance continues to be limited to unauthorized access to
sensitive customer information. Of course, a financial institution
still may send notices to customers in any additional circumstances
that it determines are appropriate.
Definition of Sensitive Customer Information
The Agencies received many comments on the proposed definition of
``sensitive customer information'' in the proposed Guidance. The first
part of the proposed definition stated that ``sensitive customer
information'' is a customer's social security number, personal
identification number (PIN), password or account number, in conjunction
with a personal identifier such as the customer's name, address, or
telephone number. In addition, the second part of the proposed
definition stated that ``sensitive customer information'' includes any
combination of components of customer information that allow someone to
log onto or access another person's account, such as user name and
password.
Some commenters agreed with this definition of ``sensitive customer
information.'' They said that it was sound, workable, and sufficiently
detailed. However, many commenters proposed additions, exclusions, or
alternative definitions.
Additional Elements
Some commenters suggested that the Agencies add various data
elements to the definition of sensitive customer information, including
a driver's license number or number of other government-issued
identification, mother's maiden name, and date of birth. One commenter
suggested inclusion of other information that institutions maintain in
their customer information systems such as a customer's account
balance, account activity, purchase history, and investment
information. The commenter noted that misuse of this information in
combination with a personal identifier can just as easily result in
substantial harm or inconvenience to a customer.
The Agencies have added to the first part of the definition several
more specific components, such as driver's license number and debit and
credit card numbers, because this information is commonly sought by
identity thieves. However, the Agencies determined that the second part
of the definition would cover the remaining suggestions. For example,
where date of birth or mother's maiden name are used as passwords,
under the final Guidance they will be considered components of customer
information that allow someone to log onto or access another person's
account. Therefore, these specific elements have not been added to the
definition.
Exclusions
Commenters also asserted that the proposed definition of sensitive
customer information was too broad and proposed various exclusions. For
example, some commenters asked the Agencies to exclude publicly
available information, and also suggested that the final Guidance apply
only to account numbers for transaction accounts or other accounts from
which withdrawals or transfers can be initiated. These commenters
explained that access to a mortgage account number (which may also be a
public record) does not permit withdrawal of additional funds or
otherwise damage the customer. Other commenters requested that the
Agencies exclude encrypted information. Some of these commenters noted
that only unencrypted information is covered by the CDPA.\25\
---------------------------------------------------------------------------

\25\ See CAL. CIV. CODE Sec. 1798.82(a) (West 2005).
---------------------------------------------------------------------------

The final Guidance does not adopt any of the proposed exclusions.
The Agencies believe it would be inappropriate to exclude publicly
available information from the definition of sensitive customer
information, where publicly available information is otherwise covered
by the definition of ``customer information.'' \26\ So for instance,
while a personal identifier, i.e., name, address, or phone number, may
be publicly available, it is sensitive customer information when linked
with particular nonpublic information such as a credit card account
number. However, where the definition of ``customer information'' does
not cover publicly available information, sensitive customer
information also would not cover publicly available information. For
instance, where an individual's name or address is linked with a
mortgage loan account number that is in the public record and,
therefore, would not be considered ``customer information,'' \27\ it
also would not be considered ``sensitive customer information'' for
purposes of the final Guidance.
---------------------------------------------------------------------------

\26\ See Security Guidelines, I.C.2.c.
\27\ See Sec. ----.3(p)(3)(i).
---------------------------------------------------------------------------

In addition, access to a customer's personal information and
account number, regardless of whether it is an account from which
withdrawals or transfers can be initiated, may permit an identity thief
to access other accounts from which withdrawals can be made. Thus, the
Agencies have determined that the definition of account number should
not be limited as suggested by commenters. The Agencies also believe
that a blanket exclusion for all encrypted information is not
appropriate, because there are many levels of encryption, some of which
do not effectively protect customer information.
Alternative Definitions
Most alternative definitions suggested by commenters resembled the
definition of ``personal information'' under the CDPA.\28\ Under the
CDPA, ``personal information'' includes a resident of California's name
together with an account number, or credit or debit card number only if
the information accessed also includes any required security code,
access code, or password that would permit access to an individual's
financial account. Therefore, some commenters asked that the final
Guidance clarify that a name and an account number, together, is not
sensitive customer information unless these elements are combined with
other information that permits access to a customer's financial
account.
---------------------------------------------------------------------------

\28\ Under California law requiring notice, ``personal
information'' means an individual's first name or first initial and
last name in combination with any one or more of the following data
elements, when either the name or the data elements are not
encrypted: (1) Social security number; (2) driver's license number
or California Identification Card number; (3) account number, credit
or debit card number, in combination with any required security code
access code, or password that would permit access to an individual's
financial account. See CAL. CIV. CODE Sec. 1798.82(e) (West 2005).
---------------------------------------------------------------------------

The Agencies concluded that it would be helpful if financial
institutions could more easily compare and contrast the definition of
``personal information'' under the CDPA with the definition of
``sensitive information'' under the Final Guidance. Therefore, the
elements in the definition of sensitive information in the final
Guidance are re-ordered and the Agencies added the elements discussed
earlier.
The final Guidance states that sensitive customer information means
a customer's name, address, or telephone number, in conjunction with
the customer's social security number, driver's license number, account
number, credit or debit card number, or a personal identification
number or password that would permit access to the customer's account.
The final Guidance also states that sensitive customer information
includes any combination of components of customer information that
would allow someone to log onto or access the customer's account, such
as user name and

[[Page 15746]]

password or a password and account number.
The Agencies decline to adopt the CDPA standard for several
reasons. First, for example, under the CDPA, personal information
includes a person's name in combination with other data elements. By
contrast, the final Guidance treats address and telephone number in the
same manner as a customer's name, because reverse directories may
permit an address or telephone number to be traced back to an
individual customer.
In addition, under the CDPA, ``personal information'' includes name
together with an account number, or credit or debit card number only if
the information accessed also includes any required security code,
access code, or password that would permit access to an individual's
financial account. The Agencies note that a name and account number,
alone, is sufficient to create fraudulent checks, or to direct the
unauthorized debit of a customer's account even without an access
code.\29\ Further, a name and credit card number may permit
unauthorized access to a customer's account. Therefore, the final
Guidance continues to define a customer's name and account number, or
credit or debit card number as sensitive customer information.
---------------------------------------------------------------------------

\29\ See, e.g., Griff Witte, Bogus Charges, Unknowingly Paid:
FTC Accuses 2 of Raiding 90,000 Bank Accounts in Card Fraud,
Washington Post, May 29, 2004, at E1 (list of names with associated
checking account numbers used by bogus company to debit bank
accounts without customer authorization).
---------------------------------------------------------------------------

Affected Customers. The Agencies received many comments on the
discussion of notice to ``affected customers'' in the proposed
Guidance. Section II.D.3. of the proposed Guidance provided that if the
institution could determine from its logs or other data precisely which
customers' information was accessed or misused, it could restrict its
notification to those individuals. However, if the institution could
not identify precisely which customers were affected, it should notify
each customer in any group likely to have been affected, such as each
customer whose information was stored in the group of files in
question.
Commenters were concerned that this provision in the proposed
Guidance was overly broad. These commenters stated that providing
notice to all customers in groups likely to be affected would result in
many notices that are not helpful. The commenters suggested that the
final Guidance narrow the standard for notifying customers to only
those customers whose information has been or is likely to be misused.
The discussion of ``affected customers'' has been relocated and is
separately set forth following the definition of ``sensitive customer
information,'' in the final Guidance. The discussion of ``affected
customers'' in the final Guidance states that if a financial
institution, based upon its investigation, can determine from its logs
or other data precisely which customers' information has been
improperly accessed,\30\ it may notify only those customers with
respect to whom the institution determines that misuse of their
information has occurred or is reasonably possible. However, the final
Guidance further notes that there may be situations where the
institution determines that a group of files has been accessed
improperly, but is unable to identify which specific customers'
information has been accessed. If the circumstances of the unauthorized
access lead the institution to determine that misuse of the information
contained in the group of files is reasonably possible, it should
notify all customers in the group. In this way, the Agencies have
reduced the number of notices that should be sent.
---------------------------------------------------------------------------

\30\ The Agencies note that system logs may permit an
institution to determine precisely which customers' data has been
improperly accessed. See, e.g., FFIEC Information Technology
Handbook, Information Security Booklet, page 64 available at http://www.ffiec.gov/ffiecinfobase/html_pages/infosec_book_frame.htm
.

---------------------------------------------------------------------------

Examples. The proposed Guidance described several examples of when
a financial institution should give notice and when the Agencies do not
expect a financial institution to give notice.
The Agencies received a number of comments on the examples. Some
commenters thought the examples were helpful and suggested that the
Agencies add more. Other commenters criticized the examples as too
broad. Many commenters suggested numerous ways to modify and clarify
the examples.
Since the examples in the proposed Guidance led to interpretive
questions, rather than interpretive clarity, the Agencies concluded
that it is not particularly helpful to offer examples of when notice is
and is not expected. In addition, the Agencies believe that the
standard for notice itself has been clarified and examples are no
longer necessary. Therefore, there are no examples in the final
Guidance.
Content of Customer Notice. The Agencies received many comments on
the discussion of the content of customer notice located in section
II.D.3.b. of the proposed Guidance. The proposed Guidance stated that a
notice should describe the incident in general terms and the customer's
information that was the subject of unauthorized access or use. It
stated that the notice should also include a number that customers can
call for further information and assistance, remind customers of the
need to remain vigilant over the next 12 to 24 months, and recommend
that customers promptly report incidents of suspected identity theft.
The proposed Guidance described several ``key elements'' that a notice
should contain. It also provided a number of ``optional elements''
namely, examples of additional assistance that institutions have
offered.
Some commenters agreed that the proposed Guidance sufficiently
addressed most of the key elements necessary for an effective notice.
However, many commenters requested greater discretion to determine the
content of the notices that financial institutions provide to
customers. Commenters suggested that the Agencies make clear that the
various items suggested for inclusion in any customer notice are
suggestions, and that not every item is mandatory in every notice.
Some commenters took issue with the enumerated items in the
proposed Guidance identified as key elements that a notice should
contain. For example, many commenters asserted that customers should
not necessarily be encouraged to place fraud alerts with credit bureaus
in every circumstance. Some of these commenters noted that not all
situations will warrant having a fraud alert posted to the customer's
credit file, especially if the financial institution took appropriate
action to render the information accessed worthless. According to these
commenters, the consequences of a fraud alert, such as increased
obstacles to obtaining credit, may outweigh any benefit. Some
commenters also noted that a proliferation of fraud alerts not related
to actual fraud would dilute the effectiveness of the alerts.
Other commenters criticized the optional elements in the proposed
Guidance. For instance, some commenters stated that a notice should not
inform the customer about subscription services that provide
notification to the customer when there is a request for the customer's
credit report, or offer to subscribe the customer to this service, free
of charge, for a period of time. These commenters asserted that
customer notices should not be converted into a marketing opportunity
for subscription services provided by consumer credit bureaus. They
stated that offering the service could mislead the customer into
believing that these expensive services

[[Page 15747]]

are essential. If the service is offered free of charge, an
institution's choice of service could be interpreted as an endorsement
for a specific company and its product.
As a result of the Fair and Accurate Credit Transactions Act of
2003, Pub. L. 108-159, 117 Stat. 1985-86 (the FACT Act), many of the
descriptions of ``key elements'' and ``optional elements'' in the
proposed Guidance, and comments on these elements, have been
superceded. For example, the frequency and circumstances under which a
customer may obtain a credit report free-of-charge have changed.
The final Guidance continues to specify that a notice should
describe the incident in general terms and the customer's information
that was the subject of unauthorized access or use. It also continues
to state that the notice should include a number that customers can
call for further information and assistance, remind customers of the
need to remain vigilant over the next 12 to 24 months, and recommend
that customers promptly report incidents of suspected identity theft.
In addition, the final Guidance also states that the notice should
generally describe what the institution has done to protect the
customers' information from further unauthorized access.
However, the final Guidance no longer distinguishes between certain
other ``key'' items that the notice should contain and those that are
``optional.'' The Agencies added greater flexibility to this section to
accommodate any new protections afforded to consumers that flow from
the FACT Act. Instead of distinguishing between items that the notice
should contain and those that are optional, an institution may now
select those items that are appropriate under the circumstances, and
that are compatible with the FACT Act. Of course, institutions may
incorporate additional information that is not mentioned in the final
Guidance, where appropriate.
Coordination With Credit Reporting Agencies
A trade association representing credit reporting agencies
commented that its members are extremely concerned about their ability
to comply with all of the duties (triggered under the FACT Act) that
result from notices financial institutions send to their customers.
This commenter strongly recommended that until a financial institution
has contacted each nationwide consumer reporting agency to coordinate
the timing, content, and staging of notices as well as the placement of
fraud alerts, as necessary, a financial institution should refrain from
issuing notices suggesting that customers contact nationwide consumer
reporting agencies.
The commenter also stated that a financial institution that
includes such suggestions in a notice to its customers should work with
the credit reporting agencies to purchase the services the financial
institution believes are necessary to protect its customers. The
commenter stated that the costs of serving the millions of consumers it
projects would receive notices under the proposed Guidance cannot be
borne by the nationwide consumer reporting agencies.
The commenter also noted that the State of California has provided
clear guidance in connection with its law requiring notice and also
suggested that coordination with consumer reporting agencies is vital
to ensure that a consumer can in fact request a file disclosure in a
timely manner. This commenter stated that similar guidance at the
federal level is essential.
The Agencies believe that the final Guidance addresses this
commenter's concerns in several ways. First, for the reasons described
earlier, the standard for customer notice in the final Guidance likely
will result in financial institutions sending fewer notices than under
the proposed Guidance. Second, the final Guidance no longer advises
financial institutions to send notices suggesting that consumers
contact the nationwide credit reporting agencies in every case.
Institutions can use their discretion to determine whether such
information should be included in a notice.
It is clear, however, that customer notice may prompt more consumer
contacts with credit reporting agencies, as predicted by the commenter.
Therefore, the final Guidance encourages a financial institution that
includes in its notice contact information for nationwide consumer
reporting agencies to notify the consumer reporting agencies in
advance, prior to sending large numbers of such notices. In this way,
the reporting agencies will be on notice that they may have to
accommodate additional requests for the placement of fraud alerts,
where necessary.
Model Notice
Some commenters stated that if mandatory elements are included in
the final Guidance, the Agencies should develop a model notice that
incorporates all the mandated elements yet allows financial
institutions to incorporate additional information where appropriate.
Given the flexibility that financial institutions now have to craft
a notice tailored to the circumstances of a particular incident, the
Agencies believe that any single model notice will be of little use.
Therefore, the final Guidance does not contain a model notice.
Other Changes Regarding the Content of a Notice
The general discussion of the content of a notice in the final
Guidance states that financial institutions should give the customer
notice in a ``clear and conspicuous manner.'' In addition, the final
Guidance adopts a commenter's suggestion that financial institutions
should generally describe what the institution has done to protect a
customer's information from further unauthorized access so that a
customer can make decisions regarding the institution's customer
service. This addition allows a customer to take measures to protect
his or her accounts that are not redundant or in conflict with the
institution's actions.
The final Guidance also states that notice should include a
telephone number that customers can call for further information and
assistance. The Agencies added a new footnote to this text, which
explains that the institution should ensure that it has reasonable
policies and procedures in place, including trained personnel, to
respond appropriately to customer inquiries and requests for
assistance.
Delivery of Customer Notice. The Agencies received numerous
suggestions regarding the delivery of customer notice located in
section II.D.3.a. of the proposed Guidance. The proposed Guidance
stated that customer notice should be timely, clear, and conspicuous,
and delivered in any manner that will ensure that the customer is
likely to receive it. The proposed Guidance provided several examples
of proper delivery and stated that an institution may choose to contact
all customers affected by telephone or by mail, or for those customers
who conduct transactions electronically, using electronic notice.
One commenter representing a large bank trade association agreed
that this was a correct standard. However, many other commenters
recommended that if it costs an institution more than $250,000 to
provide notice to customers, if the affected class of persons to be
notified exceeds 500,000, or if an incident warrants large
distributions of notices, the final Guidance should permit various
forms of mass distribution of information, such as by postings on an
Internet Web page and in national or regional media outlets.

[[Page 15748]]

Commenters explained that the CDPA contains such a provision.\31\
---------------------------------------------------------------------------

\31\ See CAL. CIV. CODE Sec. 1798.82(g)(3) (West 2005).
---------------------------------------------------------------------------

One commenter suggested that a financial institution should only
provide notice in response to inquiries. By contrast, other commenters
stated that the final Guidance should make clear that general notice on
a Web site is inadequate and that financial institutions should provide
individual notice to customers.
The Agencies determined that the provision in the proposed Guidance
that notice be delivered in a ``timely, clear, and conspicuous'' manner
already appears elsewhere in the Guidance and does not relate to manner
of delivery. This phrase appears elsewhere in the final Guidance and is
unnecessary here.
The Agencies have decided not to include a provision in the final
Guidance that permits notice through a posting on the Web or through
the media in order to provide notice to a specific number of customers
or where the cost of notice to individual customers would exceed a
specific dollar amount. The Agencies believe that the thresholds
suggested by commenters would not be appropriate in every case,
especially in connection with incidents involving smaller institutions.
Therefore, the final Guidance states that customer notice should be
delivered in any manner that is designed to ensure that a customer can
reasonably be expected to receive it. This standard places the
responsibility on the financial institution to select a method to
deliver notice that is designed to ensure that a customer is likely to
receive notice.
The final Guidance also provides examples of proper delivery noting
that an institution may choose to contact all customers affected by
telephone or by mail, or by electronic mail for those customers for
whom it has a valid e-mail address and who have agreed to receive
electronic communications from the institution.
Some commenters questioned the effect of other laws on the proposed
Guidance. A few commenters noted that electronic notice should conform
to the requirements of the Electronic Signatures in Global and National
Commerce Act (E-Sign Act), 15 U.S.C. 7001 et seq.
The final Guidance does not discuss a financial institution's
obligations under the E-Sign Act. The Agencies note that the final
Guidance specifically contemplates that a financial institution may
give notice electronically or by telephone. There is no requirement
that notice be provided in writing. Therefore, the final Guidance does
not trigger any consent requirements under the E-Sign Act.\32\
---------------------------------------------------------------------------

\32\ Under the E-Sign Act, if a statute, regulation, or other
rule of law requires that information be provided or made available
to a consumer in writing, certain consent procedures apply. See 15
U.S.C. 7001(c).
---------------------------------------------------------------------------

Still other commenters requested clarification that a telephone
call made to a customer for purposes of complying with the final
Guidance is for ``emergency purposes'' under the Telephone Consumer
Protection Act, 47 U.S.C. 227 (TCPA). These commenters noted that this
is important because under the TCPA and its implementing
regulation,\33\ it is unlawful to initiate a telephone call to any
residential phone line using an artificial or prerecorded voice to
deliver a message, without the prior express consent of the called
party, unless such call is for ``emergency purposes.''
---------------------------------------------------------------------------

\33\ 47 CFR 64.1200.
---------------------------------------------------------------------------

The final Guidance does not address the TCPA, because the TCPA is
interpreted by the Federal Communications Commission (FCC), and the FCC
has not yet taken a position on this issue.\34\
---------------------------------------------------------------------------

\34\ The Agencies note, however, that the TCPA and its
implementing regulations generally exempt calls made to any person
with whom the caller has an established business relationship at the
time the call is made. See, e.g., 47 CFR 64.1200(a)(1)(iv). Thus,
the TCPA would not appear to prohibit a financial institution's
telephone calls to its own customers. In addition, the FCC's
regulations state that the phrase for ``emergency purposes'' means
calls made necessary in any situation affecting the health and
safety of consumers. 47 CFR 64.1200(f)(2). See also FCC Report and
Order adopting rules and regulations implementing the TCPA, October
16, 1992, available at http://www.fcc.gov/cgb/donotcall/, paragraph

51 (calls from utilities to notify customers of service outages, and
to warn customers of discontinuance of service are included within
the exemption for emergencies). Financial institutions will give
customer notice under the final Guidance for a public safety
purpose, namely, to permit their customers to protect themselves
where their sensitive information is likely to be misused, for
example, to facilitate identity theft. Therefore, the Agencies
believe that the exemption for emergency purposes likely would
include customer notice that is provided by telephone using an
artificial or prerecorded voice message call.
---------------------------------------------------------------------------

V. Effective Date

Many commenters noted that the proposed Guidance did not contain a
delayed effective date. They suggested that the Agencies include a
transition period to allow adequate time for financial institutions to
implement the final Guidance.
The final Guidance is an interpretation of existing provisions in
section 501(b) of the GLBA and the Security Guidelines. A delayed
effective date is not required under the APA, 12 U.S.C. 553(d)(2), or
the Riegle Community Development and Regulatory Improvement Act of
1994, 12 U.S.C. 4802, which requires a delayed effective date for new
regulations, because the final Guidance is a statement of policy.
Given the comments received, the Agencies recognize that not every
financial institution currently has a response program that is
consistent with the final Guidance. The Agencies expect these
institutions to implement the final Guidance as soon as possible.
However, we appreciate that some institutions may need additional time
to develop new compliance procedures, modify systems, and train staff
in order to implement an adequate response program. The Agencies will
take into account the good faith efforts made by each institution to
develop a response program that is consistent with the final Guidance,
together with all other relevant circumstances, when examining the
adequacy of an institution's information security program.

VI. OTS Conforming and Technical Change

OTS is making a conforming, technical change to its Security
Procedures Rule at 12 CFR 568.5. That regulation currently provides
that savings associations and subsidiaries that are not functionally
regulated must comply with the Security Guidelines in Appendix B to
part 570. OTS is adding a sentence to make clear that Supplement A to
Appendix B is intended as interpretive guidance only.
With regard to this rule change, OTS finds that there is good cause
to dispense with prior notice and comment and with the 30-day delay of
effective date mandated by the Administrative Procedure Act. 5 U.S.C.
553. OTS believes that these procedures are unnecessary and contrary to
the public interest because the revision merely makes conforming and
technical changes to an existing provision. A conforming and technical
change is necessary to make clear that Supplement A to Appendix B to
part 570 is intended as interpretive guidance only. Because the
amendment in the rule is not substantive, it will not affect savings
associations.
With regard to this rule change, OTS further finds that the Riegle
Community Development and Regulatory Improvement Act of 1994 does not
apply because the revision imposes no additional requirements and makes
only a technical and conforming change to an existing regulation.

[[Page 15749]]

VII. Impact of Guidance

The Agencies invited comment on the potential burden associated
with the customer notice provisions for financial institutions
implementing the proposed Guidance. The Agencies also asked for
information about the anticipated burden that may arise from the
questions posed by customers who receive the notices. In addition, the
proposed Guidance asked whether the Agencies should consider how the
burden may vary depending upon the size and complexity of a financial
institution. The Agencies also asked for information about the amount
of burden, if any, the proposed Guidance would impose on service
providers.
Although many commenters representing financial institutions stated
that they already have a response program in place, they also noted
that the Agencies had underestimated the burden that would be imposed
on financial institutions and their customers by the proposed Guidance.
Some commenters stated that the proposed Guidance would require greater
time, expenditure, and documentation for audit and compliance purposes.
Other commenters stated that the costs of providing notice and
requiring a sufficient number of appropriately trained employees to be
available to answer customer inquiries and provide assistance could be
substantial.
Yet other commenters stated that the Agencies failed to adequately
consider the burden to customers who begin to receive numerous notices
of ``unauthorized access'' to their data. They stated that the stress
to customers of having to change account numbers, change passwords, and
monitor their credit reports would be enormous and could be unnecessary
because the standard in the proposed Guidance would require notice when
information subject to unauthorized access might be, but would not
necessarily be, misused.
Some commenters maintained that the proposed Guidance would be
especially burdensome for small community banks, which one commenter
asserted are the lowest risk targets. These commenters stated that the
most burdensome elements of the proposed Guidance would be creating a
general policy, establishing procedures and training staff. They added
that developing and implementing new procedures for determining when,
where and how to provide notice and procedures for monitoring accounts
would also be burdensome. One commenter recommended that the agencies
exempt institutions with assets of under $500 million from having to
comply with the Guidance.
Finally, a trade association commenter stated that the notice
requirements in the proposed Guidance would impose a large burden on
the nationwide consumer reporting agencies, over which they have no
control and no means of recouping costs.
The Agencies have addressed the burdens identified by commenters as
follows. First, the Agencies eliminated many of the more prescriptive
elements of the response program described in the proposed Guidance.
The final Guidance states that an institution's response program should
be risk-based. It lists a number of components that the program should
contain.
The final Guidance does not detail the steps that an institution
should take to contain and control a security incident to prevent
further unauthorized access to or use of customer information. It also
does not state that an institution should secure all accounts that can
be accessed using the same account number or name and password
combination until such time as the institution and the customer can
agree on a course of action. Instead, the final Guidance leaves such
measures to the discretion of the institution and gives examples of the
steps that an institution should consider, such as monitoring,
freezing, or closing affected accounts. Thus, under the final Guidance
a small institution may choose to close an affected account in place of
monitoring the account, an element of the proposed Guidance that
smaller institutions identified as potentially very costly.
Though the final Guidance still states that notification to
regulators should be a part of an institution's response program, it
states that notice should only be given when the institution becomes
aware of an incident of unauthorized access to or use of ``sensitive''
customer information. This standard should result in fewer instances of
notice to the regulators than under the proposed Guidance. The final
Guidance also makes clear that when the security incident involves a
service provider, the institution may authorize the service provider to
notify the institution's regulator.
The standard of notice to customers also has been modified to be
less burdensome to institutions and their customers. The Agencies
believe that under this new standard, customers will be less likely to
be alarmed needlessly, and institutions will no longer be asked to
prove a negative `` namely, that misuse of information is unlikely to
occur. In addition, the Agencies also have provided institutions with
greater discretion to determine what should be contained in a notice to
customers.
The Agencies do not believe that there is a basis for exempting
small institutions from the Guidance. For example, many small
institutions outsource functions to large service providers that have
been the target of those seeking to misuse customer information.
Therefore, the Agencies believe that all institutions should prepare
customer response programs including customer notification procedures
that can be used in the event the institution determines that misuse of
its information about a customer has occurred or is reasonably
possible. However, as noted above, the Agencies recognize that within
the framework of the Guidance, an institution's program will vary
depending on the size and complexity of the institution and the nature
and scope of its activities.
Finally, to address comments relating to the potential burden on
the nationwide consumer reporting agencies, as noted previously, the
Guidance no longer suggests that customer notice always include advice
to contact the nationwide consumer reporting agencies. The Agencies
recognize that not all security breaches warrant such contacts. For
example, we recognize that it may not always be in the best interest of
a consumer to have a fraud alert placed in the consumer's file because
the fraud alert may have an adverse impact on the consumer's ability to
obtain credit.

VIII. Regulatory Analysis

A. Paperwork Reduction Act

Burden Estimates for the OCC, FDIC, and OTS
Certain provisions of the final Guidance contain ``collection of
information'' requirements as defined in the Paperwork Reduction Act of
1995 (44 U.S.C. 3501 et seq.) (PRA). An agency may not conduct or
sponsor, and a respondent is not required to respond to, an information
collection unless it displays a currently valid Office of Management
and Budget (OMB) control number.
The Agencies requested comment on a proposed information collection
as part of the notice requesting comment on the proposed Guidance. An
analysis of the comments related to paperwork burden and commenters'
recommendations is provided below. The OCC, FDIC, and OTS submitted
their proposed information collections to OMB for review and approval
and the collections have been approved.

OCC: 1557-0227

[[Page 15750]]

FDIC: 3064-0145
OTS: 1550-0110

The Agencies have reconsidered the burden estimates published in
the Proposed Guidance in light of the comments received asserting that
the paperwork burden associated with the information collection were
underestimated, and in light of measures taken by the Agencies to
reduce burden in this final Guidance. The Agencies agreed to increase
the estimate for the time it will take an institution to develop
notices and determine which customers should be notified. However,
revisions incorporated into the final Guidance will result in the
issuance of fewer notices than was originally estimated. A discussion
of the comments received follows the revised estimates.
New Estimates:

OCC

Number of Respondents: 2,200.
Estimated Time per Response:
Developing Notices: 24 hours x 2,200 = 52,800 hours.
Notifying Customers: 29 hours x 36 = 1,044 hours.
Total Estimated Annual Burden = 53,844 hours.

FDIC

Number of Respondents: 5,200.
Estimated Time per Response:
Developing Notices: 24 hours x 5,200 = 124,800 hours.
Notifying Customers: 29 hours x 91 = 2,639 hours.
Total Estimated Annual Burden = 127,439 hours.

OTS

Number of Respondents: 880.
Estimated Time per Response:
Developing Notices: 24 hours x 880 = 21,120 hours.
Notifying Customers: 29 hours x 15 = 435 hours.
Total Estimated Annual Burden = 21,555 hours.
Burden Estimate for the Board:
While this represents a statement of policy, certain provisions of
the final Guidance encourage ``collection of information.'' See 44
U.S.C. 3501 et seq. In the spirit of the PRA, the Board requested
comment on the burden associated with a proposed information collection
as part of the notice requesting comment on the proposed Guidance. The
Board has approved this final information collection under its
delegated authority from OMB.

FRB [To Be Assigned]

Number of Respondents: 6,692.
Estimated Time per Response:
Developing Notices: 24 hours x 6,692 = 160,608 hours.
Notifying Customers: 29 hours x 110 = 3,190 hours.
Total Estimated Annual Burden = 163,798 hours.
Discussion of Comments:
The information collection in the proposed Guidance stated that
financial institutions should: (1) Develop notices to customers; and
(2) determine which customers should receive the notices and send the
notices to customers. The Agencies received various comments regarding
the Agencies' burden estimates, including the estimated time per
response and the number of recordkeepers involved.
Some commenters stated that the burden estimates of twenty hours to
develop and produce notices and three days to determine which customers
should receive notice in the proposed Guidance were too low. These
commenters stated that the Guidance should include language indicating
that an institution be given as much time as necessary to determine the
scope of an incident and examine which customers may be affected. One
of these commenters stated that ten business days, as recommended by
the California Department of Consumer Affairs Office of Privacy
Protection, should provide an institution with a known safe harbor to
complete the steps described lest regulated entities be subject to
inconsistent notification deadlines from the same incident.
These commenters misunderstood the meaning of PRA burden estimates.
PRA burden estimates are judgments by Agencies regarding the length of
time that it would take institutions to comply with information
collection requirements. These estimates do not impose a deadline upon
institutions to complete a requirement within a specific period of
time.
The final Guidance states that an institution should notify
customers ``as soon as possible'' after an investigation leads it to
conclude that misuse of customer information has occurred or is
reasonably possible. It also states that notification may be delayed at
the written request of law enforcement.
The cost of disclosing information is considered part of the burden
of an information collection. 5 CFR 1320.3(b)(1)(ix). Many commenters
stated that the Agencies had underestimated the cost associated with
disclosing security incidents to customers pursuant to the proposed
Guidance. However, these commenters did not distinguish between the
usual and customary costs of doing business and the costs of the
disclosures associated with the information collection in the proposed
Guidance.
For example, one commenter stated that the Agencies' estimates did
not include $0.60 per customer for a one-page letter, envelope, and
first class postage; the customer service time, handling the enormous
number of calls from customers who receive notice; or the costs
associated with closing or reopening accounts, printing new checks or
embossing new cards. This commenter stated that printing and mailing
costs, alone, for one notice to its customer database, at current
postal rates, would be at least $500,000.
Some of the costs mentioned in this comment are non-labor costs
associated with providing disclosures. The Agencies assumed that non-
labor costs associated with the disclosures would be negligible,
because institutions already have in place well-developed systems for
providing disclosures to their customers. This comment and any other
comments received regarding the Agencies' assumptions about non-labor
costs will be taken into account in any future estimate of the burden
for this collection.
Other costs mentioned in this comment, such as the cost of customer
service time, printing checks, and embossing cards, are costs that the
institution would incur regardless of the implementation of the final
Guidance. These costs are not associated with an information
collection, and, therefore, have not been factored into the Agencies'
cost estimates.
In addition, the estimates in this comment are based on the
assumption that notice should always be provided by mail. However, the
final Guidance states that financial institutions should deliver
customer notice in any manner designed to ensure that a customer can
reasonably be expected to receive it, such as by telephone, mail, or
electronically for those customers for whom it has a valid e-mail
address and who have agreed to receive communications electronically.
The Agencies assume that given this flexibility, financial institutions
may not necessarily choose to mail notices in every case, but may
choose less expensive methods of delivery that ensure customers will
reasonably be expected to receive notice.
Another commenter concerned about the burdens imposed on consumer
reporting agencies provided an example of a security breach involving a
single company from which identifying information about 500,000
military families was stolen. Among other things, the company's notice
to its customers advised them to contact the

[[Page 15751]]

nationwide consumer reporting agencies. The commenter stated that the
nationwide consumer reporting agencies spent approximately $1.5 million
per company, handling approximately 365,000 inquiries from the
company's customers.
The final Guidance contains a number of changes that will diminish
the costs identified by these commenters. First, the standard for
notification in the final Guidance likely will result in fewer notices.
In addition, the final Guidance no longer states that all notices
should advise customers to contact the nationwide consumer reporting
agencies. Therefore, the Agencies' estimates do not factor in the costs
to the reporting agencies.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act applies only to rules for which an
agency publishes a general notice of proposed rulemaking pursuant to 5
U.S.C. 553(b). See 5 U.S.C. 601(2). As previously noted, a general
notice of proposed rulemaking was not published because this final
Guidance is a general statement of policy. Thus, the Regulatory
Flexibility Act does not apply to the final Guidance.
With respect to OTS's revision to its regulation at 12 CFR 568.5,
as noted above, OTS has concluded that there is good cause to dispense
with prior notice and comment. Accordingly, OTS has further concluded
that the Regulatory Flexibility Act does not apply to this final rule.

C. Executive Order 12866

The OCC and OTS have determined that this final Guidance is not a
significant regulatory action under Executive Order 12866. With respect
to OTS's revision to its regulation at 12 CFR 568.5, OTS has further
determined that this final rule is not a significant regulatory action
under Executive Order 12866.

D. Unfunded Mandates Reform Act of 1995

The OCC and OTS have determined that this final Guidance is not a
regulatory action that would require an assessment under the Unfunded
Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531. The final Guidance
is a general statement of policy and, therefore, the OCC and OTS have
determined that the UMRA does not apply.
With respect to OTS's revision to its regulation at 12 CFR 568.5,
as noted above, OTS has concluded that there is good cause to dispense
with prior notice and comment. Accordingly, OTS has concluded that the
UMRA does not require an unfunded mandates analysis.

Text of Common Final Guidance

The text of the Agencies' common final Guidance reads as follows:

Supplement A to Appendix -- to Part ----Interagency Guidance on
Response Programs for Unauthorized Access to Customer Information and
Customer Notice

I. Background

This Guidance \1\ interprets section 501(b) of the Gramm-Leach-
Bliley Act (``GLBA'') and the Interagency Guidelines Establishing
Information Security Standards (the ``Security Guidelines'')\2\ and
describes response programs, including customer notification
procedures, that a financial institution should develop and
implement to address unauthorized access to or use of customer
information that could result in substantial harm or inconvenience
to a customer. The scope of, and definitions of terms used in, this
Guidance are identical to those of the Security Guidelines. For
example, the term ``customer information'' is the same term used in
the Security Guidelines, and means any record containing nonpublic
personal information about a customer, whether in paper, electronic,
or other form, maintained by or on behalf of the institution.
---------------------------------------------------------------------------

\1\ This Guidance is being jointly issued by the Board of
Governors of the Federal Reserve System (Board), the Federal Deposit
Insurance Corporation (FDIC), the Office of the Comptroller of the
Currency (OCC), and the Office of Thrift Supervision (OTS).
\2\ 12 CFR part 30, app. B (OCC); 12 CFR part 208, app. D-2 and
part 225, app. F (Board); 12 CFR part 364, app. B (FDIC); and 12 CFR
part 570, app. B (OTS). The ``Interagency Guidelines Establishing
Information Security Standards'' were formerly known as ``The
Interagency Guidelines Establishing Standards for Safeguarding
Customer Information.''
---------------------------------------------------------------------------

A. Interagency Security Guidelines

Section 501(b) of the GLBA required the Agencies to establish
appropriate standards for financial institutions subject to their
jurisdiction that include administrative, technical, and physical
safeguards, to protect the security and confidentiality of customer
information. Accordingly, the Agencies issued Security Guidelines
requiring every financial institution to have an information
security program designed to:
1. Ensure the security and confidentiality of customer
information;
2. Protect against any anticipated threats or hazards to the
security or integrity of such information; and
3. Protect against unauthorized access to or use of such
information that could result in substantial harm or inconvenience
to any customer.

B. Risk Assessment and Controls

1. The Security Guidelines direct every financial institution to
assess the following risks, among others, when developing its
information security program:
a. Reasonably foreseeable internal and external threats that
could result in unauthorized disclosure, misuse, alteration, or
destruction of customer information or customer information systems;
b. The likelihood and potential damage of threats, taking into
consideration the sensitivity of customer information; and
c. The sufficiency of policies, procedures, customer information
systems, and other arrangements in place to control risks.\3\
---------------------------------------------------------------------------

\3\ See Security Guidelines, III.B.
---------------------------------------------------------------------------

2. Following the assessment of these risks, the Security
Guidelines require a financial institution to design a program to
address the identified risks. The particular security measures an
institution should adopt will depend upon the risks presented by the
complexity and scope of its business. At a minimum, the financial
institution is required to consider the specific security measures
enumerated in the Security Guidelines,\4\ and adopt those that are
appropriate for the institution, including:
---------------------------------------------------------------------------

\4\ See Security Guidelines, III.C.
---------------------------------------------------------------------------

a. Access controls on customer information systems, including
controls to authenticate and permit access only to authorized
individuals and controls to prevent employees from providing
customer information to unauthorized individuals who may seek to
obtain this information through fraudulent means;
b. Background checks for employees with responsibilities for
access to customer information; and
c. Response programs that specify actions to be taken when the
financial institution suspects or detects that unauthorized
individuals have gained access to customer information systems,
including appropriate reports to regulatory and law enforcement
agencies.\5\
---------------------------------------------------------------------------

\5\ See Security Guidelines, III.C.
---------------------------------------------------------------------------

C. Service Providers

The Security Guidelines direct every financial institution to
require its service providers by contract to implement appropriate
measures designed to protect against unauthorized access to or use
of customer information that could result in substantial harm or
inconvenience to any customer.\6\
---------------------------------------------------------------------------

\6\ See Security Guidelines, II.B. and III.D. Further, the
Agencies note that, in addition to contractual obligations to a
financial institution, a service provider may be required to
implement its own comprehensive information security program in
accordance with the Safeguards Rule promulgated by the Federal Trade
Commission (``FTC''), 12 CFR part 314.
---------------------------------------------------------------------------

II. Response Program

Millions of Americans, throughout the country, have been victims
of identity theft.\7\ Identity thieves misuse personal information
they obtain from a number of sources, including financial
institutions, to perpetrate identity theft. Therefore, financial
institutions should take preventative measures to safeguard customer
information against attempts to gain unauthorized access to the
information. For example, financial

[[Page 15752]]

institutions should place access controls on customer information
systems and conduct background checks for employees who are
authorized to access customer information.\8\ However, every
financial institution should also develop and implement a risk-based
response program to address incidents of unauthorized access to
customer information in customer information systems \9\ that occur
nonetheless. A response program should be a key part of an
institution's information security program.\10\ The program should
be appropriate to the size and complexity of the institution and the
nature and scope of its activities.
---------------------------------------------------------------------------

\7\ The FTC estimates that nearly 10 million Americans
discovered they were victims of some form of identity theft in 2002.
See The Federal Trade Commission, Identity Theft Survey Report,
(September 2003), available at http://www.ftc.gov/os/2003/09/synovatereport.pdf
.

\8\ Institutions should also conduct background checks of
employees to ensure that the institution does not violate 12 U.S.C.
1829, which prohibits an institution from hiring an individual
convicted of certain criminal offenses or who is subject to a
prohibition order under 12 U.S.C. 1818(e)(6).
\9\ Under the Guidelines, an institution's customer information
systems consist of all of the methods used to access, collect,
store, use, transmit, protect, or dispose of customer information,
including the systems maintained by its service providers. See
Security Guidelines, I.C.2.d (I.C.2.c for OTS).
\10\ See FFIEC Information Technology Examination Handbook,
Information Security Booklet, Dec. 2002 available at http://www.ffiec.gov/ffiecinfobase/html_pages/infosec_book_frame.htm.

Federal Reserve SR 97-32, Sound Practice Guidance for Information
Security for Networks, Dec. 4, 1997; OCC Bulletin 2000-14,
``Infrastructure Threats--Intrusion Risks'' (May 15, 2000), for
additional guidance on preventing, detecting, and responding to
intrusions into financial institution computer systems.
---------------------------------------------------------------------------

In addition, each institution should be able to address
incidents of unauthorized access to customer information in customer
information systems maintained by its domestic and foreign service
providers. Therefore, consistent with the obligations in the
Guidelines that relate to these arrangements, and with existing
guidance on this topic issued by the Agencies,\11\ an institution's
contract with its service provider should require the service
provider to take appropriate actions to address incidents of
unauthorized access to the financial institution's customer
information, including notification to the institution as soon as
possible of any such incident, to enable the institution to
expeditiously implement its response program.
---------------------------------------------------------------------------

\11\ See Federal Reserve SR Ltr. 00-04, Outsourcing of
Information and Transaction Processing, Feb. 9, 2000; OCC Bulletin
2001-47, ``Third-Party Relationships Risk Management Principles,''
Nov. 1, 2001; FDIC FIL 68-99, Risk Assessment Tools and Practices
for Information System Security, July 7, 1999; OTS Thrift Bulletin
82a, Third Party Arrangements, Sept. 1, 2004.
---------------------------------------------------------------------------

A. Components of a Response Program

1. At a minimum, an institution's response program should
contain procedures for the following:
a. Assessing the nature and scope of an incident, and
identifying what customer information systems and types of customer
information have been accessed or misused;
b. Notifying its primary Federal regulator as soon as possible
when the institution becomes aware of an incident involving
unauthorized access to or use of sensitive customer information, as
defined below;
c. Consistent with the Agencies' Suspicious Activity Report
(``SAR'') regulations,\12\ notifying appropriate law enforcement
authorities, in addition to filing a timely SAR in situations
involving Federal criminal violations requiring immediate attention,
such as when a reportable violation is ongoing;
---------------------------------------------------------------------------

\12\ An institution's obligation to file a SAR is set out in the
Agencies' SAR regulations and Agency guidance. See 12 CFR 21.11
(national banks, Federal branches and agencies); 12 CFR 208.62
(State member banks); 12 CFR 211.5(k) (Edge and agreement
corporations); 12 CFR 211.24(f) (uninsured State branches and
agencies of foreign banks); 12 CFR 225.4(f) (bank holding companies
and their nonbank subsidiaries); 12 CFR part 353 (State non-member
banks); and 12 CFR 563.180 (savings associations). National banks
must file SARs in connection with computer intrusions and other
computer crimes. See OCC Bulletin 2000-14, ``Infrastructure
Threats--Intrusion Risks'' (May 15, 2000); Advisory Letter 97-9,
``Reporting Computer Related Crimes'' (November 19, 1997) (general
guidance still applicable though instructions for new SAR form
published in 65 FR 1229, 1230 (January 7, 2000)). See also Federal
Reserve SR 01-11, Identity Theft and Pretext Calling, Apr. 26, 2001;
SR 97-28, Guidance Concerning Reporting of Computer Related Crimes
by Financial Institutions, Nov. 6, 1997; FDIC FIL 48-2000,
Suspicious Activity Reports, July 14, 2000; FIL 47-97, Preparation
of Suspicious Activity Reports, May 6, 1997; OTS CEO Memorandum 139,
Identity Theft and Pretext Calling, May 4, 2001; CEO Memorandum 126,
New Suspicious Activity Report Form, July 5, 2000; http://www.ots.treas.gov/BSA
(for the latest SAR form and filing

instructions required by OTS as of July 1, 2003).
---------------------------------------------------------------------------

d. Taking appropriate steps to contain and control the incident
to prevent further unauthorized access to or use of customer
information, for example, by monitoring, freezing, or closing
affected accounts, while preserving records and other evidence;\13\
and
---------------------------------------------------------------------------

\13\ See FFIEC Information Technology Examination Handbook,
Information Security Booklet, Dec. 2002, pp. 68-74.
---------------------------------------------------------------------------

e. Notifying customers when warranted.
2. Where an incident of unauthorized access to customer
information involves customer information systems maintained by an
institution's service providers, it is the responsibility of the
financial institution to notify the institution's customers and
regulator. However, an institution may authorize or contract with
its service provider to notify the institution's customers or
regulator on its behalf.

III. Customer Notice

Financial institutions have an affirmative duty to protect their
customers' information against unauthorized access or use. Notifying
customers of a security incident involving the unauthorized access
or use of the customer's information in accordance with the standard
set forth below is a key part of that duty. Timely notification of
customers is important to manage an institution's reputation risk.
Effective notice also may reduce an institution's legal risk, assist
in maintaining good customer relations, and enable the institution's
customers to take steps to protect themselves against the
consequences of identity theft. When customer notification is
warranted, an institution may not forgo notifying its customers of
an incident because the institution believes that it may be
potentially embarrassed or inconvenienced by doing so.

A. Standard for Providing Notice

When a financial institution becomes aware of an incident of
unauthorized access to sensitive customer information, the
institution should conduct a reasonable investigation to promptly
determine the likelihood that the information has been or will be
misused. If the institution determines that misuse of its
information about a customer has occurred or is reasonably possible,
it should notify the affected customer as soon as possible. Customer
notice may be delayed if an appropriate law enforcement agency
determines that notification will interfere with a criminal
investigation and provides the institution with a written request
for the delay. However, the institution should notify its customers
as soon as notification will no longer interfere with the
investigation.

1. Sensitive Customer Information

Under the Guidelines, an institution must protect against
unauthorized access to or use of customer information that could
result in substantial harm or inconvenience to any customer.
Substantial harm or inconvenience is most likely to result from
improper access to sensitive customer information because this type
of information is most likely to be misused, as in the commission of
identity theft. For purposes of this Guidance, sensitive customer
information means a customer's name, address, or telephone number,
in conjunction with the customer's social security number, driver's
license number, account number, credit or debit card number, or a
personal identification number or password that would permit access
to the customer's account. Sensitive customer information also
includes any combination of components of customer information that
would allow someone to log onto or access the customer's account,
such as user name and password or password and account number.

2. Affected Customers

If a financial institution, based upon its investigation, can
determine from its logs or other data precisely which customers'
information has been improperly accessed, it may limit notification
to those customers with regard to whom the institution determines
that misuse of their information has occurred or is reasonably
possible. However, there may be situations where the institution
determines that a group of files has been accessed improperly, but
is unable to identify which specific customers' information has been
accessed. If the circumstances of the unauthorized access lead the
institution to determine that misuse of the information is
reasonably possible, it should notify all customers in the group.

B. Content of Customer Notice

1. Customer notice should be given in a clear and conspicuous
manner. The notice should describe the incident in general terms and
the type of customer information that was the subject of
unauthorized access or use. It also should generally describe what
the institution has done to protect the

[[Page 15753]]

customers' information from further unauthorized access. In
addition, it should include a telephone number that customers can
call for further information and assistance.\14\ The notice also
should remind customers of the need to remain vigilant over the next
twelve to twenty-four months, and to promptly report incidents of
suspected identity theft to the institution. The notice should
include the following additional items, when appropriate:
---------------------------------------------------------------------------

\14\ The institution should, therefore, ensure that it has
reasonable policies and procedures in place, including trained
personnel, to respond appropriately to customer inquiries and
requests for assistance.
---------------------------------------------------------------------------

a. A recommendation that the customer review account statements
and immediately report any suspicious activity to the institution;
b. A description of fraud alerts and an explanation of how the
customer may place a fraud alert in the customer's consumer reports
to put the customer's creditors on notice that the customer may be a
victim of fraud;
c. A recommendation that the customer periodically obtain credit
reports from each nationwide credit reporting agency and have
information relating to fraudulent transactions deleted;
d. An explanation of how the customer may obtain a credit report
free of charge; and
e. Information about the availability of the FTC's online
guidance regarding steps a consumer can take to protect against
identity theft. The notice should encourage the customer to report
any incidents of identity theft to the FTC, and should provide the
FTC's Web site address and toll-free telephone number that customers
may use to obtain the identity theft guidance and report suspected
incidents of identity theft.\15\
---------------------------------------------------------------------------

\15\ Currently, the FTC Web site for the ID Theft brochure and
the FTC Hotline phone number are http://www.consumer.gov/idtheft and

1-877-IDTHEFT. The institution may also refer customers to any
materials developed pursuant to section 151(b) of the FACT Act
(educational materials developed by the FTC to teach the public how
to prevent identity theft).
---------------------------------------------------------------------------

2. The Agencies encourage financial institutions to notify the
nationwide consumer reporting agencies prior to sending notices to a
large number of customers that include contact information for the
reporting agencies.

C. Delivery of Customer Notice

Customer notice should be delivered in any manner designed to
ensure that a customer can reasonably be expected to receive it. For
example, the institution may choose to contact all customers
affected by telephone or by mail, or by electronic mail for those
customers for whom it has a valid e-mail address and who have agreed
to receive communications electronically.

Adoption of Final Guidance

The agency-specific adoption of the common final Guidance, which
appears at the end of the common preamble, follows.

List of Subjects

12 CFR Part 30

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

12 CFR Part 208

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

12 CFR Part 225

Banks, banking, Holding companies, Reporting and recordkeeping
requirements.

12 CFR Part 364

Administrative practice and procedure, Bank deposit insurance,
Banks, banking, Reporting and recordkeeping requirements, Safety and
Soundness.

12 CFR Part 568

Consumer protection, Privacy, Reporting and recordkeeping
requirements, Savings associations, Security measures.

12 CFR Part 570

Accounting, Administrative practice and procedure, Bank deposit
insurance, Consumer protection, Holding companies, Privacy, Reporting
and recordkeeping requirements, Safety and soundness, Savings
associations.

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR CHAPTER I

Authority and Issuance

0
For the reasons set out in the joint preamble, the OCC amends part 30
of chapter I of title 12 of the Code of Federal Regulations to read as
follows:

PART 30--SAFETY AND SOUNDNESS STANDARDS

0
1. The authority citation for part 30 continues to read as follows:

Authority: 12 U.S.C. 93a, 371, 1818, 1831p, 3102(b); 15 U.S.C.
1681s, 1681w, 6801, 6805(b)(1).

0
2. Revise the heading of Appendix B to read as follows:

Appendix B to Part 30--Interagency Guidelines Establishing Information
Security Standards

* * * * *

0
3. Amend Appendix B to part 30 by adding a new Supplement A to the end
of the appendix to read as set forth at the end of the common preamble.

Dated: March 8, 2005.
Julie L. Williams,
Acting Comptroller of the Currency.

FEDERAL RESERVE SYSTEM

12 CFR CHAPTER II

Authority and Issuance

0
For the reasons set out in the joint preamble, the Board amends part
208 and 225 of chapter II of title 12 of the Code of Federal
Regulations to read as follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)

0
1. The authority citation for 12 CFR part 208 continues to read as
follows:

Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a,
371d, 461, 481-486, 601, 611, 1814, 1816, 1820(d)(9), 1823(j),
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882,
2901-2907, 3105, 3310, 3331-3351, and 3906-3909, 15 U.S.C. 78b,
78l(b), 78l(g), 78l(i), 78o-4(c)(5), 78q, 78q-1, 78w, 1681s, 1681w,
6801 and 6805; 31 U.S.C. 5318, 42 U.S.C. 4012a, 4104a, 4104b, 4106,
and 4128.

0
2. Revise the heading of Appendix D-Z to read as follows:

Appendix D-2 to Part 208--Interagency Guidelines Establishing
Information Security Standards.

* * * * *

0
3. Amend Appendix D-2 to part 208 by adding a new Supplement A to the
end of the appendix to read as set forth at the end of the common
preamble.

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)

0
4. The authority citation for 12 CFR part 225 is revised to read as
follows:

Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906,
3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.

0
5. Revise the heading of Appendix F to read as follows:

Appendix F to Part 225--Interagency Guidelines Establishing Information
Security Standards

* * * * *

0
6. Amend Appendix F to part 225 by adding a new Supplement A to the end
of the appendix to read as set forth at the end of the common preamble.

[[Page 15754]]

By order of the Board of Governors of the Federal Reserve
System, March 21, 2005.
Jennifer J. Johnson,
Secretary of the Board.

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR CHAPTER III

Authority and Issuance

0
For the reasons set out in the joint preamble, the FDIC amends part 364
of chapter III of title 12 of the Code of Federal Regulations to read
as follows:

PART 364--STANDARDS FOR SAFETY AND SOUNDNESS

0
1. The authority citation for part 364 is revised to read as follows:

Authority: 12 U.S.C. 1818 and 1819 (Tenth); 15 U.S.C. 1681b,
1681s, and 1681w.

0
2. Revise the heading of Appendix B to read as follows:

Appendix B to Part 364--Interagency Guidelines Establishing Information
Security Standards

* * * * *

0
3. Amend Appendix B to part 364 by adding a new Supplement A to the end
of the appendix to read as set forth at the end of the common preamble.

Dated at Washington, DC, this 18th day of March, 2005.

By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR CHAPTER V

Authority and Issuance

0
For the reasons set out in the joint preamble, the OTS amends parts 568
and 570 of chapter V of title 12 of the Code of Federal Regulations to
read as follows:

PART 568--SECURITY PROCEDURES

0
1. Revise the part heading for part 568 to read as shown above.

0
2. Revise the authority citation for part 568 to read as follows:

Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1828, 1831p-1,
1881-1884; 15 U.S.C. 1681s and 1681w; 15 U.S.C. 6801 and 6805(b)(1).

0
3. Amend Sec. 568.5 by adding a new sentence after the final sentence
to read as follows:

Sec. 568.5 Protection of customer information.

* * * Supplement A to Appendix B to part 570 provides interpretive
guidance.

PART 570--SAFETY AND SOUNDNESS GUIDELINES AND COMPLIANCE PROCEDURES

0
4. Revise the authority citation for part 570 to read as follows:

Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1828, 1831p-1,
1881-1884; 15 U.S.C. 1681s and 1681w; 15 U.S.C. 6801 and 6805(b)(1).

0
5. Revise the heading of Appendix B to part 570 to read as follows:

Appendix B to Part 570--Interagency Guidelines Establishing Information
Security Standards

* * * * *

0
6. Amend Appendix B to part 570 by adding a new Supplement A to the end
of the appendix to read as set forth at the end of the common preamble.

Dated: March 8, 2005.

By the Office of Thrift Supervision.
James E. Gilleran,
Director.
[FR Doc. 05-5980 Filed 3-28-05; 8:45 am]

BILLING CODE 4810-33-P


 


Last Updated 03/28/2005 Regs@fdic.gov