BMO
FINANCIAL GROUP
August 16, 2004
Office of the Comptroller of the Currency
250 E Street, S.W., Mail Stop 1-5
Washington, DC 20219
Attention: Docket No. 04-13
Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Attention: Docket No. R-1199
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
RIN No. 3064-AC77
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549-0609
Ladies and Gentlement:
BMO Financial
Group appreciates the opportunity to comment to the Board of Governors
of the Federal Reserve System
(the “Board”),
the Federal Deposit Insurance Corporation (“FDIC”), the
Office of the Comptroller of the Currency (“OCC”) and
the Securities and Exchange Commission (“SEC”) on the
proposed regulations to implement section 624 of the Fair and Accurate
Credit Transactions Act of 2003(“FACT Act”).
BMO Financial Group is a Canadian organization operating in the
United States with three foreign banking offices, and under Harris
Financial Corp., a financial holding company with assets of more
than $38 billion (U.S.) at year-end 2003, 29 banks including Harris
Trust and Savings Bank and several non-bank entities, two of which,
Harrisdirect LLC and Harris Nesbitt Corp., are registered broker
dealers. We offer a wide range of financial services including trust,
retail and private banking, and investment services.
We appreciate the Agencies soliciting comments on the proposed regulations.
We generally support the comments submitted by the Financial Services
Roundtable of which we are a member institution. We also offer the
following additional comments. We offer the following additional
comments for consideration in developing the final regulations.
Mandatory Compliance Date of Regulations
The Agencies requested comment on what the mandatory compliance date
should be and whether it should be different from the effective date
of the final rules in order to permit institutions to incorporate
the affiliate marketing notice into their next annual Gramm-Leach-Bliley
Act (“GLBA”) privacy notice. We support a mandatory compliance
date that is different from the effective date of the regulations.
It is recommended that the mandatory compliance date be no later
than the first annual GLBA privacy notice mailing that is scheduled
to occur after a six month period following the effective date of
the regulations. It is important that financial institutions have
flexibility during 2005 to incorporate the new notice and opt-out
requirements into the GLBA notices which will then be provided to
the consumer as part of the scheduled annual GLBA notice mailing.
This will minimize consumer confusion as the consumer would not receive
multiple privacy notices in 2005. Further, it minimizes financial
institutions’ expenses and ensures adequate time for development
of appropriate compliance procedures.
Exceptions to Affiliate Use of Eligibility Information for Marketing
(Section .20)
The Agencies invited comment on whether, given the policy objectives
of the FACT Act, proposed paragraph .20(a) should apply if affiliated
companies seek to avoid providing notice and opt-out by engaging
in the “constructive sharing” of eligibility information
to conduct marketing. We believe that the issue of “constructive
sharing” should not trigger the notice and opt-out required
under these proposed rules simply because a financial institution
requests that an affiliate provide a marketing solicitation to the
affiliate’s customers. For example, if Affiliate B requests
Affiliate A to provide a marketing solicitation describing a product
or service offered by Affiliate B to a certain portion of Affiliate
A’s customer base (as determined by use of eligibility information)
Affiliate B has not received eligibility information about the customers
for purposes of making the marketing solicitation. The eligibility
information has remained with the affiliate that has the relationship
with the customer. The rationale that the responses to the marketing
solicitation would provide Affiliate B with eligibility information
does not take into account the fact that by responding, the customer
is indicating an interest in the product or service and would reasonably
expect Affiliate B to obtain information about the customer. The
customer would likely expect that Affiliate B would contact the customer
to follow-up on the response. Further, the customer would reasonably
expect that he/she may be required to provide Affiliate B with additional
personal information in order to apply for and obtain the product
or service.
The Agencies should give consideration to creating an additional
exception under subsection .20(c) that permits the sharing of eligibility
information among affiliates that are aligned under one line of business
within their organization provided those affiliates share common
management, branding, and are regulated entities (i.e., banking,
securities, and insurance companies). Some institutions have their
banking, brokerage, and financial planning operations organized as
separate legal entities operating under one line of business in order
to provide seamless service to their customers. In this approach,
a customer’s private banking relationship manager may discuss
the customer’s financial situation (including eligibility information)
with “team” members that are employees of affiliated
entities, but still service the customer’s total relationship
with the institution. The “team” can then recommend various
products and possibly changes to the customer’s financial plan
based upon this information. A customer expects this type of service
from the institution they trust to manage their financial matters.
However, the proposed regulations may be interpreted to prohibit
the customer’s relationship manager from discussing eligibility
information with other “team” members.
We support the Agencies proposal that the provisions do not prohibit
an affiliate from using eligibility information it has received from
an affiliate to make or send marketing solicitation to a consumer
if the information was received by the affiliate prior to the mandatory
compliance date of these regulations.
Reasonable Opportunity to Opt Out (Section .22)
The Agencies should clarify that the requirement to give a consumer
30 days from the date the consumer is provided with the affiliate
marketing notice to respond to the notice is only triggered once
and that is when the initial notice is provided to the consumer.
A new 30 day period should not be triggered for each required annual
mailing of the notice. If a new 30 day period is required with each
mailing, there would be a significant operations impact to ensure
compliance with this provision.
Definition of Eligibility Information (Section .3(j)
The Agencies should consider clarifying the definition of “eligibility
information” to state that it excludes “identifying” information
such as name, address, phone number, email address, Social Security
Number and date of birth. For example, it should be permissible for
a bank to give its brokerage company a list containing the names,
addresses and phone numbers of all customers for a particular location
without consideration for the consumers’ opt-out of affiliate
marketing preference provided that list does not contain eligibility
information about the consumers. It is recognized that in a situation
where the brokerage company requests a list of consumers from an
affiliate that meet a minimum balance requirement would require that
consumers’ opt-out of affiliate marketing preference be honored
in preparing the requested list.
Definition of Solicitation (Section .3(n))
The Agencies
should clarify the definition of “solicitation” to
exclude specific types of communications with a consumer that are
not intended to encourage a consumer to purchase or obtain a particular
product or service. The types of events that would be excluded would
include educational seminars, customer appreciation events, surveys,
focus group invitations, newsletters and other communications that
are educational in nature. Financial institutions that have a significant
wealth management business frequently have events for purposes of
educating their customers. Consumers would not necessarily view these
types of communications as marketing solicitations even if provided
by the affiliate. Based on our experience with applying do-not-mail
preferences to these types of mailings, we have experienced complaints
because the consumers want the invitations to these types of events
but want to limit other forms of marketing solicitations.
Definition of Consumer
In creating the proposed regulations, the Agencies used the definition
of “consumer” that follows the statutory definition in
section 603(c) of the Fair Credit Reporting Act. (“FCRA”).
In finalizing these regulations, the Agencies should consider clarifying
the definition of “consumer” to exclude individuals who
are doing business with a financial institution for purposes other
than personal, family or household purposes. This would make the
definition consistent with GLBA and the intent of the FCRA.
We thank you for allowing us the opportunity to provide you with
comments on the proposed regulations. If you have any questions concerning
this comment letter, or if we may otherwise be of assistance, please
do no hesitate to contact us.
Respectfully submitted,
Paul V. Reagan
Senior Vice President and U.S. General Counsel
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