WASHINGTON (5/7/14)--The Consumer Financial Protection Bureau (CFPB) Tuesday proposed a rule aimed at promoting more effective privacy disclosures from financial institutions to their members or customers. The rule would allow companies that limit their consumer data-sharing and meet other requirements to post their annual privacy notices online rather than delivering them individually in paper form.
"Consumers need clear information about how their personal information is being used by financial institutions," said CFPB Director Richard Cordray. "This proposal would make it easier for consumers to find and access privacy policies, while also making it cheaper for industry to provide disclosures."
Under the Gramm-Leach-Bliley Act (GLBA), financial institutions are required to send annual notices to consumers, describing the conditions by which and how the financial institution shares members' personal information.
The CFPB proposal would allow institutions to post privacy notices online if they satisfy certain conditions, such as using a model disclosure form developed by federal regulatory agencies in 2009. (See resource link.) The rule would apply both to financial institutions and those nonbanks that are within the CFPB's jurisdiction under the GLBA.
Under the proposal, if an institution qualified for and wants to rely on the online disclosure method, it would have to inform consumers annually about the availability of the disclosures. Those alerts, however, could be included as part of other routine mailings. Currently institutions must send consumers a separate annual communication about privacy disclosures.
If an institution chooses not to meet the requirements for the online disclosure method, it would be required to continue to deliver annual privacy notices to its customers.
Benefits of the proposed rule include constant access to privacy policies for consumers, limited data sharing with third parties, and a potential savings of $17 million across the industry if institutions were to choose the online disclosure method.
In addition, the model disclosure form designed by federal regulators would allow consumers to easily comparison shop before deciding which financial institution to use. It would allow customers to better educate themselves about different types of privacy policies.
The CFPB will accept comments on the proposed rule for 30 days after its publication in the Federal Register.
Use the second resource link to see a copy of the proposed rule.