Before sharing borrower information with an affiliate, the loan team checks GLBA privacy limits. Which response is defensible?
Correct Answer
D) Protect nonpublic personal information before sharing
Why this is correct: The Gramm-Leach-Bliley Act (GLBA) requires financial institutions to protect the security and confidentiality of customers' nonpublic personal information (NPI). Before sharing NPI with an affiliate, the institution must have safeguards in place and, depending on the circumstances, may need to provide privacy notices outlining sharing practices. The correct response, "Protect nonpublic personal information before sharing," captures the core duty to implement security measures and comply with privacy rules prior to any disclosure. 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 overridden by internal exceptions. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because privacy protections must be established and maintained proactively. "Rely on oral agreement when the rule requires documented compliance" is wrong because GLBA often requires written privacy notices and documented security programs; oral agreements do not fulfill these requirements. Exam tip: GLBA's Privacy Rule focuses on notice and opt-out rights for sharing with non-affiliates, while the Safeguards Rule requires a written security plan to protect customer data at all times.
Why This Is the Correct Answer
The correct response is "Protect nonpublic personal information before sharing" 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 C: 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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