Compliance with Privacy Laws (Gramm-Leach-Bliley Act) Flashcards
One of the weighing laws that oversees and regulates mortgage loan disclosures and documentation is the privacy law of the Gramm-Leach-Bliley Act This section will introduce and test your knowledge of this law and outline how it plays a major role in how lenders handle the private data of their customers.
One of the most important parts of a lender’s job is ensuring that there is trust in the lending-client relationship. In order to achieve this many laws have come into effect to achieve these goals. What is the
Gramm-Leach-Bliley Act?
A. An act that outlaws mortgage lenders engaging in investments.
B. An act that requires companies that provide financial products or services to disclose their information-shared practices.
C. A promotion of the consolidation of financial services.
D. An act that allows banks to interact with various insurance and investment companies.
Correct answer: B
B is correct, as the Gramm-Leach-Bliley Act is a 1999 law introduced to
protect customers’ private information from financial companies. It requires
that these financial providers and product sellers disclose plainly to their
customers their information-sharing practices and safeguard private data.
Lenders have many tools to help them protect the data of their clients, so what is not way lenders keep in compliance with privacy laws?
A. The TILA.
B. The Gramm-Leach-Bliley Act.
C. They share all information about their clients to improve lending practices.
D. Consent and opt-out procedures.
E. Staff training
Correct answer: C
C is correct, as there are many ways that lenders comply with privacy laws,
but they are not allowed to share every personal detail about their clients,
even if it is for improving lending practices. The Gramm-Leach-Bliley Act
protects clients’ personal information, so a lender would need to get the
client’s consent if they wanted to use their data for anything. Lenders must
have rigorous privacy regulations in protecting and handling clients’
personal data.
Who enforces compliance in the lending industry with privacy laws like GLBA?
A. Federal National Mortgage Association (FNMA).
B. Consumer Financial Protection Bureau (CFPB).
C. The Federal Trade Commission (FTC).
D. Congress.
Correct answer: C
C is correct because it is hard to argue the power that the FTC has as an
independent agency of the government established to regulate fair trade.
When thinking about how this looks in the lending sphere, they oversee
overseeing customer privacy laws and ensure that mortgage customers’ data
is carefully handled and cared for by lenders. They also will enforce
punishment on those that breach their laws, such as the Gramm-LeachBliley Act.
What is the punishment for non-compliance with mortgage privacy?
A. Prison time.
B. A fine.
C. Loss of practicing license.
D. All of the above.
Correct answer: D
D is correct because those that fail to follow or acknowledge the GrammLeach-Bliley Act may be charged up to 100,000 for companies and 10,000
for individuals per infringement. This can also include prison time of up to
five years, depending on the level of offending, with a loss of practicing
license in extreme cases.
What is not part of the GLBA?
A. Client information can’t be mishandled by lenders.
B. Lenders who can’t obtain information about their clients are false pretenses.
C. Lenders can sell and buy client information.
D. Lenders must be clear about what the client’s information is used for.
E. Client information must be safeguarded.
Correct answer: C
C is correct because the GLBA does not allow lenders to sell or buy client
information to or from other lenders under any circumstances. Clients own
the right to their own information, and it is the job of lenders to safeguard
and protect them from being mishandled. Lenders should also be clear
about what the client’s information will be used for, and they can’t obtain
information about their clients under false pretenses.
What example may be a breach of GLBA?
A. A lender that pretends to be buddy with a client to find out if they have a
lot of money.
B. A lender that keeps a record of all their clients’ personal details related to
the loan.
C. A lender that refuses to disclose the personal information of a client to
another lender.
D. A lender that discusses personal information about a client with another
client without the owner’s prior written or spoken approval.
E. A & D.
Correct answer: E
E is correct because the GLMA prohibits a lender from pretending to be
something so they can find out information about the client, even if it’s to
do with finding out financial details. A lender must be clear about what they
need from a client, and that starts with being direct with questions and not
misleading them in any way. The same is said with D, which shows a
classic example of a GLBA breach where a lender is sharing personal
information about a client without their knowledge or approval. Both these
examples shown in A & D show common GLMA breaches.
Thinking about the purpose of the GLBA and its power to help regulate the client-lending relationships with the handling of personal data. What is clearly NOT one of the three sections in the GLBA?
A. The Financial Privacy Rule.
B. The Mishandling Information Rule.
C. The Safeguards Rule.
D. The Pretexting Provisions.
Correct answer: B
B is correct because The Mishandling Information Rule is not an official
section in the GLBA. The Financial Privacy Rule is a part of the GLBA,
which requires financial institutions to put privacy policies in place to help
protect the private information of their clients. The Safeguards Rule
requires financial institutions to put in place security to ensure that clients’
private information is kept well-guarded. The Pretesting Provisions prevent
employees and business partners from obtaining customer information
under false pretenses (such as social engineering).
