How, if at all, can we participate (sell portions of)loans if we have stated to our customers that we will not share their non-public information with unaffiliated third parties? Also, if we purchase consumer loans BUT NOT the servicing rights (retained by the seller)are we under any requirement to give privacy disclosures annually? I have read that no obligations if we sell and do not retain servicing rights but this is a little different. Any one have any ideas??

Section _.14 allows for disclosure of NPI when done in consideration of an actual or anticipated secondary market or similar transaction. I would think that a participation would fall under the "similar transaction" portion of this exception and would be able to be consummated without disclosure or opt-out.

Also, when purchasing consumer loans, but not the servicing rights you would have no customer relationship and no automatic disclosure obligations. However, you would have consumers and if you were going to subsequently share any of that NPI (other than as allowed by section _.14 or _.15) you would have an obligation to provide at least the short form privacy notice to those consumers and provide an opt-out opportunity before sharing.

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Jim Bedsole, CRCM, CBA, CFSA

Opinions expressed are my own, and do not necessarily reflect those of my employer.

Regarding an "anticipated" secondary market transaction, i.e., the loan will be sold within two weeks after closing (the transfer disclosure is provided at closing to the borrower), is a notice required from the bank? The loan will close in our name, but then be transferred within a couple of weeks.

Our affiliates are providing the Privacy Notice at the loan application - using the KISS principle - because some loans are sold, some kept in portfolio, some participated...

Bob, I believe in your scenario, you are required to provide the borrower with your privacy notice at or before the loan closing. In addition, the purchaser of the servicing rights to that loan (which may or may not be the investor purchasing the loan) would be responsible for providing their privacy notice within a reasonable amount of time after acquiring the servicing rights. You cannot avoid giving your notice because you anticipate selling the loan shortly after closing. The "anticipated secondary market transaction" language in §_.14 means that you can share the information with the potential purchaser of the loan even if the notice you gave to your customer says "We don't share information with nonaffiliated third parties except as allowed by law".

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Jim Bedsole, CRCM, CBA, CFSA

Opinions expressed are my own, and do not necessarily reflect those of my employer.

the attorneys of our division of the bank were very careful in crafting our privacy disclosure to customers to say that, even though we don't share at all in normal circumstances (even internally with other divisions of the bank), we can share for such things as loan sales, audits, etc. They wanted to make certain that we didn't make a promise to the client that we couldn't keep and create problems for ourselves for things that otherwise are legally permissible.