[Federal Register Volume 65, Number 113 (Monday, June 12, 2000)]
[Rules and Regulations]
[Pages 36782-36783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14785]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 716


Privacy of Consumer Financial Information

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board is issuing a final rule to amend the 
requirements for privacy and opt out notice where there is a joint 
relationship on a loan. The amendment provides that a credit union is 
required to provide a separate initial notice and a separate opt out 
notice to each borrower and guarantor only if the credit union actually 
shares their nonpublic personal information with nonaffiliated third 
parties outside of one of the permissible exceptions. This amendment 
does not affect the right of borrowers and guarantors to receive 
notices if they are otherwise entitled to receive them as members of 
the credit union.

EFFECTIVE DATE: This rule is effective November 13, 2000. However, 
compliance is not required until July 1, 2001.

ADDRESSES: National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.

FOR FURTHER INFORMATION CONTACT: Mary F. Rupp or Regina M. Metz, Staff 
Attorneys, Division of Operations, Office of General Counsel, at the 
above address or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

Background

    On February 24, 2000, the NCUA Board issued a proposed rule and, on 
May 8, 2000, a final rule applicable to all federally-insured credit 
unions, as required by the Gramm-Leach-Bliley Act (GLB Act). 65 FR 
10988 (March 1, 2000) and 65 FR 31722 (May 18, 2000). The Board 
received 99 comments on its proposal. The final rule required credit 
unions to have a privacy policy and provide certain disclosures and 
notices to individuals about whom credit unions collect nonpublic 
personal information. In drafting the rule, the NCUA participated as 
part of an interagency group composed of representatives from the NCUA, 
the Federal Trade Commission, the Office of Comptroller of the 
Currency, Board of Governors of the Federal Reserve System, Secretary 
of the Treasury, and Securities and Exchange Commission (collectively, 
the Agencies). The final rule took into account the unique 
circumstances of federally-insured credit unions and their members but, 
as required by the GLB Act, was consistent and comparable with the 
regulations of the other Agencies.
    The other Agencies' final regulations, which were issued after the 
NCUA, permit a financial institution to provide a single initial notice 
and opt out notice if two or more consumers jointly obtain a financial 
product or service. Unlike the other Agencies, NCUA's rule specifically 
excluded from the provisions governing joint relationships, the 
authority to provide only one notice in the case of a loan. 65 FR at 
31743, 31745. The Board's rationale for the exclusion was that ``co-
makers and guarantors should receive the notice and right to opt out 
because of the extent and nature of nonpublic personal information 
provided to the credit union in conjunction with these types of 
transactions.'' 65 FR at 31728. Upon further reflection, the Board is 
persuaded by the 50 commenters that objected to requiring separate 
notices for all joint account holders. The commenters noted that the 
administrative and financial burden of tracking down joint account 
holders is substantial and that one notice is consistent with other 
consumer loan regulations. The Board believes that to accomplish its 
goal of protecting borrowers and guarantors from the sharing of their 
nonpublic personal information, notice to all borrowers and guarantors 
is not necessary and has amended its rule to require notices only under 
limited circumstances. The Board is amending the rule to provide that a 
credit union must only provide separate notices to individuals, other 
than the primary borrower, if a credit union is actually sharing 
nonpublic personal information about them.

Final Amendment

    Sections 716.4(f)(2) and 716.7(d)(6) of this amendment only require 
a credit union to provide a separate initial notices and opt out notice 
to all borrowers and guarantors if the credit union shares their 
nonpublic personal information with nonaffiliated third parties other 
than for purposes permitted under Secs. 716.13, 716.14 and 716.15. In 
addition, no annual notices are required.
    This amendment does not affect the notice requirements for existing 
members in Sec. 716.4(d) or the duty in Secs. 716.4, 716.5 and 716.7 to 
provide initial, annual and opt out notices to co-borrowers and 
guarantors who have a member relationship with the credit union, in 
addition to a co-borrower or guarantor relationship. Finally, this 
provision does not affect the right of a co-borrower or guarantor to 
opt out as permitted for other types of joint relationships.
    This provision is effective November 13, 2000, and compliance is 
mandatory July 1, 2001. This means that, like the recently passed final 
rule, all notices required by this amendment must be mailed by July 1, 
2001. 65 FR at 31749.
    The Board is issuing this rule as a final rule because it decreases 
the regulatory burden and there is a strong public interest in having a 
final privacy rule in place that allows federally-insured credit unions 
ample time to comply. Accordingly, and for good cause, because the rule 
decreases the regulatory burden, pursuant to 5 U.S.C. 553(b)(3)(B), 
notice and public procedures are impracticable, unnecessary, and 
contrary to the public interest.

[[Page 36783]]

Regulatory Procedures

A. Paperwork Reduction Act

    The final rule does not impose any additional paperwork 
requirements on federally-insured credit unions.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires, subject 
to certain exceptions, that NCUA prepare an initial regulatory 
flexibility analysis (IRFA) with a proposed rule and a final regulatory 
flexibility analysis (FRFA) with a final rule, unless NCUA certifies 
that the rule will not have a significant economic impact on a 
substantial number of small credit unions. For purposes of the 
Regulatory Flexibility Act, and in accordance with NCUA's authority 
under 5 U.S.C. 601(4), NCUA has determined that small credit unions are 
those with less than one million dollars in assets. See 12 CFR 
791.8(a). NCUA's final rule will apply to approximately 1,626 small 
credit unions, out of a total of approximately 10,627 federally-insured 
credit unions.
    The NCUA Board has determined and certifies that the final rule 
will not have a significant economic impact on a substantial number of 
small credit union. The reason for this determination is that the final 
rule decreases the regulatory burden for all federally-insured credit 
union. This will result in reduced costs for all federally-insured 
credit unions.

C. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their regulatory actions on state and local 
interests. In adherence to fundamental federalism principles, NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order. This final rule will 
apply to all federally-insured credit unions, but it will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government. Section 
507 of the GLB Act states that state law may provide greater consumer 
protections than this proposed rule. In that event, federal law would 
not preempt state law. NCUA has determined the final rule does not 
constitute a policy that has federalism implications for purposes of 
the executive order.

D. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) provides generally for congressional review of agency 
rules. A reporting requirement is triggered in instances where NCUA 
issues a final rule as defined by Section 551 of the Administrative 
Procedures Act. 5 U.S.C. 551. NCUA has recommended to The Office of 
Management and Budget that it determine that this is not a major rule, 
and is awaiting its determination.

E. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    NCUA has determined that the final rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

Agency Regulatory Goal

    NCUA's goal is clear, understandable regulations that impose 
minimal regulatory burden. This rule reduces a requirement for 
federally-insured credit unions and so it meets the agency's goal of 
reducing regulatory burden.

List of Subjects 12 CFR Part 716

    Consumer protection, Credit unions, Privacy, Reporting and 
recordkeeping requirements.

    By the National Credit Union Administration Board on June 5, 
2000.
Becky Baker,
Secretary of the Board.

    For the reasons set out in the preamble, NCUA amends 12 CFR part 
716 as follows:

PART 716--PRIVACY OF CONSUMER FINANCIAL INFORMATION

    1. The authority citation for part 716 continues to read as 
follows:

    Authority: 15 U.S.C. 6801 et seq., 12 U.S.C. 1751 et seq.


    2. Amend Sec. 716.4 by redesignating paragraph (f) as paragraph 
(f)(1) and adding paragraphs (f)(2) to read as follows:


Sec. 716.4  Initial privacy notice to consumers required.

* * * * *
    (f)(1) * * *
    (2) Special rule for loans. (i) You are required to provide an 
initial notice to a borrower or guarantor on a loan if you share his or 
her nonpublic personal information with nonaffiliated third parties 
other than for purposes under Secs. 716.13, 716.14 and 716.15. (ii) You 
may satisfy the annual notice requirements of Sec. 716.5 by providing 
one notice to those borrowers and guarantors jointly.
* * * * *

    3. Amend Sec. 716.7 by adding paragraphs (d)(6) to read as follows:


Sec. 716.7  Form of opt out notice to consumers and opt out methods.

* * * * *
    (d) * * *
    (6) Special rule for loans. (i) You are required to provide an 
initial opt out notice to a borrower or guarantor on a loan if you 
share his or her nonpublic personal information with nonaffiliated 
third parties other than for purposes under Secs. 716.13, 716.14 and 
716.15.
    (ii) You may satisfy your annual opt out notice requirement by 
providing one notice to those borrowers and guarantors jointly.
* * * * *
[FR Doc. 00-14785 Filed 6-9-00; 8:45 am]
BILLING CODE 7535-01-U