Privacy Act - Check Verification

This is what the Privacy of Consumer Financial Information FAQ has to say on the subject:

I.1. I offer consumer checking accounts. I notify my customers that, among other things, I make disclosures as permitted by law. Merchants sometimes call me and ask whether a particular consumer’s checking account has sufficient funds to cover a check to the merchant. How does the Privacy Rule apply to my response to the merchant’s question?

Answer: The Privacy Rule allows you to disclose nonpublic personal information about your consumers without providing them a reasonable opportunity to opt out under certain circumstances. These exceptions to the opt out requirement are described at Section Section 216.13 - 216.15 of the Privacy Rule. For example, you do not need to allow your customer to opt out of a disclosure made in connection with processing or clearing checks (Section 216.14(b)(2)(vi)(A)) or for the purposes of preventing actual or potential fraud, unauthorized transactions, claims, or other liability (Section 216.15(a)(2)(ii)). Therefore, if you have notified your customer that you make disclosures as permitted by law, you may disclose whether your customer’s checking account has sufficient funds to cover a check, regardless of whether or not the customer has exercised his or her opt out rights.

Be aware of the possibility that the caller may be attempting to obtain information about your customer through false or fraudulent statements to you. Toward this end, you must ensure that you respond to the caller in accordance with the controls you have implemented as part of your information security program, as required by the applicable provisions of the banking agencies’ Interagency Guidelines Establishing Standards for Safeguarding Customer Information (the “security guidelines”). See 66 Fed. Reg. 8616 (February 1, 2001).

First published on BankersOnline.com 3/30/09