Mortgage Considerations

Generally:  As we say goodbye to 2007 and hello to 2008 we look at the some of the regulatory proposals and bills that are currently in Congress.  The state of the mortgage industry remains in uncertainty, with the increase in home loan foreclosures and additional subprime mortgage loans resetting in 2008, the mortgage market shake up will likely continue. 

Regulatory Changes:  The Department of Housing and Urban Development has designed a plan to amend the Real Estate Settlement Procedures Act (RESPA), which on November 2, 2007 was passed onto the Office of Management and Budget.   Watch for comments and the proposed ruling to become public early 2008. With the current climate in the mortgage industry, we believe the RESPA overhaul will take a front seat in 2008, along with additional consumer friendly disclosures. 

Some other regulations to watch for are: The FHA Modernization Act, looking to keep the dream of home ownership alive, by lowering down payment requirements allowing FHA to insure higher loan amounts and introducing FHA pricing flexibility, FHA could be the answer to many families that have mortgage loans that are due to reset.  FHA introduced another initiative in the fall of 2007, the FHA Secure loan.  This program allows borrower’s that have had a good credit history, until their mortgage loan had reset, to refinance their current balance into a more affordable payment allowing families the option of staying in their home.  There could be another solution on the horizon for borrowers with sub-prime mortgage loans that are due to reset. Treasury
Secretary Henry Paulson, other members of the treasury and key players in the mortgage arena have introduced a temporary rate freeze, “Hope Now”.  This proposal is still in the preliminary phases with the details not yet finalized, watch for more discussions on this topic in 2008.

In addition, Federal Reserve Chairman Ben Bernanke promised Congress that his agency would issue rules in 2007 to combat abusive subprime mortgage-lending practices and misleading loan solicitation and advertising. The Federal Reserve Board plans to use its authority under the Home Ownership and Equity Protection Act to address specific practices that are unfair or deceptive. Chairman Bernanke expected that the FRB will propose additional rules under HOEPA in 2007.  

Legislative Changes:  Congress has introduced a number of bills some of which would provide relief to struggling borrowers.  These include the Emergency Home Ownership and Mortgage Equity Protection Act (H.R. 3609) which would allow bankruptcy judges to modify loan terms for borrowers going through Chapter 13 bankruptcy and the Emergency Mortgage Loan Modification Act (H.R. 4178) which would protect mortgage servicers who modify loan terms from legal liability.   Other bills such as the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915) and the Escrow, Appraisal and Mortgage Services Improvement Act (H.R. 3837) seek to reform mortgage practices. H.R. 3915 passed the House in November and was expected to encounter opposition in the Senate.  In fact, the Senate has just introduced its own mortgage reform legislation, the Homeownership Preservation and Protection Act, S. 2452.

Lending Considerations

Regulatory Changes:  In May 2007, after years of careful consideration, the Federal Reserve Board (FRB) issued proposed amendments to the Truth-in-Lending open-end lending rules. The primary goal of the proposed changes is to make the open-end credit disclosures easier to understand and more useful to the consumer making credit decisions. The changes will affect credit and charge card accounts as well as all other types of revolving open-end credit that is not secured by a home.  Revisions to home equity lines of credit (HELOCs) rules will be considered separately. 

Specifically, the FRB has proposed changes to credit and charge card application and solicitation disclosures, open-end account opening disclosures, periodic statements, change-in-terms notices and advertising requirements.  If adopted as proposed, financial institutions will need time to implement significant changes to policies and procedures, operational systems as well as open-end account documentation.

In addition, the proposal would implement some of the amendments to the Truth in Lending Act passed by Congress as part of the Bankruptcy Reform Act of 2005.  For example, periodic statements for all types of plans must disclose the amount of any late fee as well as the earliest date the fee would be imposed. 

The comment period ended October 12, 2007.  After reviewing the comments, the Federal Reserve Board plans to conduct additional consumer testing.  We should expect to see final rules in mid-2008.

Deposit Considerations

Regulatory Changes:  On September 21, 2007, the Federal Reserve Board, Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation and National Credit Union Administration proposed Guidance related to Garnishment of Exempt Federal Benefit Funds (e.g., social security payments). The comment period for the proposal closed November 27, 2007. Financial institutions should incorporate any final guidance that may be issued into their garnishment policies and procedures.

Legislative Changes:  The Consumer Overdraft Protection Fair Practices Act (H.R. 946) has been introduced. This bill would: 1) amend the Truth in Lending Act to clarify that overdraft fees are finance charges (i.e., it would require the APR to be disclosed); 2) require written consumer consent (i.e., an “opt in”) before enrollment in an overdraft loan program; 3) require financial institutions to warn consumers when an ATM withdrawal will trigger an overdraft fee-and allow the consumer to cancel the transaction at that time; and 4) prohibit financial institutions from manipulating the order of check clearing. Given industry opposition, as well as some of the technical difficulties in implementing some of these requirements, the likelihood of it passing “as is” seems very low. Possibly for these reasons, interest in the bill has waned in recent months. However, given the amount of industry press it generated over the summer and the relative significance of the proposals, this legislation is worthy of being watched closely.

Individual Retirement Accounts (IRA)/Health Savings Accounts (HSA)

Generally:  There are a host of miscellaneous bills that could affect financial institutions engaged in IRA business. For example, there is a bill that makes technical corrections to the Pension Protection Act (S. 1974/H.R. 3361), a bill that makes the charitable contributions rules permanent (S. 819/H.R. 1419), and a couple of bills that address the establishment of automatic IRAs (S. 1141/H.R. 2167, S. 1288). In addition, given the prominence of health care as a national issue there is always the possibility of legislation affecting HSA’s, which, of course, might be very limited given that 2008 is an election year.

Regulatory Changes:  On November 27, 2007, the Internal Revenue Service released new model contracts for health savings accounts (HSA). Form 5305-B, Health Savings Trust Account and Form 5305-C, Health Savings Custodial Account have been updated to incorporate changes from the Health Opportunity Patient Empowerment (HOPE) Act of 2006.The changes address increased contribution limits as well as new methods for funding an HSA using dollars from an IRA, a health flexible spending arrangement or a health reimbursement arrangement.

Privacy/Identity Theft

Affiliate Marketing Regs:  On October 25, 2007, the banking regulators jointly issued final Affiliate Marketing Regulations which implement Section 214 of the Fair and Accurate Credit Transactions (FACT) Act. These regulations provide model language and guidance for the notices financial institutions are required to send if they share customer information with their affiliates for marketing solicitation purposes. The regulations are effective January 1, 2008 with a mandatory compliance date of October 1, 2008. This requirement is far broader than the existing GLB and FCRA opt-outs, so many institutions that have never had to give those opt-outs may be covered by this new requirement.

Red Flag Regs:  On October 31, 2007, the banking regulators jointly issued final Red Flag regulations implementing Section 114 and 315 of the FACT Act. These regulations require all banks, savings associations and credit unions to have an Identity Theft Prevention Program, require users of consumer reports from the major consumer reporting agencies to be able to respond to notices regarding address discrepancies, and require credit a debit card issuers to meet certain requirements regarding changes of address. These regulations are effective January 1, 2008 with a mandatory compliance date of November 1, 2008.

Although the mandatory compliance dates are not until the fall of 2008, institutions will need to act far ahead of that time. Many institutions may include the Affiliate Marketing Notices with their annual privacy notice mailings to save the cost and expense of another mailing. The Identity Theft Prevention Program requirement must be developed and approved prior to the compliance date, and could take time to develop and conduct mandatory staff training, particularly if new tools are required for the detection of Red Flags for Identity Theft.

These two new FACT Act requirements will be a major compliance focus at many institutions in 2008.

Purpose           

If you are a homeowner and believe your property is not located in the designated 100-year floodplain [also known as a 1-percent-annual-chance floodplain, or Special Flood Hazard Area (SFHA)], as shown on the effective Flood Insurance Rate Map or Digital Flood Insurance Rate Map for your community and you would like the Federal Emergency Management Agency (FEMA) to make an official determination regarding the location of your property relative to the SFHA, you may request a Letter of Map Amendment (LOMA) or a Letter of Map Revision Based on Fill (LOMR-F).

The tutorials in this series were designed to walk you through the application and information-gathering processes that you must follow to request single-lot/single-structure LOMAs and LOMR-Fs. The tutorials in this series also provide you with online tools to complete portions of the MT-EZ form (used for single-lot/single-structure LOMAs) and MT-1 forms (used for LOMR-Fs), which you may then print and mail to FEMA at the address provided in the form instructions with all required supporting information, signatures, and review and processing fees (only for LOMR-Fs).

Additional information about the LOMA and LOMR-F request processes follows. If you have not already done so, we encourage you to download copies of the MT-EZ and MT-1 forms, available in the Forms section of this site, before launching the tutorials.

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Background

National Flood Insurance Program (NFIP) regulations require flood insurance for insurable structures located in SFHAs that carry a mortgage loan backed by a federally regulated lender or servicer.  The SFHAs are the areas subject to inundation by the 1-percent-annual-chance) flood, which is also referred to as the base, or 100-year, flood.

For a LOMA to be issued to remove a structure from the SFHA, NFIP regulations require that the lowest adjacent grade (the lowest ground touching the structure) be at or above the Base Flood Elevation (BFE). To remove an entire lot from the SFHA, NFIP regulations require that the lowest point on the lot be at or above the BFE.

A LOMR-F is submitted for properties on which fill has been placed to raise a structure or lot to or above the BFE. NFIP regulations require that the lowest adjacent grade of the structure be at or above the BFE for a LOMR-F to be issued to remove the structure from the SFHA. The participating community must also determine that the land and any existing or proposed structures to be removed from the SFHA are “reasonably safe from flooding.” To remove an entire lot and structure, both the lowest point on the lot and the lowest adjacent grade of the structure must be at or above the BFE.

The issuance of a LOMA or LOMR-F by FEMA eliminates the Federal flood insurance purchase requirement as a condition of Federal or federally backed financing. However, lenders retain the prerogative to require flood insurance as a condition of any loan as part of their standard business practices, regardless of the location of the structure.

Certain sections of the LOMA and LOMR-F application forms must be certified by a Registered Professional Engineer or Licensed Land Surveyor. Therefore, requesters may incur certain fees associated with obtaining data and hiring a Registered Professional Engineer or Licensed Land Surveyor to provide and certify certain information that must be submitted with LOMA and LOMR-F requests. Information about the required supporting information and FEMA review and processing fees (only for LOMR-Fs) is provided in the MT-EZ and MT-1 Forms Packages, available in the Forms section of this site, and in the LOMA and LOMR-F modules of this tutorial series.

If your house was built on natural ground and its lowest adjacent grade is at or above the BFE, and you would like to request a LOMA, please go to the LOMA Tutorial.  (See minimum system requirements and specifications below.)

If your house was built on fill (or has been elevated by the placement of earthen fill), and you would like to request a LOMR-F, please go to the LOMR-F Tutorial. (See minimum system requirements and specifications below.)  Fill is defined as material from any source placed to raise the ground to or above the BFE. The common construction practice of removing unsuitable existing material (topsoil) and backfilling with select structural material is not considered the placement of fill if the practice does not alter the existing (natural grade or ground) elevation, which is at or above the BFE. Fill that is placed before the date of the first NFIP map showing the area in an SFHA is considered natural grade.

April 7, 2008 - Consumer Credit release

April 16, 2008 - Beige Book release

April 27-30, 2008 - Fair Isaac InterACT Conference

April 29-30, 2008 - Fed meeting

April 30 - May 2, 2008 - CBA Community Reinvestment Act Conference

May 7, 2008 - Consumer Credit release

May 31, 2008 - Quarterly Banking Profile release

June 4-6, 2008 - CBA Collections Conference

June 6, 2008 - Consumer Credit release

June 11, 2008 - Beige Book release

June 24-25, 2008 - Fed meeting

July 7, 2008 - Consumer Credit release

July 23, 2008 - Beige Book release

August 5, 2008 - Fed meeting

August 7, 2008 - Consumer Credit release

August 31, 2008 - Quarterly Banking Profile release

September 3, 2008 - Beige Book release

September 5, 2008 - Consumer Credit release

September 7-9, 2008 - CBA Home Equity Conference

September 16, 2008 - Fed meeting

October 7, 2008 - Consumer Credit release

October 15, 2008 - Beige Book release

October 28-29, 2008 - Fed meeting

November 5-7, 2008 - CBA Fair Lending Conference

November 7, 2008 - Consumer Credit release

November 31, 2008 - Quarterly Banking Profile release

December 3, 2008 - Beige Book release

December 3-5, 2008 - CBA Student Lending Conference

December 5, 2008 - Consumer Credit release

December 16, 2008 - Fed meeting

The skyrocket trajectory of the island real-estate market hit new heights last week with a $100 million sale of an oceanfront estate, but only time will tell if there’s more fuel in the rocket.

Real estate mogul Donald Trump sold the former Abe Gosman estate at 515 N. County Road after floating the idea of razing the mansion and replacing it with a luxury hotel.

The Trump sale was the high point of a season of big-ticket real estate transactions.

Unlike the rest of the country, which has seen sales and prices fall, the island market is steaming ahead, according to real estate attorney Les Evans.

“It’s the opposite of a bubble,” Evans said. “Demand is increasing while supply is decreasing. I see it continuing. Look at the record sales we’ve had in the last few weeks.”

Evans, who regularly produces a survey of the market called The Evans Report, said Thursday the median sale price of single-family homes was up $870,000 to $4.67 million in the first quarter of the year.

The median price for condos was $800,000, up $15,000.

Evans said the market is growing because investors recognize the growth potential for Palm Beach real estate and are putting their money there instead of in the stock market or other investments.

“You can’t live in a stock or a CD,” he said. “Here you can live and enjoy.”

In addition, the supply is shrinking because of a trend of combining several smaller properties into fewer larger ones, such as replacing apartment buildings with a few townhouses.

“The number of units here is shrinking while you’ve got the Baby Boomers coming in and others who are looking at it as a safe investment.”

Here is a look at a few of the notable sales of the season:

Trump house

515 N. County Road, $100 million

Trump bought the mansion at a bankruptcy auction for $41.35 million and spent $25 million renovating it.

He dropped his asking price from $125 million but still managed to set a sales record.

The main house covers 62,000 square feet. Two guest houses and a 50-car garage bring the total square footage to 81,738.

The buyer was undisclosed but is said to be Russian.

Although the house is under contract, the sale could still fall through, putting the hotel project back on the table, Trump said.

Kimmel estate

1236 S. Ocean Blvd., more than $75 million

Retailer and philanthropist Sidney Kimmel closed in April on the sale of 1236 S. Ocean Blvd. for a price said to be in excess of $75 million.

John L. Thornton and wife Margaret bought the Kimmel property. John Thornton was president and co-chief operating officer of Goldman Sachs from 1999 to 2003.

The property, on 5 acres with 316 feet of oceanfront, was listed with Paulette Koch and Dana Koch of The Corcoran Group.

According to one broker, the oceanfront property wasn’t big enough to go around, drawing as many as 20 qualified prospects and numerous bidders.

Koch said interested parties included celebrities, sports figures and team owners, wealthy Europeans, a Saudi prince, hedge fund experts, Fortune 500 CEOs “and other captains of industry.”

Lindemann estate

60 Blossom Way,

$70 million-80 million

Entrepreneur and art collector George Lindemann has indicated he will close on the sale of 60 Blossom Way about June 1, at a price said to be between $70 million and $80 million.

Venezuelan native Victor Vargas, president of Banco Occidental de Descuento, is the buyer.

The Lindemann property was not on the market and was said to be not for sale “at any price.” The deal was put together by broker Lawrence Moens, whose speciality is private sales.

The Lindemanns’ 27,000-square-foot house, built in 2000, was designed by Peter Marino in the Polynesian style of Bali. The 3.7-acre lot has 320 feet of ocean frontage.

Swanson spec house

589 N. County Road, about $40 million

Palm Beach developer Dan Swanson of Addison Development Co. in December had his new oceanfront spec mansion at 589 N. County Road under contract for an undisclosed sum.

Swanson declined to comment on the deal, but sources in town put the sales price between $40 million and the list price of $47 million.

Swanson bought the property for $11.8 million in December 2001 from the estate of Doris Merrill Magowan. It has 1.5 acres with 150 feet of direct oceanfront. A 1962 Bermuda-style home, guest house and staff quarters were razed.

The developer replaced them with a Mediterranean compound: a main house with 15,700 air-conditioned square feet, two guest houses and a seven-car garage.

The Reef

702 N. County Road, $31.85 million

The Reef, lauded as an architectural gem at The Paris Exposition of 1937, is still a scene-stealer seven decades later, landing $31.85 million in a private, very quiet sale in October.

The buyer of the landmarked oceanfront mansion at 702 N. County Road is Stephen M. Ross, co-owner of the Miami Dolphins and chairman, CEO and founder of The Related Companies, a real-estate development empire that created the Time Warner Center and dozens of luxury towers in Manhattan.

The Reef was not listed for sale, and no real estate brokers were involved in the deal.

Ross, who paid $6.36 million for a condominium at Il Lugano in 2002, is one of the four owners of CityPlace in West Palm Beach, which The Related Companies developed.

The sellers were Anita and Stuart Subotnick, executive vice president and partner in Palm Beacher John Kluge’s Metromedia empire.

The Subotnicks paid $9 million for The Reef in October 1996.

Myers house

460 Worth Ave., $19.94 million

Stephen E. Myers Sr., co-founder and chairman of US Cable Group, in February sold his house fully furnished for $19.94 million, plus an unspecified sum for the contents. It had been listed at $23.9 million and came on the market in fall 2006.

According to the Palm Beach Board of Realtors, the sale was not within its Multiple Listing Service.

According to records at the Palm Beach County Property Appraiser’s Office, Karlheinz Andresen and his wife, Marianne, of Hamburg, Germany, bought the property, which is just south of the Town Docks.

Myers paid $4 million for the property in June 1993.

The Mediterranean-style villa was built in 1991 on the site where society grande dame Sue Whitmore had lived. But in 1920, it was the location of Villa des Cygnes - House of Swans - which Addison Mizner designed for Maj. Barclay H. Warburton.

Former Wilmot estate

1075 N. Ocean Blvd., $23 million

The former site of socialite Molly Wilmot’s home, developer Paul Wittman bought the vacant land and erected a “pure Mediterranean” design by architect Tom Kirchhoff.

In mid-July, exactly three years after he bought the oceanfront land, the mansion was under contract.

It closed in September for $23 million. Wittman’s partner in the project was Peter Callahan, former owner of the National Enquirer and Star tabloids.

The buyers were Michael Schulhof, former head of U.S. operations for Sony, and his wife Paola.

The two-story house has 7,390 square feet on the first floor and 4,357 square feet on the second floor. It sits next to the former Kennedy estate, now owned by Marianne and John Castle.

Gittis estate

212 Via Palma, $22 million

In January, the estate of Howard Gittis had a contract for his home at 212 Via Palma, which was listed for $23.5 million.

The contract price was not disclosed but was said to be about $22 million, not much below the listing price of $23.5 million. More impressive was its short stay on the market - less than six weeks.

Designed in 1952 by Marion Sims Wyeth, the home was listed about Dec. 1 with Paulette Koch and Dana Koch of The Corcoran Group. Gittis’ estate put it on the market less than three months after his sudden death at his home in New York.

Betsy Green, a New York broker with a desk in Palm Beach, represented the buyer, who is said to be Manhattan property baron Lloyd Goldman, one of the largest real estate owners in New York.

Records at the Palm Beach County Property Appraiser’s Office show Gittis bought the waterfront compound in ‘01 for $9.95 million.

Nuestro Paradiso

860 S. Ocean Blvd., $16 million

Nuestro Paradiso, a landmarked oceanview mansion designed by Addison Mizner associate Julius Jacobs, closed in November for $16 million, more than five years after being reintroduced to the market.

Since June 2006, the three-story Gothic-Mediterranean edifice had been listed for $22 million with Cristine Condon of Sotheby’s International Realty. Steve Hall of Brown Harris Stevens represented the buyer, shopping center developer John J. Cafaro of Youngstown, Ohio, and his wife, Janet Silvestri Cafaro.

According to the Landmarks Preservation Commission, the house is “one of the best and well-preserved examples of the Mediterranean-style villa.” It was created in 1928 as a winter home for Ellis Z. Nutting, a sheet-music buyer for F.W. Woolworth.

Nuestro Paradiso is on a 1.5-acre lot and includes a 150-foot beach parcel, a large garden terrace, a 60-foot pool and a hard-surface tennis court. The new air-conditioned footprint after renovation was 18,663 square feet.

Il Lugano condo

300 Seminole Ave., $12.1 million

Miami Dolphins co-owner Stephen Ross set a sales record of his own - this one for condos - when he sold his penthouse at Il Lugano for $12.1 million.

The 5,798-square-foot unit’s five terraces offer wide views of the Intracoastal Waterway, Palm Beach and the Atlantic Ocean, according to broker Susan Polan.

Lee and Laura Munder of Palm Beach bought the condo.

The unit is the only penthouse on the west building of the two-building Il Lugano complex.

The unit has its own boat dock, private cabana and four-car garage, Polan said. The cachet of the building makes it special, she said.

Developer Richard Schlesinger and his son, Adam, converted the 46-year-old Dorset House’s 66 rental units into 14 luxury condominiums in 2000. As part of architect Gene Lawrence’s design, a floor was removed to add height to each unit.

Pamela Gottfried, president of Martha A. Gottfried Real Estate, said the price per square foot is likely a state record.

Biltmore condo

150 Bradley Place, $5 million

Slim-Fast founder S. Daniel Abraham in December let go of one of his properties at the Palm Beach Biltmore.

The buyer, financier, Broadway producer and philanthropist Roy L. Furman, paid $5 million for two combined units on a lower floor. The layout has three bedrooms and 41/2 baths, and covers more than 4,300 square feet.

Abraham, who owns a few units in The Biltmore, paid $4.5 million in November 2006 for 109-G and 110-F.

Furman, vice chairman of investment firm Jefferies & Co., is vice chairman of Lincoln Center and co-produced Monty Python’s Spamalot, The Pillowman and Dirty Rotten Scoundrels.

Smith commercial building

201 Chilean Ave., more than $2 million

Former Mayor Lesly Smith bought the commercial building at 201 Chilean Ave. that adjoins the Earl E.T. Smith Preservation Park named for her late husband.

The one-story structure once housed The Preservation Foundation of Palm Beach, which he co-founded.

The undisclosed price was said to be more than $2 million, no extra charge for nine parking spaces downtown.

The seller was Palm Beach art dealer John Surovek, who bought the 1,800-square-foot property “for about $1 million” in December 2004 from the Preservation Foundation.

Smith, who is president of the Fortin Child Care Foundation and the Fortin Foundation of Florida, said she will use the building to house their headquarters. She will move the groups’ offices from rented space at 125 Worth Ave.

Fed Survey Finds Tightening Lending Standards

The percentage of banks tightening lending standards during the past three months was near historic highs in nearly all loan categories, according to the Federal Reserve’s April survey of senior loan officers released on May 5th. Some 80 percent of U.S. banks said they tightened standards for making commercial real estate loans, and about 60 percent said they tightened lending standards on prime mortgages. Those tougher standards also extended to other types of consumer debt. For example, 70 percent of U.S. banks stiffened standards for approving home equity lines of credit, the survey found. About 40 percent of banks that make student loans said they expect their commitments to provide such loans this fall will decrease compared with last year. 

Bernanke: Action Needed to Avert Foreclosure Crisis (5/6/08)

The nearly unprecedented decline in home prices that is a key factor in the current wave of foreclosures will require a concerted government and private-sector response, Federal Reserve Chairman Ben Bernanke said at a Columbia Business School dinner in New York on May 5th. “Realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment,” Bernanke said. He added that Congress can take an important step by moving quickly to reconcile and enact legislation permitting the Federal Housing Administration “to increase its scale and improve its management of risks.” “Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It’s in everybody’s interest,” Bernanke said.

April News 

• Loans Exceeding Reg O Limits Before Officer Is Appointed Are Grandfathered (4/29/08)
• FDIC to Conduct Survey of Banks’ Efforts to Serve the Unbanked and Underbanked (4/11/08)
• FDIC’s Bair Testifies on Mortgage Bill (4/9/08)
• ABA Asks for Removal of TILA Provisions in Housing Bills (4/2/08)
• Fed Issues Dynamic Maps and Data on Subprime Loan Conditions (4/1/08)

• FinCEN SAR Activity Review (5/13/08)
  FinCEN launched Issue 13 of The SAR Activity Review Trends Tips & Issues. Section two of this issue highlights three recent FinCEN SAR analytical reports related to the Insurance Industry, Mortgage Loan Fraud and Residential Real Estate.  “Overall, the quality of SAR reporting has been quite good, indicating that insurance companies are well positioned to report suspected illicit activities relating to money laundering” the report said.  Section three provides examples of how BSA data played a role in healthcare fraud, tax evasion, and drug gang investigations.
• OFAC Removes Limit on Personal Remittances to Burma (5/12/08)
  The Department of the Treasury’s Office of Foreign Assets Control (OFAC) removed the limit on funds that U.S. individuals can send to family and friends in Burma, a Treasury news release said on May 12th.  The action “authorizes U.S. financial institutions to process transfers of funds, unlimited in amount, for noncommercial, personal remittances to or from Burma, or for or on behalf of an individual ordinarily resident in Burma” the news release said.  “This action will speed the flow of aid to the Burmese people by allowing Americans to send an unlimited amount of funds to their relatives and friends who are in need” said OFAC Director Adam J. Szubin.
• Risk-Based Pricing Notices Proposed (5/8/08)
  Lenders would be required to inform consumers when they are being offered less-favorable terms based on poorer credit scores under a joint proposal the Federal Reserve and the Federal Trade Commission issued May 8th. The proposal — mandated by the 2003 Fair and Accurate Credit Transaction Act — would require a risk-based pricing notice to be provided to consumers when they receive more expensive credit terms than those offered to individuals with better credit histories. The notice generally would be provided “after terms of the credit have been set, but before the consumer becomes contractually obligated on the credit transaction,” the Fed and the FTC said in a statement. There will be a 90-day comment period after the proposal is published in the Federal Register. For more information, contact ABA’s Nessa Feddis.
• FinCEN Strategic Plan for FY 2008-2012 (5/8/08)
  The Financial Crimes Enforcement Network (FinCEN) released Strategic Plan for 2008-2012, outlining FinCEN’s goals for the next five years.  Among its goals include: financial systems resistant to abuse by money launderers, terrorists and their financial supporters; detection and deterrence of money laundering, terrorism financing and other illicit activity; and efficient management, safeguarding, and use of BSA information.
• Wolfsberg Group Updates FAQs on Politically Exposed Persons (5/7/08)
  The Wolfsberg Group updated its 2003 Frequently Asked Questions (FAQs) on Politically Exposed Persons (”PEPs”).  The revised edition reinforces the position that only individuals holding senior, prominent or important positions with substantial authority over policy, operations or the use or allocation of government-owned resources can be PEPs (and that “Close Associates” and “Close Family” of PEPs should be included in the control framework for PEPs).  The FAQs also include guidance on assessing whether an individual is a PEP; managing PEP relationships other than in a private banking context; dealing with PEP involvement in operating companies and state owned enterprises; and managing individuals and related entities once the reason for their PEP designation is no longer applicable.
• Federal Reserve Announces Partnership with NeighborWorks® America (5/7/08)
  Federal Reserve Governor Randall S. Kroszner spoke about the Fed’s commitment in addressing foreclosures at the NeighborWorks® America Symposium on May 7th. In his speech, Kroszner discussed what the Fed is doing to assist communities struggling with the impact of foreclosures. Through a partnership with NeighborWorks® America, the Fed will be able to focus on efforts to stabilize neighborhoods that have experienced high rates of foreclosures, Kroszner said.  “Together, the Federal Reserve and NeighborWorks® America will develop and deploy resources, tools, strategies, and best practices for mitigating the impact of foreclosures across the country.”
• ABA Offers Solutions to SSA Proposal on Garnishment (5/6/08)
  ABA on May 5th offered possible solutions to the Social Security Administration’s proposal regarding garnishments of federal benefits payments.  “A solution that minimizes the length of time during which funds are unavailable would help lessen the hardship currently experienced by some” ABA wrote.  In addition, public benefits payments that are potentially exempt from garnishment must provide depository institutions with a clear set of ACH codes and descriptors. “Distinctive ACH codes, rather than descriptors, would be more easily identified by bank deposit systems, but at a minimum there must be absolutely uniform descriptors to systemically identify possibly exempt benefit payments so that they can be identified without manual review.” ABA added that whatever solution is taken, it is important to have one consistent uniform federal standard.  For questions or comments, contact ABA’s Mark Tenhundfeld.
• Fed Survey Finds Tightening Lending Standards (5/6/08)
  The percentage of banks tightening lending standards during the past three months was near historic highs in nearly all loan categories, according to the Federal Reserve’s April survey of senior loan officers released on May 5th. Some 80 percent of U.S. banks said they tightened standards for making commercial real estate loans, and about 60 percent said they tightened lending standards on prime mortgages. Those tougher standards also extended to other types of consumer debt. For example, 70 percent of U.S. banks stiffened standards for approving home equity lines of credit, the survey found. About 40 percent of banks that make student loans said they expect their commitments to provide such loans this fall will decrease compared with last year. 
• Bernanke: Action Needed to Avert Foreclosure Crisis (5/6/08)
  The nearly unprecedented decline in home prices that is a key factor in the current wave of foreclosures will require a concerted government and private-sector response, Federal Reserve Chairman Ben Bernanke said at a Columbia Business School dinner in New York on May 5th. “Realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment,” Bernanke said. He added that Congress can take an important step by moving quickly to reconcile and enact legislation permitting the Federal Housing Administration “to increase its scale and improve its management of risks.” “Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It’s in everybody’s interest,” Bernanke said.
• Basel Committee’s Joint Forum Releases Report on Customer Suitability (5/5/08)
  The Basel Committee on Banking Supervision’s Joint Forum released a report April 30th on “Customer suitability in the retail sale of financial products and services.” The report surveyed 90 financial firms around the world to study how the banking, securities and insurance sectors deal with customer suitability, and manage the risks posed by mis-selling. (The term “mis-selling” generally refers to the situation where the firm sells a product to a client that is not suitable for that client, whether or not a recommendation is made.) The report focuses exclusively on requirements related to retail customers and products with a significant investment component. The report found that in most countries, liability for mis-selling of products will fall to the sales agent, rather than the creator of the product. Another finding is that when looking at the range of information provided to investors when making a sale or recommendation, the range of information provided to customers was generally more limited in the insurance sector. “As regulators, our concern is to make sure that investors are properly protected, and that the institutions we supervise don’t suffer damage to their reputation. This report will help greatly in that regard” said Comptroller of the Currency John C. Dugan, who is also Chairman of the Joint Forum.
• Fed Issues Proposed Rules to Reform Credit Card, Overdraft Practices (5/5/08)
  The Federal Reserve Board on May 2nd, along with the Office of Thrift Supervision and National Credit Union Administration, proposed rules intended to prohibit unfair credit card and overdraft protection practices. The proposed rules, among other things, would prohibit double-cycle billing; restrict a bank’s ability to raise interest rates on pre-existing balances; and prohibit the use of certain payment allocation methods. The proposal also requires institutions to provide consumers with notice and an opportunity to opt out of the payment of overdrafts, before any overdraft fees or charges are imposed on consumers’ accounts. “The proposed rules are not the right policy response to concerns over the ability of consumers to understand the terms of their credit cards,” ABA President and CEO Ed Yingling said in a news release. Yingling added that the proposal could end zero- or low- interest balance transfer options. There will a 75-day comment period on the Fed’s proposal to amend Regulation AA and a 60-day comment period on complementary proposals to amend Reg Z and Reg DD. For more information, contact ABA’s Nessa Feddis or Ken Clayton.
• Teach Children to Save Day Coverage Reaches 26 Million People (5/5/08)
• OTS Releases Outline of Proposed Rule on Credit Card, Overdraft Practices (5/2/08)
• OCC Publication Looks at Preserving Affordable Rental Housing (5/2/08)
• ABA Urges Fannie, Freddie to Reconsider Implementing Code of Conduct (5/2/08)
• Trade Groups: OFHEO Should Withdraw Assent to Agreement (5/2/08)
• FinCEN Report on Residential Real Estate Money Laundering (5/1/08)

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April 2008 News

• ABAWorks on ID Theft Red Flag Regulation Now Online  (4/30/08)
• ABA says FDIC Should Withdraw Information Collection Request (4/29/08) 
• Loans Exceeding Reg O Limits Before Officer Is Appointed Are Grandfathered

Section 216.1 - Purpose and scope.

Section 216.2 - Rule of construction.

Section 216.3 - Definitions.
Subpart A - Privacy and Opt Out Notices

Section 216.4 - Initial privacy notice to consumers required.

Section 216.5 - Annual privacy notice to customers required.

Section 216.6 - Information to be included in privacy notices.

Section 216.7 - Form of opt out notice to consumers; opt out methods.

Section 216.8 - Revised privacy notices.

Section 216.9 - Delivering privacy and opt out notices.
Subpart B - Limits on Disclosures

Section 216.10 - Limitation on disclosure of nonpublic personal information to nonaffiliated third parties.

Section 216.11 - Limits on redisclosure and reuse of information.

Section 216.12 - Limits on sharing account number information for marketing purposes.
Subpart C - Exceptions

Section 216.13 - Exception to opt out requirements for service providers and joint marketing.

Section 216.14 - Exceptions to notice and opt out requirements for processing and servicing transactions.

Section 216.15 - Other exceptions to notice and opt out requirements.
Subpart D - Relation to Other Laws; Effective Date

Section 216.16 - Protection of Fair Credit Reporting Act.

Section 216.17 - Relation to state laws.

Section 216.18 - Effective Date; transition rule.
Appendix A - Sample Clauses

Authority: 15 U.S.C. 6801 et seq.
Sec. 216.1 Purpose and scope.
(a) Purpose This part governs the treatment of nonpublic personal information about consumers by the financial institutions listed in paragraph (b) of this section. This part:
(1) Requires a financial institution to provide notice to customers about its privacy policies and practices;
(2) Describes the conditions under which a financial institution may disclose nonpublic personal information about consumers to nonaffiliated third parties; and
(3) Provides a method for consumers to prevent a financial institution from disclosing that information to most nonaffiliated third parties by “opting out” of that disclosure, subject to the exceptions in ??216.13, 216.14, and 216.15.
(b) Scope This part applies only to nonpublic personal information about individuals who obtain financial products or services primarily for personal, family, or household purposed from the institutions listed below. This part does not apply to information about companies or about individuals who obtain financial products or services for business, commercial, or agricultural purposes. This part applies to the U. S. offices of entities for which the Board has primary supervisory authority. They are referred to in this part as ?you.? These are: State member banks, bank holding companies and certain of their nonbank subsidiaries or affiliates, State uninsured branches and agencies of foreign banks, commercial lending companies owned or controlled by foreign banks, and Edge and Agreement corporations.
Nothing in this part modifies, limits, or supersedes the standards governing individually identifiable health information promulgated by the Secretary of Health and Human Services under the authority of sections 262 and 264 of the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).

 
Sec. 216.2 Rule of construction.
The examples in this part and the sample clauses in Appendix A of this part are not exclusive. Compliance with an example or use of a sample clause, to the extent applicable, constitutes compliance with this part.
Sec. 216.3 Definitions.
As used in this part, unless the context requires otherwise:
(a) Affiliate means any company that controls, is controlled by, or is under common control with another company.
(b)(1) Clear and conspicuous means that a notice is reasonably understandable and designed to call attention to the nature and significance of the information in the notice.
(2) Examples–(i)Reasonably understandable. You make your notice reasonably understandable if you:
(A) Present the informationin the notice in clear, concise sentences, paragraphs, and sections; office;
(B) Use short explanatory sentences or bullet lists whenever possible;
(C) Use definite, concrete, everyday words and active voice whenever possible;
(D) Avoid multiple negatives;
(E) Avoid legal and highly technical business terminology whenever possible; and
(F) Avoid explanations that are imprecise and readily subject to different interpretations
(ii) Designed to call attention. You design your notice to call attention to the nature and significance of the information in it if you:
(A) Use a plain-language heading to call attention to the notice;
(B) Use a typeface and type size that are easy to read;
(C) Provide wide margins and ample line spacing;
(D) Use boldface or italics for key words; and
(E) In a form that combines your notice with other information, use distinctive type size, style, and graphic devices, such as shading or sidebars, when you combine your notice with other information.
(iii) Notices on web sites. If you provide a notice on a web page, you design your notice to call attention to the nature and significance of the information in it if you use text or visual cues to encourage scrolling down the page if necessary to view the entire notice and ensure that other elements on the web site (such as text, graphics, hyperlinks, or sound) do not distract attention from the notice, and you either:
(A) Place the notice on a screen that consumers frequently access, such as a page on which transactions are conducted; or
(B) Place a link on a screen that consumers frequently access, such as a page on which transactions are conducted, that connects directly to the notice and is labeled appropriately to convey the importance, nature, and relevance of the notice.
(c) Collect means to obtain information that you organize or can retrieve by the name of an individual or by identifying number, symbol, or other identifying particular assigned to the individual, irrespective of the source of the underlying information.
(d) Company means any corporation, limited liability company, business trust, general or limited partnership, association, or similar organization.
(e)(1) Consumer means an individual who obtains or has obtained a financial product or service from you that is to be used primarily for personal, family, or household purposes, or that individual?s legal representative.
(2) Examples–(i) An individual who applies to you for credit for personal, family, or household purposes is a consumer of a financial service, regardless of whether the credit is extended.
(ii) An individual who provides nonpublic personal information to you in order to obtain a determination about whether he or she may qualify for a loan to be used primarily for personal, family, or household purposes is a consumer of a financial service, regardless of whether the loan is extended.
(iii) An individual who provides nonpublic personal information to you in connection with obtaining or seeking to obtain financial, investment, or economic advisory services is a consumer regardless of whether you establish a continuing advisory relationship.
(iv) If you hold ownership or servicing rights to an individual?s loan that is used primarily for personal, family, or household purposes, the individual is your consumer, even if you hold those rights in conjunction with one or more other institutions. (The individual is also a consumer with respect to the other financial institutions involved.) An individual who has a loan in which you have ownership or servicing rights is your consumer, even if you, or another institution with those rights, hire an agent to collect on the loan.
(v) An individual who is a consumer of another financial institution is not your consumer solely because you act as agent for, or provide processing or other services to, that financial institution.
(vi) An individual is not your consumer solely because he or she has designated you as trustee for a trust.)

(vii) An individual is not your consumer solely because he or she is a beneficiary of a trust for which you are a trustee.

(viii) An individual is not your consumer solely because he or she is a participant or a beneficiary of an employee benefit plan that you sponsor or for which you act as a trustee or fiduciary.
(f) Consumer reporting agency has the same meaning as in section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
(g) Control of a company means:
(1) Ownership, control, or power to vote 25 percent or more of the outstanding shares of any class of voting security of the company, directly or indirectly, or acting through one or more other persons;
(2) Control in any manner over the election of a majority of the directors, trustees, or general partners (or individuals exercising similar functions) of the company; or
(3) The power to exercise, directly or indirectly, a controlling influence over the management or policies of the company, as the Board determines.
(h) Customer means a consumer who has a customer relationship with you.
(i)(1)Customer relationship means a continuing relationship between a consumer and you under which you provide one or more financial products or services to the consumer that are to be used primarily for personal, family, or household purposes.
(2) Examples–(i)Continuing relationship A consumer has a continuing relationship with you if the consumer:
(A) Has a deposit or investment account with you;
(B) Obtains a loan from you;
(C) Has a loan for which you own the servicing rights;
(D) Purchases an insurance product from you;
(E) Holds an investment product through you, such as when you act as a custodian for securities or for assets in an Individual Retirement Arrangement;
(F) Enters into an agreement or understanding with you whereby you undertake to arrange or broker a home mortgage loan for the consumer;
(G) Enters into a lease of personal property with you; or
(H) Obtains financial, investment, or economic advisory services from you for a fee.
(ii) No continuing relationship. a consumer does not, however, have a continuing relationship with you if:
(A) The consumer obtains a financial product or service only in isolated transactions, such as using your ATM to withdraw cash from an account at another financial institution or purchasing a cashier?s check or money order;
(B) You sell the consumer?s loan and do not retain the rights to service that loan; or
(C) You sell the consumer airline tickets, travel insurance, or traveler?s checks in isolated transactions.
(j) Federal functional regulator means:
(1) The Board of Governors of the Federal Reserve System
(2) The Office of the Comptroller of the Currency
(3) The Board of Directors of the Federal Deposit Insurance Corporation
(4) The Director of the Office of Thrift Supervision
(5) The National Credit Union Administration Board; and
(6) The Securities and Exchange Commission

(k)(1) Financial institution means any institution the business of which is engaging in activities that are financial in nature or incidental to such financial activities as described in section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
(2) Financial institution does not include:
(i) Any person or entity with respect to any financial activity that is subject to the jurisdiction of the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
(ii) The Federal Agricultural Mortgage Corporation or any entity chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.); or
(iii) Institutions chartered by Congress specifically to engage in securitizations, secondary market sales (including sales of servicing rights), or similar transactions related to a transaction of a consumer, as long as such institutions do not sell or transfer nonpublic personal information to a nonaffiliated third party.
(1)(1) Financial product or service means any product or service that a financial holding company could offer by engaging in an activity that is financial in nature or incidental to such a financial activity under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
(1) Financial service includes your evaluation or brokerage of information that you collect in connection with a request or an application from a consumer for a financial product or service.
(m)(1) Nonaffiliated third party means any person except:
(i) Your affiliate; or

(ii) A person employed jointly by you and any company that is not your affiliate (but nonaffiliated third party includes the other company that jointly employs the person).

(2) Nonaffiliated third party includes any company that is an affiliate solely by virtue of your or your affiliate?s direct or indirect ownership or control of the company in merchant banking or investment banking activities of the type described in section 4(k)(4)(H) or insurance company investment activities of the type described in section 4(k)(4)(I) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)(4)(H) and (I)).
(n)(1) Nonpublic personal information means:
(i) Personally identifiable financial information; and
(ii) Any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived using any personally identifiable financial information that is not publicly available.
(2) Nonpublic personal information does not include:
(i) Publicly available information, except as included on a list described in paragraph (n)(1)(ii) of this section; or

(ii) Any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived without using any personally identifiable financial information that is not publicly available.
(3) Examples of lists–(i) Nonpublic personal information includes any list of individuals? names and street addresses that is derived in whole or in part using personally identifiable financial information that is not publicly available, such as account numbers.
(ii) Nonpublic personal information does not include any list of individuals? names and addresses that contains only publicly available information, is not derived in whole or in part using personally identifiable financial information that is not publicly available, and is not disclosed in a manner that indicates that any of the individuals on the list is a consumer of a financial institution.
(o)(1) Personally identifiable financial information means any information:
(i) A consumer provides to you to obtain a financial product or service from you;
(ii) About a consumer resulting from any transaction involving a financial product or service between you and a consumer; or
(iii) You otherwise obtain about a consumer in connection with providing a financial product or service to that consumer.
(2) Examples–(i) Information included Personally identifiable financial information includes:
(A) Information a consumer provides to you on an application to obtain a loan, credit card, or other financial product or service;
(B) Account balance information, payment history, overdraft history, and credit or debit card purchase information;
(C) The fact that an individual is or has been one of your customers or has obtained a financial product or service from you;
(D) Any information about your consumer if it is disclosed in a manner that indicates that the individual is or has been your consumer;

(E) Any information that a consumer provides to you or that you or your agent otherwise obtain in connection with collecting on a loan or servicing a loan;
(F) Any information you collect through an Internet “cookie” (an information collecting device from a web server); and
(G) Information from a consumer report.

(ii) Information not included Personally identifiable financial information does not include:
(A) A list of names and addresses of customers of an entity that is not a financial institution; and
(B) Information that does not identify a consumer, such as aggregate information or blind data that does not contain personal identifiers such as account numbers, names, or addresses.
(p)(1) Publicly available information means any information that you have a reasonable basis to believe is lawfully made available to the general public from:
(i) Federal, State, or local government records;
(ii) Widely distributed media; or
(iii) Disclosures to the general public that are required to be made by Federal, State, or local law.
(2) Reasonable basis You have a reasonable basis to believe that information is lawfully made available to the general public if you have taken steps to determine:
(i) That the information is of the type that is available to the general public; and
(ii) Whether an individual can direct that the information not be made available to the general public and, if so, that your consumer has not done so.
(3) Examples–(i) Government records Publicly available information in government records includes information in government real estate records and security interest filings.
(ii) Publicly available information from widely distributed media includes information from a telephone book, a television or radio program, a newspaper, or a web site that is available to the general public on an unrestricted basis. A web site is not restricted merely because an Internet service provider or a site operator requires a fee or a password, so long as access is available to the general public.
(iii) Reasonable basis–(1) You have a reasonable basis to believe that mortgage information is lawfully made available to the general public if you have determined that the information is of the type included on the public record in the jurisdiction where the mortgage would be recorded.
(2) You have a reasonable basis to believe that an individual?s telephone number is lawfully made available to the general public if you have located the telephone number in the telephone book or the consumer has informed you that the telephone number is not unlisted.
(q) You means:
(1) A State member bank, as defined in 12 CFR 208.3(g);

(2) A bank holding company, as defined in 12 CFR 225.2(c);

(3) A subsidiary (as defined in 12 CFR 225.2(o)) or affiliate of a bank holding company and a subsidiary of a State member bank, except for:
(i) A national bank or a State bank that is not a member of the Federal Reserve System;
(ii) A broker or dealer that is registered under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
(iii) A registered investment adviser, properly registered by or on behalf of either the Securities Exchange Commission or any State, with respect to its investment advisory activities and its activities incidental to those investment advisory activities;
(iv) An investment company that is registered under the Investment Company Act of 1940 ( 15 U.S.C. 80a-1 et seq.); or
(v) An insurance company, with respect to its insurance activities and its activities incidental to those insurance activities, that is subject to supervision by a State insurance regulator;
(4) A State agency or State branch of a foreign bank, as those terms are defined in 12 U.S.C. 3101(b)(11) and (12), the deposits of which agency or branch are not insured by the Federal Deposit Insurance Corporation;
(5) A commercial lending company, as defined in 12 CFR 211.21(f), that is owned or controlled by a foreign bank, as defined in 12 CFR 211.21(m); or
(6) A corporation organized under section 25A of the Federal Reserve Act (12 U.S.C. 611-631) or a corporation having an agreement or undertaking with the Board under section 25 of the Federal Reserve Act (12 U.S.C. 601-604a).
Subpart A — Privacy and Opt Out Notices

216.4 Initial privacy notice to consumers requires.
(a) Initial notice requirement You must provide a clear and conspicuous notice that accurately reflects your privacy policies and practices to:
(1) Customer An individual who becomes your customer, not later than when you establish a customer relationship, except as provided in paragraph (e) of this section; and
(2) Consumer A consumer, before you disclose any nonpublic personal information about the consumer to any nonaffiliated third party, if you make such a disclosure other than as authorized by ?? 216.14 and 216.15.
(b) When initial notice to a consumer is not required. You are not required to provide an initial notice to a consumer under paragraph (a) of this section if:
(1) You do not disclose any nonpublic personal information about the consumer to any nonaffiliated third party, other than as authorized by ?? 216.14 and 216.15; and
(2) You do not have a customer relationship with the consumer.
(c) When you establish a customer relationship–(1) General Rule You establish a customer relationship when you and the consumer enter into a continuing relationship.
(2) Special rule for loans– You establish a customer relationship with a consumer when you originate a loan to the consumer for personal, family, or household purposes. If you subsequently transfer the servicing rights to that loan to another financial institution, the customer relationship transfers with the servicing rights.
(3)(i) Examples of establishing customer relationship You establish a customer relationship when the consumer:
(A) Opens a credit card account with you;
(B) Executes the contract to open a deposit account with you, obtains credit from you, or purchases insurance from you;
(C) Agrees to obtain financial, economic, or investment advisory services from you for a fee; or
(D) Becomes your client for the purpose of your providing credit counseling or tax preparation services.
(ii) Examples of loan rule You establish a customer relationship with a consumer who obtains a loan for personal, family, or household purposes when you:
(A) Originate the loan to the consumer; or
(B) Purchase the servicing rights to the consumer’s loan
(d) Existing customers When an existing customer obtains a new financial product or service from you that is to be used primarily for personal, family, or household purposes, you satisfy the initial notice requirements of paragraph (a) of this section as follows:
(1) You may provide a revised privacy notice, under ? 216.8, that covers the customer?s new financial product or service; or
(2) If the initial, revised, or annual notice that you most recently provided to that customer was accurate with respect to the new financial product or service, you do not need to provide a new privacy notice under paragraph (a) of this section.
(e) Exceptions to allow subsequent delivery of notice (1) You may provide the initial notice required by paragraph (a)(1) of this section within a reasonable time after you establish a customer relationship if:
(i) Establishing the customer relationship is not at the customer?s election; or

(ii) Providing notice not later than when you establish a customer relationship would substantially delay the customer?s transaction and the customer agrees to receive the notice at a later time.
(2) Examples of exceptions–(i) Not at customer’s election Establishing a customer relationship is not at the customer?s election if you acquire a customer?s deposit liability or the servicing rights to a customer?s loan from another financial institution and the customer does not have a choice about your acquisition.
(ii) Substantial delay of customer’s transaction Providing notice not later than when you establish a customer relationship would substantially delay the customer?s transaction when:
(A) You and the individual agree over the telephone to enter into a customer relationship involving prompt delivery of the financial product or service; or
(B) You establish a customer relationship with an individual under a program authorized by Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.) or similar student loan programs where loan proceeds are disbursed promptly without prior communication between you and the customer.

(iii) No substantial delay of customer’s trnasaction Providing notice not later than when you establish a customer relationship would not substantially delay the customer?s transaction when the relationship is initiated in person at your office or through other means by which the customer may view the notice, such as on a web site.
(f) Delivery When you are required to deliver an initial privacy notice by this section, you must deliver it according to ? 216.9. If you use a short-form initial notice for non-customers according to ? 216.6(d), you may deliver your privacy notice according to ? 216.6(d)(3).

Sec. 216.5 Annual privacy notice to customers required
(a)(1) General rule You must provide a clear and conspicuous notice to customers that accurately reflects your privacy policies and practices not less than annually during the continuation of the customer relationship. Annually means at least once in any period of 12 consecutive months during which that relationship exists. You may define the 12-consecutive-month period, but you must apply it to the customer on a consistent basis.
(f) Example You provide a notice annually if you define the 12-consecutive-month period as a calendar year and provide the annual notice to the customer once in each calendar year following the calendar year in which you provided the initial notice. For example, if a customer opens an account on any day of year 1, you must provide an annual notice to that customer by December 31 of year 2.
(a)(1) Termination of customer relationship You are not required to provide an annual notice to a former customer.
(2) Examples Your customer becomes a former customer when:
(i) In the case of a deposit account, the account is inactive under your policies;
(ii) In the case of a closed-end loan, the customer pays the loan in full, you charge off the loan, or you sell the loan without retaining servicing rights;
(iii) In the case of a credit card relationship or other open-end credit relationship, you no longer provide any statements or notices to the customer concerning that relationship or you sell the credit card receivables without retaining servicing rights; or
(iv) You have not communicated with the customer about the relationship for a period of 12 consecutive months, other than to provide annual privacy notices or promotional material.
(c) Special rule for loans You have not communicated with the customer about the relationship for a period of 12 consecutive months, other than to provide annual privacy notices or promotional material.
(d) Delivery When you are required to deliver an annual privacy notice by this section, you must deliver it according to ? 216.9.
Sec. 216.6 Information to be included in privacy notices.
(c) General rule The initial, annual, and revised privacy notices that you provide under ?? 216.4, 216.5, and 216.8 must include each of the following items of information, in addition to any other information you wish to provide, that applies to you and to the consumers to whom you send your privacy notice:
(1) The categories of nonpublic personal information that you collect;
(2) The categories of nonpublic personal information that you disclose;
(3) The categories of affiliates and nonaffiliated third parties to whom you disclose nonpublic personal information, other than those parties to whom you disclose information under ?? 216.14 and 216.15;
(4) The categories of nonpublic personal information about your former customers that you disclose and the categories of affiliates and nonaffiliated third parties to whom you disclose nonpublic personal information about your former customers, other than those parties to whom you disclose information under ?? 216.14 and 216.15;
(5) If you disclose nonpublic personal information to a nonaffiliated third party under ? 216.13 (and no other exception in ? 216.14 or 216.15 applies to that disclosure), a -separate statement of the categories of information you disclose and the categories of third parties with whom you have contracted;
(6) An explanation of the consumer?s right under ? 216.10(a) to opt out of the disclosure of nonpublic personal information to nonaffiliated third parties, including the method(s) by which the consumer may exercise that right at that time;
(7) Any disclosures that you make under section 603(d)(2)(A)(iii) of the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that is, notices regarding the ability to opt out of disclosures of information among affiliates);
(8) Your policies and practices with respect to protecting the confidentiality and security of nonpublic personal information; and
(9) Any disclosure that you make under paragraph (b) of this section.
(b) Description of nonaffiliated third parties subject to exceptions If you disclose nonpublic personal information to third parties as authorized under ?? 216.14 and 216.15, you are not required to list those exceptions in the initial or annual privacy notices required by ?? 216.4 and 216.5. When describing the categories with respect to those parties, you are required to state only that you make disclosures to other nonaffiliated third parties as permitted by law.
(c) Examples–(1) Categories of nonpublic personal information that you collect You satisfy the requirement to categorize the nonpublic personal information that you collect if you list the following categories, as applicable:
(i) Information from the customer
(ii) Information about the consumer?s transactions with you or your affiliates;
(iii) Information about the consumer?s transactions with nonaffiliated third parties; and
(iv) Information from a consumer reporting agency
(2) Categories of nonpublic personal information you disclose-?(i) You satisfy the requirement to categorize the nonpublic personal information that you disclose if you list the categories described in paragraph (c)(1) of this section, as applicable, and a few examples to illustrate the types of information in each category.
(ii) If you reserve the right to disclose all of the nonpublic personal information about consumers that you collect, you may simply state that fact without describing the categories or examples of the nonpublic personal information you disclose.
(2) Categories of affiliates and nonaffiliated third parties to whom you disclose You satisfy the requirement to categorize the affiliates and nonaffiliated third parties to whom you disclose nonpublic personal information if you list the following categories, as applicable, and a few examples to illustrate the types of third parties in each category.
(i) Financial service providers
(ii) Non-financial companies; and
(iii) Others
(4) Disclosures under exception for service providers and joint marketers If you disclose nonpublic personal information under the exception in ? 216.13 to a nonaffiliated third party to market products or services that you offer alone or jointly with another financial institution, you satisfy the disclosure requirement of paragraph (a)(5) of this section if you:
(i) List the categories of nonpublic personal information you disclose, using the same categories and examples you used to meet the requirements of paragraph (a)(2) of this section, as applicable; and
(ii) State whether the third party is:
(A) A service provider that performs marketing services on your behalf or on behalf of you and another financial institution; or
(B) A financial institution with whom you have a joint marketing agreement.
(5) Simplified notices If you do not disclose, and do not wish to reserve the right to disclose, nonpublic personal information about customers or former customers to affiliates or nonaffiliated third parties except as authorized under ?? 216.14 and 216.15, you may simply state that fact, in addition to the information you must provide under paragraphs (a)(1), (a)(8), (a)(9), and (b) of this section.

(6) Confidentiality and security You describe your policies and practices with respect to protecting the confidentiality and security of nonpublic personal information if you do both of the following:

(i) Describe in general terms who is authorized to have access to the information; and

(ii) State whether you have security practices and procedures in place to ensure the confidentiality of the information in accordance with your policy. You are not required to describe technical information about the safeguards you use.

(d) Short-form initial notice with opt out notice for non-customers-?(1) You may satisfy the initial notice requirements in ?? 216.4(a)(2), 216.7(b), and 216.7(c) for a consumer who is not a customer by providing a short-form initial notice at the same time as you deliver an opt out notice as required in ? 216.7.
(2) A short-term initial notice must:
(i) Be clear and conspicious;
(ii) State that your privacy notice is available upon request; and
(iii) Explain a reasonable means by which the consumer may obtain that notice.
(3) You must deliver your short-form initial notice according to ? 216.9. You are not required to deliver your privacy notice with your short-form initial notice. You instead may simply provide the consumer a reasonable means to obtain your privacy notice. If a consumer who receives your short-form notice requests your privacy notice, you must deliver your privacy notice according to ? 216.9.
(4) Examples of obtaining privacy notice You provide a reasonable means by which a consumer may obtain a copy of your privacy notice if you:
(i) Provide a toll-free telephone number that the consumer may call to request the notice; or

(ii) For a consumer who conducts business in person at your office, maintain copies of the notice on hand that you provide to the consumer immediately upon request.
(e) Future disclosures Your notice may include:
(1) Categories of nonpublic personal information that you reserve the right to disclose in the future, but do not currently disclose; and
(2) Categories of affiliates or nonaffiliated third parties to whom you reserve the right in the future to disclose, but to whom you do not currently disclose, nonpublic personal information.
(f) Sample clauses Sample clauses illustrating some of the notice content required by this section are included in Appendix A of this part.

Sec. 216.7 Form of opt out notice to consumers; opt out method.
(4)(1) Form of opt out notice If you are required to provide an opt out notice under ? 216.10(a), you must provide a clear and conspicuous notice to each of your consumers that accurately explains the right to opt out under that section. The notice must state:
(i) That you disclose or reserve the right to disclose nonpublic personal information about your consumer to a nonaffiliated third party;
(ii) That the consumer has the right to opt out of that disclosure; and
(iii) A reasonable means by which the consumer may exercise the opt out right.
(2) Examples–(i) Adequate opt out notice You provide adequate notice that the consumer can opt out of the disclosure of nonpublic personal information to a nonaffiliated third party if you:
(A) Identify all of the categories of nonpublic personal information that you disclose or reserve the right to disclose, and all of the categories of nonaffiliated third parties to which you disclose the information, as described in ? 216.6(a)(2) and (3), and state that the consumer can opt out of the disclosure of that information; and
(B) Identify the financial products or services that the consumer obtains from you, either singly or jointly, to which the opt out direction would apply.
(ii) Reasonable opt out means You provide a reasonable means to exercise an opt out right if you:
(A) Designate check-off boxes in a prominent position on the relevant forms with the opt out notice;
(B) Include a reply form together with the opt out notice;
(C) Provide an electronic means to opt out, such as a form that can be sent via electronic mail or a process at your web site, if the consumer agrees to the electronic delivery of information; or

(D) Provide a toll-free telephone number that consumers may call to opt out.
(iii) Unreasonable opt out means You do not provide a reasonable means of opting out if:
(A) The only means of opting out is for the consumer to write his or her own letter to exercise that opt out right; or
(B) The only means of opting out as described in any notice subsequent to the initial notice is to use a check-off box that you provided with the initial notice but did not include with the subsequent notice.
(iv) Specific opt out means. You may require each consumer to opt out through a specific means, as long as that means is reasonable for that consumer.
(b) Same form as initial notice permitted. You may provide the opt out notice together with or on the same written or electronic form as the initial notice you provide in accordance with ? 216.4.
(c) Initial notice required when opt out notice delivered subsequent to initial notice. If you provide the opt out notice later than required for the initial notice in accordance with ? 216.4, you must also include a copy of the initial notice with the opt out notice in writing or, if the consumer agrees, electronically.
(d) Joint relationships–(1) If two or more consumers jointly obtain a financial product or service from you, you may provide a single opt out notice. Your opt out notice must explain how you will treat an opt out direction by a joint consumer (as explained in paragraph (d)(5) of this section).
(2) Any of the joint consumers may exercise the right to opt out. You may either:
(i) Treat an opt out direction by a joint consumer as applying to all of the associated joint consumers; or
(ii) Permit each joint consumer to opt out separately
(3) If you permit each joint consumer to opt out separately, you must permit one of the joint consumers to opt out on behalf of all of the joint consumers.
(4) You may not require all joint consumers to opt out before you implement any opt out direction.
(5) Example. If John and Mary have a joint checking account with you and arrange for you to send statements to John?s address, you may do any of the following, but you must explain in your opt out notice which opt out policy you will follow:
(i) Send a single opt out notice to John?s address, but you must accept an opt out direction from either John or Mary.
(ii) Treat an opt out direction by either John or Mary as applying to the entire account. If you do so, and John opts out, you may not require Mary to opt out as well before implementing John?s opt out direction.
(iii) Permit John and Mary to make different opt out directions. If you do so:
(A) You must permit John and Mary to opt out for each other;
(B) If both opt out, you must permit both to notify you in a single response (such as on a form or through a telephone call); and
(C) If John opts out and Mary does not, you may only disclose nonpublic personal information about Mary, but not about John and not about John and Mary jointly.
(e) Time to comply with opt out If John opts out and Mary does not, you may only disclose nonpublic personal information about Mary, but not about John and not about John and Mary jointly.
(f) Continuing right to opt out A consumer may exercise the right to opt out at any time.
(g) Duration of consumer?s opt out direction-?(1) A consumer?s direction to opt out under this section is effective until the consumer revokes it in writing or, if the consumer agrees, electronically.
(2) When a customer relationship terminates, the customer?s opt out direction continues to apply to the nonpublic personal information that you collected during or related to that relationship. If the individual subsequently establishes a new customer relationship with you, the opt out direction that applied to the former relationship does not apply to the new relationship.
(h) Delivery When you are required to deliver an opt out notice by this section, you must deliver it according to ? 216.9.
Sec. 216.8 Information to be included in privacy notices.
(a) General rule Except as otherwise authorized in this part, you must not, directly or through any affiliate, disclose any nonpublic personal information about a consumer to a nonaffiliated third party other than as described in the initial notice that you provided to that consumer under ? 216.4, unless:
(1) You have provided to the consumer a clear and conspicuous revised notice that accurately describes your policies and practices;
(2) You have provided to the consumer a new opt out notice;
(3) You have given the consumer a reasonable opportunity, before you disclose the information to the nonaffiliated third party, to opt out of the disclosure; and
(4) The consumer does not opt out.
(b) Examples-?(1) Except as otherwise permitted by ?? 216.13, 216.14, and 216.15, you must provide a revised notice before you:
(i) Disclose a new category of nonpublic personal information to any nonaffiliated third party;
(ii) Disclose nonpublic personal information to a new category of nonaffiliated third party; or
(iii) Disclose nonpublic personal information about a former customer to a nonaffiliated third party, if that former customer has not had the opportunity to exercise an opt out right regarding that disclosure.
(2) A revised notice is not required if you disclose nonpublic personal information to a new nonaffiliated third party that you adequately described in your prior notice.
(c) Delivery. When you are required to deliver a revised privacy notice by this section, you must deliver it according to ? 216.9.
Sec. 216.9 Delivering privacy and opt out notices.
(a) How to provide notices You must provide any privacy notices and opt out notices, including short-form initial notices, that this part requires so that each consumer can reasonably be expected to receive actual notice in writing or, if the consumer agrees, electronically.
(b)(1) Examples of reasonable expectation of actual notice. You may reasonably expect that a consumer will receive actual notice if you:

(i) Hand-deliver a printed copy of the notice to the consumer;
(ii) Mail a printed copy of the notice to the last known address of the consumer;

(iii) For the consumer who conducts transactions electronically, post the notice on the electronic site and require the consumer to acknowledge receipt of the notice as a necessary step to obtaining a particular financial product or service; or
(iv) For an isolated transaction with the consumer, such as an ATM transaction, post the notice on the ATM screen and require the consumer to acknowledge receipt of the notice as a necessary step to obtaining the particular financial product or service.
(2) Examples of unreasonable expectation of actual notice. You may not, however, reasonably expect that a consumer will receive actual notice of your privacy policies and practices if you:
(i) Only post a sign in your branch or office or generally publish advertisements of your privacy policies and practices; or
(ii) Send the notice via electronic mail to a consumer who does not obtain a financial product or service from you electronically.
(c) Annual notices only. You may reasonably expect that a customer will receive actual notice of your annual privacy notice if:
(i) The customer uses your web site to access financial products and services electronically and agrees to receive notices at the web site, and you post your current privacy notice continuously in a clear and conspicuous manner on the web site; or
(ii) The customer has requested that you refrain from sending any information regarding the customer relationship, and your current privacy notice remains available to the customer upon request.
(d) Oral description of notice insufficient. You may not provide any notice required by this part solely by orally explaining the notice, either in person or over the telephone.
(e) Retention or accessibility of notices for customers-?(1) For customers only, you must provide the initial notice required by ? 216.4(a)(1), the annual notice required by ? 216.5(a), and the revised notice required by ? 216.8 so that the customer can retain them or obtain them later in writing or, if the customer agrees, electronically.
(2) Examples of retention or accessibility. You provide a privacy notice to the customer so that the customer can retain it or obtain it later if you:
(i) Hand-deliver a printed copy of the notice to the customer;
(ii) Mail a printed copy of the notice to the last known address of the customer; or

(iii) Make your current privacy notice available on a web site (or a link to another web site) for the customer who obtains a financial product or service electronically and agrees to receive the notice at the web site.
(f) Joint notice with other financial institutions. You may provide a joint notice from you and one or more of your affiliates or other financial institutions, as identified in the notice, as long as the notice is accurate with respect to you and the other institutions.
(g) Joint relationships If two or more consumers jointly obtain a financial product or service from you, you may satisfy the initial, annual, and revised notice requirements of ?? 216.4(a), 216.5(a), and 216.8(a), respectively, by providing one notice to those consumers jointly.
Subpart B–Limits on Disclosures

Sec. 216.10 Limits on disclosure of non-public personal information to nonaffiliated third parties.
(a)(1) Conditions for disclosure Except as otherwise authorized in this part, you may not, directly or through any affiliate, disclose any nonpublic personal information about a consumer to a nonaffiliated third party unless:
(i) You have provided to the consumer an initial notice as required under ? 216.4;
(ii) You have provided to the consumer an opt out notice as required in ? 216.7;
(iii) You have given the consumer a reasonable opportunity, before you disclose the information to the nonaffiliated third party, to opt out of the disclosure; and
(iv) The consumer does not opt out.
(2) Opt out definition Opt out means a direction by the consumer that you not disclose nonpublic personal information about that consumer to a nonaffiliated third party, other than as permitted by ?? 216.13, 216.14, and 216.15.
(3) Examples of reasonable opportunity to opt out. You provide a consumer with a reasonable opportunity to opt out if:
(i) By mail. You mail the notices required in paragraph (a)(1) of this section to the consumer and allow the consumer to opt out by mailing a form, calling a toll-free telephone number, or any other reasonable means within 30 days from the date you mailed the notices.

(ii) By electronic means. A customer opens an on-line account with you and agrees to receive the notices required in paragraph (a)(1) of this section electronically, and you allow the customer to opt out by any reasonable means within 30 days after the date that the customer acknowledges receipt of the notices in conjunction with opening the account.
(iii) Isolated transaction with consumer. For an isolated transaction, such as the purchase of a cashier?s check by a consumer, you provide the consumer with a reasonable opportunity to opt out if you provide the notices required in paragraph (a)(1) of this section at the time of the transaction and request that the consumer decide, as a necessary part of the transaction, whether to opt out before completing the transaction.
(b) Application of opt out to all consumers and all nonpublic personal information-?(1) You must comply with this section, regardless of whether you and the consumer have established a customer relationship.

(2) Unless you comply with this section, you may not, directly or through any affiliate, disclose any nonpublic personal information about a consumer that you have collected, regardless of whether you collected it before or after receiving the direction to opt out from the consumer.
(c) Partial opt out You may allow a consumer to select certain nonpublic personal information or certain nonaffiliated third parties with respect to which the consumer wishes to opt out.
Sec. 216.11 Limits on redisclosure and reuse of information.
(a)(1) Information you receive under an exception. If you receive nonpublic personal information from a nonaffiliated financial institution under an exception in ? 216.14 or 216.15 of this part, your disclosure and use of that information is limited as follows:
(i) You may disclose the information to the affiliates of the financial institution from which you received the information;
(ii) You may disclose the information to your affiliates, but your affiliates may, in turn, disclose and use the information only to the extent that you may disclose and use the information; and
(iii) You may disclose and use the information pursuant to an exception in ? 216.14 or 216.15 in the ordinary course of business to carry out the activity covered by the exception under which you received the information.
(2) Example If you receive a customer list from a nonaffiliated financial institution in order to provide account processing services under the exception in ? 216.14(a), you may disclose that information under any exception in ? 216.14 or 216.15 in the ordinary course of business in order to provide those services. For example, you could disclose the information in response to a properly authorized subpoena or to your attorneys, accountants, and auditors. You could not disclose that information to a third party for marketing purposes or use that information for your own marketing purposes.
(b)(1) Information you receive outside of an exception If you receive nonpublic personal information from a nonaffiliated financial institution other than under an exception in ? 216.14 or 216.15 of this part, you may disclose the information only:
(i) To the affiliates of the financial institution from which you received the information;
(ii) To your affiliates, but your affiliates may, in turn, disclose the information only to the extent that you can disclose the information; and
(iii) To any other person, if the disclosure would be lawful if made directly to that person by the financial institution from which you received the information.
(2) Example. If you obtain a customer list from a nonaffiliated financial institution
(i) You may use the list for your own purposes
(ii) You may disclose that list to another nonaffiliated third party only if the financial institution from which you purchased the list could have lawfully disclosed the list to that third party. That is, you may disclose the list in accordance with the privacy policy of the financial institution from which you received the list, as limited by the opt out direction of each consumer whose nonpublic personal information you intend to disclose, and you may disclose the list in accordance with an exception in ? 216.14 or 216.15, such as to your attorneys or accountants.
(c) Information you disclose under an exception. If you disclose nonpublic personal information to a nonaffiliated third party under an exception in ? 216.14 or 216.15 of this part, the third party may disclose and use that information only as follows:
(1) The third party may disclose the information to your affiliates;
(2) The third party may disclose the information to its affiliates, but its affiliates may, in turn, disclose and use the information only to the extent that the third party may disclose and use the information; and
(3) The third party may disclose and use the information pursuant to an exception in ? 216.14 or 216.15 in the ordinary course of business to carry out the activity covered by the exception under which it received the information.
(d) Information you disclose outside of an exception. If you disclose nonpublic personal information to a nonaffiliated third party other than under an exception in ? 216.14 or 216.15 of this part, the third party may disclose the information only:
(1) To your affiliates;
(2) To its affiliates, but its affiliates, in turn, may disclose the information only to the extent the third party can disclose the information; and
(3) To any other person, if the disclosure would be lawful if you made it directly to that person.
Sec. 216.12 Limits on sharing account number information for marketing purposes.
(a) General prohibition on disclosure of account numbers. You must not, directly or through an affiliate, disclose, other than to a consumer reporting agency, an account number or similar form of access number or access code for a consumer?s credit card account, deposit account, or transaction account to any nonaffiliated third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail to the consumer.
(b) Exceptions Paragraph (a) of this section does not apply if you disclose an account number or similar form of access number or access code:
(1) To your agent or service provider solely in order to perform marketing for your own products or services, as long as the agent or service provider is not authorized to directly initiate charges to the account; or
(2) To a participant in a private label credit card program or an affinity or similar program where the participants in the program are identified to the customer when the customer enters into the program.
(c) Examples-?(1) Account number. An account number, or similar form of access number or access code, does not include a number or code in an encrypted form, as long as you do not provide the recipient with a means to decode the number or code.
(2) Transaction account. A transaction account is an account other than a deposit account or a credit card account. A transaction account does not include an account to which third parties cannot initiate charges.
Subpart C–Exceptions

Sec. 216.13 Exception to opt out requirements for service providers and joint marketing.

(a) General Rule (1) The opt out requirements in ?? 216.7 and 216.10 do not apply when you provide nonpublic personal information to a nonaffiliated third party to perform services for you or functions on your behalf, if you:
(i) Provide the initial notice in accordance with ? 216.4; and
(ii) Enter into a contractual agreement with the third party that prohibits the third party from disclosing or using the information other than to carry out the purposes for which you disclosed the information, including use under an exception in ? 216.14 or 216.15 in the ordinary course of business to carry out those purposes.
(2) Example If you disclose nonpublic personal information under this section to a financial institution with which you perform joint marketing, your contractual agreement with that institution meets the requirements of paragraph (a)(1)(ii) of this section if it prohibits the institution from disclosing or using the nonpublic personal information except as necessary to carry out the joint marketing or under an exception in ? 216.14 or 216.15 in the ordinary course of business to carry out that joint marketing.
(b) Service may include joint marketing. The services a nonaffiliated third party performs for you under paragraph (a) of this section may include marketing of your own products or services or marketing of financial products or services offered pursuant to joint agreements between you and one or more financial institutions.
(c) Definition of joint agreement. For purposes of this section, joint agreement means a written contract pursuant to which you and one or more financial institutions jointly offer, endorse, or sponsor a financial product or service.
Sec. 216.14 Exceptions to notice and opt out requirements for processing and servicing transactions.

(a) Exceptions for processing transactions at consumer?s request. The requirements for initial notice in ? 216.4(a)(2), for the opt out in ?? 216.7 and 216.10, and for service providers and joint marketing in ? 216.13 do not apply if you disclose nonpublic personal information as necessary to effect, administer, or enforce a transaction that a consumer requests or authorizes, or in connection with:
(1) Servicing or processing a financial product or service that a consumer requests or authorizes;
(2) Maintaining or servicing the consumer’s account with you, or with another entity as part of a private label credit card program or other extension of credit on behalf of such entity; or

(3) A proposed or actual securitization, secondary market sale (including sales of servicing rights), or similar transaction related to a transaction of the consumer.
(b) Necessary to effect, administer, or enforce a transaction means that the disclosure is:
(1) Required, or is one of the lawful or appropriate methods, to enforce your rights or the rights of other persons engaged in carrying out the financial transaction or providing the product or service; or
(2) Required, or is a usual, appropriate or acceptable method:
(i) To carry out the transaction or the product or service business of which the transaction is a part, and record, service, or maintain the consumer’s account in the ordinary course of providing the financial service or financial product;
(ii) To administer or service benefits or claims relating to the transaction or the product or service business of which it is a part;
(iii) To provide a confirmation, statement, or other record of the transaction, or information on the status or value of the financial service or financial product to the consumer or the consumer?s agent or broker;
(iv) To accrue or recognize incentives or bonuses associated with the transaction that are provided by you or any other party;
(v) To accrue or recognize incentives or bonuses associated with the transaction that are provided by you or any other party;
(vi) In connection