Before the loan advances, a compliance manager must resolve a GLBA privacy requirements issue in a state-law refresher. What should happen?
Correct Answer
C) Share borrower information only with proper authority
Why this is correct: The Gramm-Leach-Bliley Act (GLBA) and its Privacy Rule require financial institutions to protect customers' nonpublic personal information (NPI). A fundamental requirement is that NPI cannot be shared with third parties (outside of certain exceptions) without providing a privacy notice and, in some cases, an opt-out right. Sharing information "only with proper authority" encapsulates the duty to share NPI only as permitted by law, such as with the consumer's consent, to effect a transaction, or as otherwise allowed by the privacy rule exceptions. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because GLBA's privacy requirements are federal law and cannot be superseded by internal policy. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because privacy protections must be in place before sharing information, not after the fact. "Rely on oral agreement when the rule requires documented compliance" is wrong because GLBA's requirements, such as providing initial and annual privacy notices, require written (or electronic) documentation. Exam tip: GLBA's privacy rule is about controlling the sharing of NPI. Think: "Can I share this, and if so, what notice is required?"
Why This Is the Correct Answer
The correct response is "Share borrower information only with proper authority" because Nonpublic personal information must be handled under GLBA privacy limits and notices.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option D: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
GLBA privacy requirements: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to GLBA privacy requirements; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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