A mortgage team asks a sponsorship reviewer about GLBA privacy requirements during a file review. Which answer should guide the file?
Correct Answer
B) Follow privacy notice and opt-out requirements
Why this is correct: The Gramm-Leach-Bliley Act (GLBA) requires financial institutions to protect the privacy of customers' nonpublic personal information. The core compliance requirements are to provide initial and annual privacy notices that explain information-sharing practices and to honor customers' opt-out choices if the institution shares information with nonaffiliated third parties under certain conditions. Therefore, the correct action is to follow privacy notice and opt-out requirements. 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or timing rule" is wrong because GLBA's privacy notice and opt-out rules are federal requirements that cannot be superseded by internal policy. "Assume the GLBA Privacy Rules condition is met because the borrower satisfied the separate asset documentation requirement" is wrong because asset documentation (for underwriting) and privacy protection are completely separate regulatory obligations. "Rely on oral agreement when the rule requires documented compliance" is wrong because privacy notices must be provided in writing, and opt-out elections must be documented. Exam tip: Remember GLBA's two main pillars: provide a privacy notice and respect the customer's right to opt out of certain information sharing.
Why This Is the Correct Answer
The correct response is "Follow privacy notice and opt-out requirements" 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 C: Assume the GLBA Privacy Rules condition is met because the borrower satisfied the separate asset documentation requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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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