Mortgage brokers are considered to be financial institutions
for purposes of the GLB Act

As of May 23, 2003, mortgage brokers will also be
obligated to comply with the FTC's Safeguards Rule

The Federal Trade Commission (FTC) has released business guidelines regarding the financial privacy requirements of Subtitle A of Title V of the Gramm-Leach Bliley Financial Modernization Act of 1999 ("GLB Act") and the FTC's Privacy of Consumer Financial Information Rule ("Privacy Rule"). Specifically, the Commission has posted on its website "In Brief: The Financial Privacy Requirements of the Gramm-Leach Bliley Act," "Getting Noticed: Writing Effective Financial Privacy Notices," and a guide for small business entitled "How to Comply with the Privacy of Consumer Financial Information Rule of the Gramm-Leach-Bliley Act." These and other materials relating to the GLB Act and the FTC's Privacy Rule can be found at:

http://www.ftc.gov/privacy/privacyinitiatives/glbact.html

Protecting the privacy of consumer information held by "financial institutions" is at the heart of the financial privacy provisions of the GLB Act. Mortgage brokers are considered to be financial institutions for purposes of the GLB Act because brokering loans is a financial activity listed in 12 C.F.R. º 225.28(b)(1) and referenced in section 4(k)(4)(F) of the Bank Holding Company Act. See 15 U.S.C. º 6809(3); 16 C.F.R. º 313.3(k)(2)(xi).

The FTC has authority to enforce the GLB Act with respect to financial institutions that are not covered by the federal banking agencies, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and state insurance authorities. Because mortgage brokers fall under the FTC's jurisdiction, they were obligated to come into compliance with the FTC's Privacy Rule by July 1, 2001 and are subject to the FTC's enforcement authority. See 15 U.S.C. º 6805(a)(7); 16 C.F.R. º313.1(b); 16 C.F.R. º 313.18(a)(1).

The materials posted on the FTC's website describe financial institutions' obligations to their customers and consumers under the GLB Act and the Privacy Rule. Under the Privacy Rule, a mortgage broker has a customer relationship with a consumer if the consumer enters into an agreement or understanding with the broker whereby the broker undertakes to arrange or broker a home mortgage loan for the consumer. See 16 C.F.R. º 313.3(i)(2)(i)(E). Additionally, a mortgage broker establishes a customer relationship when the consumer provides any personally identifiable financial information to the broker in an effort to obtain a mortgage loan through the broker. See 16 C.F.R. º 313.4(c)(3)(i)(E).

A mortgage broker's customer becomes a former customer when he or she has obtained a loan through the broker (and the broker no longer provides any statements or notices to the customer concerning that relationship), or has ceased using the broker's services for such purposes. See 16 C.F.R. º 313.5(b)(2)(iv).

As of May 23, 2003, mortgage brokers will also be obligated to comply with the FTC's Safeguards Rule, which was issued pursuant to the GLB Act and governs the protection of customer information by financial institutions. The Safeguards Rule and a business alert regarding safeguards are posted on the FTC's website.

If you have any questions regarding the above information or you would like any additional information, please call Doug Perry, toll free at: 800-398-0504, or send an email to: info@click1003.com.

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