The Federal Trade Commission yesterday issued for public comment proposed privacy rules that contain a very broad definition of the term “financial institution” and thus subject a wide range of businesses to the Gramm-Leach-Bliley Act. The act is a financial modernization law passed last year that will allow banks, securities firms and insurance companies to enter into one another’s businesses.
As expected, the FTC’s definition of what constitutes a financial institution includes several entities not traditionally considered in the same business sector as banks and securities firms. Included in the FTC’s definition are retailers that issue credit, manufacturers of computer hardware and software, travel agencies operated in connection with financial services, real-estate appraisers, personal-property appraisers and career counselors for employees in financial occupations.
Any firms in those fields that offer a financial product to consumers or households would have to notify customers of their privacy policies and give them the chance to opt out of having their financial information shared with other companies.
The FTC’s rules, which follow other rules issued earlier in the month by other government agencies, including the Federal Reserve Board and the Office of the Comptroller of the Currency, are open to public comment until March 31. The agencies will then draft the final regulations, which are scheduled to become effective in November.