Answer:
Answer by Jerry Loeser:
The GrammLeachBliley Act's privacy provisions contain an exception for the disclosure of nonpublic personal information in connection with a proposed or actual sale, merger, transfer, or exchange of all or a portion of a business or operating unit. Thus, the sharing of the information is not prohibited by the new privacy law.
The new privacy law technically does not cover the next step, i.e. the customer contact proposed by this question. However, I would always advise in this situation that, until the merger or acquisition actually closes, there is a risk that it will not close, and it might not be wise to contact customers as if the closing of the transaction is a given. In recent years, a major bank acquisition involving the largest banks in Utah failed to close and was abandoned.
Answer:
Answer by Mary Beth Guard:
The issue that the GLBA privacy provisions focus on is the SHARING of nonpublic customer information. So, first you look at whether it is permissible for a target bank to share information with an institution acquiring it.The regulation doesn't prohibit all sharing of NPI with third parties. It merely provides that the information sharing may not take place unless it either l) fits within the exceptions or 2) has been disclosed to the customer and the customer has been given a right to opt out.
The exception in Section __.15 of the privacy rule provides an exception to the prohibition against sharing and opt out right when the disclosure is made:
" In connection with a proposed or actual sale, merger, transfer, or exchange of all or a portion of a business or operating unit if the disclosure of nonpublic personal information concerns solely consumers of such business or unit;"
So, the information sharing with the acquiring institution is permissible, but can the information be used by them for the purpose you described? Section ___.11 places limits on redisclosure and reuse of information received under an exception. It states at __.11(a)(1)(iii), when talking about a third party (such as the acuiqiring institution) to whom NPI has been disclosed:
"You may disclose and use the information pursuant to an exception in Section ___.14 or ___.15 in the ordinary course of business to carry out the activity covered by the exception under which you received the information."
Looks to me like if the acquiring institution wanted to contact customers of the target in preparation for the merger to familiarize them with the acquirer and its products and services, that would be a natural part of carrying out the merger (which was the exception under which it received the information).
Answer:
Answer by Lucy Griffin:
You shouldn't have to do this because the FDIC deposit insurance rules protect these customers, insuring both deposits, for six months. If the deposit is a time deposit, the protection extends for the period of the deposit contract.
Letting them know early is nice, but you probably also want to advise them that they have time to decide what to do with their funds. You might be able to advise them on restucturing account ownership so that the funds could all stay in the resulting bank. The FDIC's software program can help with this and is fun to use.
First published on BankersOnline.com 8/6/01
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