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Using the Service Provider Exception

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Question: 
What is the best way for a bank to disclose their privacy policy if they want to use the 40.13 exception for service providers and joint marketing? Our bank wants to reserve the right to market our products through nonaffiliated third parties if the occasion arises, but we want to avoid having to do "optout" at this point.
Answer: 

You raise two issues. One is whether the optout right will arise if you simply reserve the right to market your products through nonaffiliated third parties. Yes, it will, unless the nonaffiliated party is another financial institution, in which case you could escape optout rights under the 40.13 exception if you are going to be jointly marketing the product with the third party. Reserving the right to share the information is tantamount to disclosing that you are actually going to share, as far as the privacy regs are concerned. If you don't intend to engage in such conduct immediately, you might be better off not reserving the right and simply instead noting that you have the right to change your policy at any point in the future upon giving proper notice. The second issue is how you disclose information sharing under 40.13. Keep in mind that you will need to have a contract provision with the joint marketer or service provider that prohibits further sharing of the information. Assuming you've gotten that, use the language in Sample Clause A5, which reads as follows:

We may disclose the following information to companies that perform marketing services on ourbehalf or to other financial institutions with whom we have joint marketing agreements:

Information we receive from you on applications or other forms, such as [provide illustrative examples, such as "your name, address, social security number, assets, and income"];

Information about your transactions with us, our affiliates, or others, such as [provide illustrative examples, such as "your account balance, payment history, parties to transactions, and credit card usage"]; and

Information we receive from a consumer reporting agency, such as [provide illustrative examples, such as "your creditworthiness and credit history"].

First published on BankersOnline.com 1/15/01

First published on 01/15/2001

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