Understanding the Gramm-Leach-Bliley Act Is More Important Than You Think – For Your Finance’s Sake!
Privacy is something that we absolutely need to have with our finances, yet there are times where we’re asked to disclose information in order to receive something else. For example, you are going to have to disclose a lot of information to open up a bank account or apply for a loan. In exchange for giving over some of your most sensitive information, you’re going to be able to demand certain privacy considerations as well. However, how do you know what you’re required to do and what they are required to do? As you might imagine, there are laws covering the nature of privacy when it comes to your finances. One such collection of laws can be found in the Gramm-Leach-Bliley Act.
The GLB Act can be divided into two categories — what is going to be required of financial institutions and what projects consumers and customers actually have.
So let’s start with the financial institution side, shall we? Well, the definition of a “financial institution” per the GLB Act is going to be any company that offers financial products or services to individuals, such as loans, financial or investment advice, or even insurance. So yes, your insurance company is considered a financial institution as well, even if they aren’t necessarily giving you money. The FTC is the watchdog of all financial institutions, and they have the authority to enforce the law with financial institutions that aren’t covered by the federal banking outlets, the SEC, the CFTC, or state insurance authorities. Non-bank mortgage lenders, loan brokers, some investment advisers, tax preparers, providers of real estate settlement services, and debt collectors are all included in this “umbrella” of sorts.
They are obligated to keep your information confidential and take steps to protect it at all costs. These steps are often audited in standard security compliance rounds, so you don’t have to worry about a company that claims to protect your information and never does anything to actually live up to their words.
So, what about the other side? Well, according to the GLB Act, a company’s duties are going to depend on whether we’re talking about consumers or customers. They might sound like the same thing, but they do have some differences according to the law.
A consumer is considered to be an individual that acquires or has acquired a financial product or service from a financial institution for “personal, family, or household reasons”. A customer is actually a consumer that has a continuing relationship with the financial institution in question. So it’s one thing to use a company’s financial services for the short term or one time, and it’s a different thing to establish a long term relationship.
Customers are entitled to receive a privacy notice automatically because they have an established relationship. That doesn’t mean that consumers are just out in the cold though. Consumers only receive a privacy notice if the company shares the consumers’ information with companies that are not affiliated with it. The privacy notice cannot just be posted on a wall — it has to be delivered by mail. Of course, there’s no guarantee that individuals will actually read the privacy notice, but that’s not the point of the law. The point of the law is to make sure that you know what the privacy provisions are for that company. They can’t force you to read it, and they can’t demand that you read it. They can simply provide it to you in a reasonable fashion.
For example, if you apply for a loan with an online lender and say that you read the privacy notice but you really didn’t, you can’t go back and say that you didn’t know something was in there. You said on the application that you read it; hence the company is not legally liable for any problems that arise out of the things that you didn’t read.
That’s why it’s so important to stop skipping over the fine print and get back to the things that really matter. Now is definitely the right time to get started with everything else on your financial plate — why not make today the right time after all?