The Financial Modernization Act of 1999, also known as the "Gramm-Leach-
Bliley Act" or “GLB Act”, includes provisions to protect consumers’ personal
financial information held by financial institutions. In the Act, Section 501 titled
“TITLE V—PRIVACY Subtitle: Disclosure of Nonpublic Personal Information”
contains three principal components to the privacy requirements: (1) the
Financial Privacy Rule, (2) the Safeguards Rule and (3) Pre-texting provisions.
Details of each of the rules are given below:
Financial Privacy Rule - governs the collection and disclosure of
customers' personal financial information by financial institutions. It also
applies to companies, whether or not they are financial institutions, who
receive such information.
Safeguards Rule - requires all financial institutions to design, implement
and maintain safeguards to protect customer information. The Safeguards
Rule applies not only to financial institutions that collect information from
their own customers, but also to financial institutions "such as credit
reporting agencies" that receive customer information from other financial
institutions.
Pre-texting - provisions of the GLB Act protect consumers from individuals
and companies that obtain their personal financial information under false
pretenses, a practice known as "pre-texting”.
The Financial Privacy Rule and the Safeguards Rule apply to "financial
institutions," such as banks, securities firms, insurance companies, and many
other companies providing different types of financial products and services to
consumers. Some of the service areas covered include companies that are in the
business of lending money, brokering securities, servicing any type of consumer
loan, transferring or safeguarding money, preparing individual tax returns,
providing financial advice or credit counseling, providing residential real estate
settlement services, collecting consumer debts and an array of other activities.
The definition of a “financial institution” is very broad and can cut a very wide
path across many different industries.
