Life & Health Insurance Exam (National Portion)Federal RegulationsMedium
An insurance company's compliance department is updating its procedures for handling customer complaints and inquiries regarding the use and sharing of their personal financial information. They must ensure that customers receive clear notices about how their data is collected and shared, and have options to opt-out of certain disclosures. Which specific rule under the Gramm-Leach-Bliley Act (GLBA) mandates these requirements?
- AThe Safeguards Rule
- BThe Financial Privacy Rule
- CThe Pretexting Rule
- DThe Customer Identification Program (CIP) Rule
Show answer & explanationAnswer & explanation
Correct answer: B. The Financial Privacy Rule
The GLBA Financial Privacy Rule requires financial institutions to provide customers with a privacy notice at the time they establish a customer relationship and annually thereafter. This notice must explain what information the institution collects, where that information is shared, and how customers can opt out of information sharing.
Why the other options are wrong
- A. The Safeguards Rule requires financial institutions to implement security plans to protect customer data.
- C. The Pretexting Rule prohibits obtaining customer information under false pretenses.
- D. The CIP Rule is part of the USA PATRIOT Act, not GLBA, and focuses on verifying customer identity to prevent money laundering.
GLBA Financial Privacy Rule
The GLBA Financial Privacy Rule governs the collection and disclosure of customers' nonpublic personal financial information by financial institutions.
- Requires privacy notices to customers.
- Explains information sharing practices.
- Provides customers with the right to opt-out of certain disclosures.
Memory trick: GLBA's three rules: Privacy tells, Safeguards dwells, Pretexting repels.