According to the Gramm-Leach-Bliley Act (GLBA) and its implementing Regulation P, a financial institution may share consumer information with non-affiliated third parties for marketing purposes only after disclosing its information-sharing practices to customers and after giving them an opportunity to opt out of such sharing. The GLBA defines a customer as a consumer who has a continuing relationship with a financial institution that provides one or more financial products or services to be used primarily for personal, family, or household purposes. A consumer is an individual who obtains or has obtained a financial product or service from a financial institution that is to be used primarily for personal, family, or household purposes, or that individual’s legal representative. A non-affiliated third party is any person except a financial institution’s affiliate or a person employed jointly by a financial institution and a company that is not the financial institution’s affiliate. An affiliate is any company that controls, is controlled by, or is under common control with another company.
The GLBA requires that a financial institution provide a privacy notice to customers: (i) at the time of establishing the customer relationship; (ii) annually during the continuation of the customer relationship; and (iii) before disclosing any nonpublic personal information (NPI) about the customer to any non-affiliated third party, unless an exception applies. The privacy notice must describe the categories of NPI that the financial institution collects and discloses; the categories of affiliates and non-affiliated third parties to whom the financial institution discloses NPI; the categories of NPI disclosed to service providers and joint marketers; the policies and practices with respect to protecting the confidentiality and security of NPI; and the disclosures of NPI to which the customer has a right to opt out. The financial institution must also provide a reasonable means for the customer to opt out of the disclosure of NPI to non-affiliated third parties, such as a check-off box, a reply form, or a toll-free telephone number. The opt-out notice must be clear and conspicuous, and must state that the customer can opt out at any time. The opt-out notice must also explain how the customer can opt out, and the effect of opting out. The financial institution must honor the customer’s opt-out direction as soon as reasonably practicable after receiving it, and must not disclose any NPI to which the opt-out applies, unless an exception applies.
The GLBA provides several exceptions to the opt-out requirement, such as when the disclosure of NPI is necessary to effect, administer, or enforce a transaction requested or authorized by the customer; when the disclosure of NPI is required or permitted by law; when the disclosure of NPI is to a consumer reporting agency in accordance with the Fair Credit Reporting Act; or when the disclosure of NPI is to a person that performs marketing services on behalf of the financial institution or on behalf of the financial institution and another financial institution under a joint marketing agreement. A joint marketing agreement is a formal written contract between a financial institution and any other person under which the parties agree to offer, endorse, or sponsor a financial product or service. The joint marketing agreement must prohibit the other person from using or disclosing the NPI for any purpose other than offering, endorsing, or sponsoring the financial product or service covered by the agreement.
The GLBA also requires that a financial institution provide a privacy notice to consumers who are not customers before disclosing any NPI about the consumer to any non-affiliated third party, unless an exception applies. The financial institution does not need to provide an opt-out notice to consumers who are not customers, unless it has a customer relationship with them. However, if the financial institution establishes a customer relationship with a consumer who was previously not a customer, it must provide a privacy notice and an opt-out notice to the customer as described above.
References:
Guide to the Gramm–Leach–Bliley Act
GLBA or FCRA? Data Sharing Between Affiliates and Non-Affiliates
Existing Privacy Laws Already Regulate Information Sharing
Why Do Banks Share Your Financial Information and Are They Allowed To?
[IAPP CIPP/US Certified Information Privacy Professional Study Guide], Chapter 5, pages 161-165.
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