RSK.IQ Question of the Week 6/12/17

Alternate Method of Delivering Annual Privacy Notice and Notice of Availability

Issue/Inquiry

 

On its periodic statements, the Bank will direct customers to the website if they would like to view the privacy notice. However, some customers (e.g., CD customers) do not receive periodic statements. How would the requirement to provide customers with the privacy notice by viewing it on the website be fulfilled for such customers? Would the Bank have to conduct a separate mailing for customers who do not receive periodic statements?

Response Summary

Unless the Bank places the required notice of availability in an account statement, coupon book, or a notice or disclosure that it is required or expressly and specifically permitted to be issued to the customer under any other provision of law, it will not be able to use this alternate method of delivery.

Response Detail

Generally, Regulation P requires a financial institution to provide an annual privacy notice at least once during any 12-month period while a customer relationship exists. Methods of providing any privacy notice to customers include:

  • Hand delivery to the customer
  • Mailing a printed copy to the last known address of the customer
  • For customers who conduct their transactions electronically, conspicuously posting the notice on the institution’s website and requiring the customer to acknowledge receipt of it as a condition of receiving a particular product or service. 12 CFR §1016.9(b)(1).

For the annual privacy notice, if the customer uses the website to access products and services and has agreed to receive notices at the website, the financial institution can also have a reasonable expectation that a customer will receive the notice if it posts the notice on its website. 12 CFR §1016.9(c)(1).

In addition, there is an alternative method for delivering the annual privacy notice, which the Bank wants to use. An institution is allowed to direct customers to its website, where annual privacy notice is posted, provided that:

  • The financial institution does not share nonpublic personal information to non-affiliated third parties
  • There is no opt-out notice
  • The FCRA rules for solicitations by affiliates on the basis of shared information are complied with
  • There has been no change in the information on the privacy notice since the previous privacy notice was provided (whether initial, annual, or revised)
  • The model privacy notice form is used

In order to use this alternative method, the institution must:

  • Convey in a clear and conspicuous manner no less than annually on an account statement, coupon book, or a notice or disclosure the institution is required or expressly and specifically permitted to issue to the customer under any other provision of law, that its privacy notice is available on its website and will be mailed to the customer upon request by telephone.
  • The statement must state that the institution’s privacy notice has not changed and must include a specific Web address that takes the customer directly to the page where the privacy notice is posted and a telephone number for the customer to request that it be mailed.
  • The current privacy notice must be posted continuously and in a clear and conspicuous manner on a page of the institution’s website on which the only content is the privacy notice, without requiring the customer to provide any information such as a login name or password, or agree to any conditions to access the page.
  • The current privacy notice must be mailed to those customers who request it by telephone within 10 days of the request. 12 CFR §1016.9(c)(2).

Providing the notice of availability on a separate notice would not meet the requirements of providing the notice to the borrower. If the financial institution cannot put the notice on a customer account statement, coupon book, or another required or permitted customer notice or disclosure, it will not be able to take advantage of this particular method of delivery.

When the alternative method of delivery of the annual notice was first proposed by the CFPB, the notice of availability was to appear on notices or disclosures that a financial institution was required or expressly permitted to provide. The CFPB received many comments urging it to expand the documents which could be used in providing the notice of availability, such as coupon books, account statements, branch postings, newsletters, and advertisements. Some institutions indicated that, for deposit products such as passbook savings accounts or certificates of deposit, they send no documents at all to a customer during the year.

In issuing the final rule, the CFPB reiterated that financial institutions which choose to use the alternative method of providing the annual privacy notice must provide the notice of availability, since this is an integral part of the alternative method. After consideration, the CFFB was persuaded that the documents on which the notice of availability could appear should be broadened to include account statements and coupon books, even though there was no requirement to provide such disclosures, since customers have a compelling reason to examine account statements or coupon books that directly concern their existing accounts. It did not, however, believe that customers would have the same interest in reviewing advertising or other materials or that it would be customer-friendly to require customers to seek out postings at branches. Consequently, it declined to broaden the methods of providing the notice of availability any further. 79 Federal Register 64069, 64070.

 

 

This entry was posted on Monday, June 12th, 2017 at 1:34 pm.

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