Third Party Vendors, Maintenance Contracts, and Privacy
by Mary Beth Guard, BOL Guru
Question: I may have thoroughly confused myself...and may confuse you, too after this....but, here goes: our bank does document imaging using software provided by a nonaffiliated third party. We image proof items, loan files, deposit account documents, etc. If the vendor had to perform maintenance on our system, they might have access to consumer (noncustomer) and customer information. I'm trying to decide whether their services fall under a Section 14 exception. If so, we would just need to make sure our contract with the vendor contains the required verbiage---right? If they are a Section 13 exception, then I'm thinking we would have to provide notice to our customers and noncustomers alike as well as having the appropriate language in the contract.
Answer: The vendor would be considered to fall within the Section 14 exception of the privacy rule. That means:
the customer would not have a right to opt out of this type of information sharing because it only occurs as necessary to effect a transaction initiated by the customer; and
you do not need to specifically mention this type of information sharing in your privacy notice. It is considered covered under the generic language of "We share information only as permitted by law" or something to that effect.
On the other hand, this service provider WOULD be covered under the information security guidelines. As a result, you will need to have a contract provision in place with the vendor that specifically obligates it to implement and maintain an information security program designed to achieve the objectives of the information security guidelines.
The two sets of requirements (the privacy rule vs. the information security guidelines) are very different.
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