Privacy and Gramm-Leach-Bliley Compliance

Under the Gramm-Leach-Bliley Financial Modernization Act of 2000, mortgage companies, along with many other financial services companies, are required to notify consumers of their privacy policies, and to disclose the details about how they gather and share information. Mortgagers typically collect personal financial information as part of the mortgage approval process. As part of the Act, financial services companies must issue consumers privacy notices, or in the case of online companies, create an online privacy notice.

This sort of disclosure is especially important in the area of online mortgage companies, which fared worst in a study by the Center for Democracy and Technology in the area of GLB compliance and offering opt-out choices to consumers. The online world offers great convenience, and the financial service sector has been in the forefront of providing services through this medium. But, privacy concerns must be met in the online marketplace.

The privacy notice, according to the legislation, has to present a clear and accurate statement about the company’s privacy practices. It must detail what information the company may collect about customers, how it shares that information, and how it protects that information. Also, by the Act, consumers may demand that a company not share information with some, but not all, third parties. The privacy notice must explain to the consumer how they may opt out of that information sharing. Under GLB, consumers do not have the right to request that a financial institution not share personal information with its affiliates. An affiliate is defined as a business entity that is controlled by the company in some way. Also, there is no opt-out right in certain other circumstances, such as information that must be shared with an outside company that provides services such as data processing or account servicing.

Even without explicitly “opting out,” companies are prohibited from sharing account numbers to non-affiliates for the purpose of telemarketing or other types of marketing.