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New Model Consumer Privacy Notices Provide Safe Harbor

Beginning on January 1, 2011, financial institutions subject to the privacy requirements of the Gramm-Leach-Bliley Act (GLB Act) must use revised model consumer privacy notices to qualify for a safe harbor from enforcement actions.

The GLB Act requires certain "financial institutions" to provide initial and annual privacy notices to their customers. These financial institutions include, but are not limited to, mortgage lenders, finance companies, mortgage brokers, auto dealers, check cashers, "pay day" lenders, wire transferors, collection agencies, credit counselors and other financial advisers, tax preparers, and providers of real estate settlement services. The consumer privacy notices must describe the entities' information collection and sharing practices and inform customers of their right to opt out of certain of these practices.

The FTC and seven other federal regulators have developed model consumer privacy notices to make it easier for companies to comply with the law and for consumers to understand how financial institutions collect and share their personal financial information and to compare different institutions' information practices.

The federal regulators have also made available an online form builder that financial institutions can download and use to develop and print customized versions of a model consumer privacy notice. The online form builder is available with several options. Easy-to-follow instructions for the form builder will guide the company in selecting the version of the model form that fits its practices, such as whether the institution provides an opt-out for consumers.

Financial institutions that use, and follow the instructions contained in, the online form builder will qualify for the safe harbor from enforcement actions based on the disclosure requirements in the GLB Act.

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