We originate some mortgage loans with properties and/or borrowers located outside of Illinois. Does our privacy notice need to include privacy requirements for each state? If yes, do you know of a resource on state privacy laws?

It is conceivable that another state’s financial privacy law would apply to a mortgage loan made by an Illinois bank, requiring you to provide information about that state’s law on your annual privacy notice.

Whether another state’s law applies to a mortgage loan is a complicated question that will depend on the circumstances of each mortgage loan, the loan and mortgage agreements, the location of the borrower, the location of the property securing the loan, and several other factors.

If a borrower or property securing a mortgage loan is located outside of Illinois, a court may or may not take the view that the other state’s law applies to the mortgage loan. However, because this determination is both uncertain and fact-specific, we believe the best practice would be to notify those borrowers of their privacy rights under the other state’s law (if any), in addition to referencing the Illinois law. And if you do so, of course, this also would entail complying with both the Illinois law and the other state’s privacy law.

For a resource on state privacy laws, a good starting place would be State Privacy Laws, which the Practicing Law Institute has made available on its website (here: http://www.pli.edu/public/booksamples/11513_sample5.pdf).

For resources related to our guidance, please see:

Regulation P, Model Privacy Form, General Instructions (“(4) Why can't I limit all sharing? Institutions that describe state privacy law provisions in the ‘Other important information’ box must use the bracketed sentence: ‘See below for more on your rights under state law.’ Other institutions must omit this sentence.”)

Bank of America Nat. Ass’n v. Bassman FBT, L.L.C., 366 Ill.Dec. 936, 940 (2nd Dist. 2012) (“The mortgages themselves contain choice-of-law provisions indicating that Illinois law will govern the relationship between the parties, and we are aware of no reason why this provision would not control. Freeman v. Williamson, 383 Ill.App.3d 933, 938 (2008). Thus, to the extent the law of New York differs from ours, we will apply Illinois law generally.”)

Kafka v. Bellevue Corp., 999 F.2d 1117 (7th Cir. 1993) (“Because this case was tried by a district court sitting in Illinois, we must apply Illinois choice of law principles. Illinois courts apply the law that the parties understood would govern the case. We have no indication that the parties agreed upon what law would govern. Our next step, then, is to consider which state has the most significant relationship to the contract. . . . To determine which state has the most significant relationship to the contract, we examine the location of the subject matter, the domicile of the parties, and the place of the last act to give rise to a valid contract. . . . Here, the investment property was located in California; all the defendants were California citizens; the investments were made in California, and the guarantees were made in California if they were made at all. Only Kafka was in Illinois. In these circumstances, California has a more significant relationship to the contract, and therefore its law governs.”)