Reference no: EM133812275

Question

Title V of the GLBA provides a set of notice rules and opt out processes regarding disclosure by financial institutions of its consumers' nonpublic personal information to non-affiliated third parties. However, Section 502(e) of the GLB Act provides a list of exceptions to the general rules permitting customers to "opt out" of sharing of their information to nonaffiliated third parties. While the non-affiliated third party rule weakens the consumers' power to opt out of information sharing between financial institutions and nonaffiliated third parties, without these exceptions, financial institutions would not be able to share information with data processing companies, credit bureaus (i.e., consumer reporting agencies), their own attorneys and accountants, check printers, clearinghouses, court appointed guardians or executors, and others in a wide range of normal business transactions. Banks would not be able to investigate ATM or credit card fraud. ATM transactions couldn't be processed through PULSE. Mortgages couldn't be sold in the secondary market or to other investors. Loan guarantees couldn't be processed. Liens couldn't be filed. Bank examiners couldn't look at consumer loan files.

Thus, these exceptions, while opening up the consumer to greater instances of disclosure of its nonpublic personal information, are necessary to ensure that our financial systems can run effectively, which is to the consumer's benefit. Despite the non-affiliated third party rule and its extensive exceptions to a consumer's right to opt out of disclosure, I don't think consumers have been left in the lurch with respect to their financial privacy rights because the GLBA permits state legislatures to enact more restrictive laws if the states so chose.