Topic: Privacy
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We share credit-related information with a subsidiary that is 100% owned by the bank (not by our holding company). Are we required to provide customers with notice and an opportunity to opt-out under the Fair Credit Reporting Act (FCRA) to avoid being considered a consumer reporting agency?
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Yes, we believe the requirement to provide customers with notice and an opportunity to opt-out under the FCRA to avoid being considered a consumer reporting agency would apply if you share credit-related information with a subsidiary that is 100% owned by your bank. The FCRA provides that a financial institution will not be considered a…
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Are we required to include the option to opt-out in our privacy notice for an affiliated service provider that is 100% owned by our bank holding company? We share credit report information with the affiliate, and they provide us with underwriting services, but we do not share information with them for marketing purposes. If we are required to provide an opt-out notice for our affiliate, do we need to provide a similar opt-out notice for nonaffiliated third-party service providers?
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Yes, we believe you should be providing customers with notice and an opportunity to opt out under the Fair Credit Reporting Act (FCRA) if you are sharing credit-related information with your affiliate, and this notice and opportunity to opt-out should be included in your privacy notice. When sharing information from credit reports and credit applications…
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What disclosures are we required to make available on our bank’s website?
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Below is a non-exhaustive list of the disclosures and notices that you may choose to post or may be required to post on your bank’s website. This list may be incomplete depending on the products and services you offer or advertise on your website, some of which may trigger additional disclosure requirements. Privacy Notices The…
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Last December, we received a citation to discover assets for a business customer, and we placed a hold on their account and sent our answer to the citation. At the time, there was less than $5 in the account. The court date for the citation was continued multiple times until a date in June, when a turnover order was entered for the amount provided in our answer. The turnover order indicates that any funds in excess of the amount indicated in the order are to be returned to the account holder, that the freeze on the account is lifted, and that the citation is dismissed. However, we recently discovered that beginning shortly after we sent our answer to the citation, the customer received multiple ACH deposits from vendors, now totaling an amount in the five figures. No funds have flowed out of the account due to the hold. Should we alert the creditor’s attorney of the additional funds, or do we have no further obligation since the citation has been dismissed? The creditor’s attorney never asked us to update our answer.
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We do not believe you are required to notify the creditor’s attorney of the additional funds in your customer’s account, and we would caution against disclosing the current account balance or continuing to impose a hold without an active citation in place. A citation to discover assets acts as a lien on a judgment debtor’s…
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When we receive a subpoena seeking information about one of our customers, are we supposed to notify the customer and wait for them to respond before responding to the subpoena?
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Yes, you generally must notify a customer of a subpoena by sending them a copy, subject to the caveats discussed below, but you do not need to wait for the customer to respond after notifying them of the subpoena. The Illinois Banking Act requires banks to send a copy of a subpoena to a customer…
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We are considering a referral program in which we would pay customers $25 if an individual they refer opens a checking account at our bank. We are aware that there are prohibitions on paying referral fees in relation to mortgage loans, but we are not aware of similar prohibitions for deposit accounts. Are there any prohibitions on paying referral fees related to deposit accounts?
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No, we are not aware of any prohibitions on paying referral fees related to deposit accounts. However, you do have a duty to maintain your customers’ privacy. As a result, we recommend obtaining a new deposit account customer’s authorization before notifying the referring party that they are entitled to a fee. As you noted, the…
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A consumer customer recently discovered that one of their monthly bills was being automatically paid out of a business customer’s account for over a year. The billing company is at fault, as the ACH entries they generated used the wrong account number. The business customer found out about the unauthorized payments from the billing company and is now threatening to sue us. How should we handle this situation? The business customer is asking for more information about the consumer customer.
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Your bank may have a claim against the originating depository financial institution (ODFI) that transmitted entries with an incorrect account number — but we recommend consulting with bank counsel before pursuing those claims, particularly because the business customer is threatening litigation. As to the business customer whose account was mistakenly debited, we recommend reviewing your…
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Our bank has established an affiliate relationship with a newly formed title company, of which we have 50% ownership. We will share only necessary information for everyday business purposes with this affiliate and will not share information for marketing purposes. We are revising our privacy notice and our website privacy notice, sending out a mass mailing, and providing each customer with the affiliated business arrangement disclosure required under the Real Estate Settlement Procedures Act (RESPA) for real estate transactions. Do these steps cover our responsibilities?
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In addition to providing the notices mentioned in your question, we recommend reviewing the information provided to your affiliate — if you are sharing credit-related information with your affiliate, you must provide customers with a notice and an opportunity to opt-out under the Fair Credit Reporting Act (FCRA). A financial institution that provides “consumer reports”…
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We received a citation to discover assets for a former business customer whose account was closed before we received the citation. Do we need to send a copy of the citation to the former customer?
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Yes, we believe you should send a copy of the citation to discover assets to your former customer. The Illinois Banking Act provides that a bank “shall disclose financial records” under a lawful citation to discover assets only after the bank mails a copy of the citation “to the person establishing the relationship with the…
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We have an elderly customer who seems to be the victim of a home improvement scam. The scammers want her to wire money to a fake healthcare company. We refused to send the wire, but our customer withdrew a cashier’s check for the same amount from one of our tellers, who was unaware of the situation. I know that we cannot normally stop payment on a cashier’s check, but this is blatant fraud. Our customer is adamant that the transaction is legitimate. Is there any way that we can prevent this fraud from occurring?
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You are correct that your bank cannot stop payment on the cashier’s check without risking liability for the check. We believe that you should instead file a suspicious activity report (SAR) and report the scam as potential elder financial exploitation to the Illinois Department of Aging. As a general rule, once a cashier’s check enters…