The Gramm-Leach-Bliley Act ( GLBA ), also known as the Financial Services Modernization Act of 1999 , (Pub.L. 106- 102 , 113Ã, Stat.1338, enacted on 12 November 1999) is the act of the 106th United States Congress (1999-2001). This repealed part of the Glass-Steagall Act of 1933, removing barriers in the market between banking companies, securities firms and insurance companies that prohibit an institution from acting as a combination of investment banks, commercial banks, and insurance companies. With the bipartisan section of the Gramm-Leach-Bliley Act, commercial banks, investment banks, securities firms, and insurance companies are allowed to consolidate. In addition, fails to provide to the SEC or other regulatory bodies of authority authority to regulate holding companies of large investment banks. The law was signed into law by President Bill Clinton.
A year before the law was passed, Citicorp, the commercial bank's parent company, joined the Travelers Group insurance company in 1998 to form a conglomerate of Citigroup, a company that combines banking, securities and insurance services under home brands including Citibank, Smith Barney, Primerica , and Travelers. Since this merger was a violation of the Glass-Steagall Act and the 1956 Holding Bank Company Act, the Federal Reserve granted Citigroup a temporary exemption in September 1998. Less than a year later, the GLBA was authorized to legalize this type of merger on a permanent basis. The law also lifted the Glass-Steagall interest prohibitions that prohibit "against simultaneous service by officials, directors, or employees of securities firms as officers, directors or employees of any member bank".
Video Gramm-Leach-Bliley Act
Legislative history
The banking industry has sought the lifting of the 1933 Glass-Steagall Act since the 1980s, if not earlier. In 1987, the Congressional Research Service prepared a report that investigated cases for and against the preservation of Glass-Steagall's actions.
Each version of the Financial Services Act was introduced in the US Senate by Phil Gramm (The Republic of Texas) and in the US House by Jim Leach (R-Iowa). The third member of parliament which is related to the bill Rep. Thomas J. Bliley, Jr. (R-Virginia), Chairman of the House Trade Committee from 1995 to 2001.
During the debate in the House of Representatives, Rep. John Dingell (Democrat from Michigan) argues that the bill would lead the bank to be "too big to fail." Dingell further argues that this will result in a bailout by the Federal Government.
The House of Representatives approved the 1999 version of the Financial Services Act on July 1, 1999, with a bipartisan vote of 343-86 (Republican 205-16, Democrat 138-69, Independent 0-1), two months after the Senate has passed the bill version on May 6 by a much narrower 54-44 voters along partisan lines (53 Republicans and 1 Democrats in favor, 44 Democrats oppose).
When the two assemblies were unable to approve the combined version of the bill, the Parliament voted on 30 July with a vote of 241-132 (R 58-131; D 182-1; Ind. 1-0) to instruct his negotiator to work for the law ensuring that consumers enjoy medical and financial privacy and "strong competition and equal and non-discriminatory access to financial services and economic opportunities in their communities" (ie, protection against exclusive redlining).
The bill was then transferred to a joint conference committee to find out the difference between the Senate and House versions. Democrats agree to support the bill after the Republic agrees to substantiate the provisions of the Anti-Redlining Society Reinvestment Act and address certain privacy concerns; the conference committee then completed its work in early November. On November 4, the final bill finalizing the differences was passed by the Senate 90-8, and by House 362-57. The law was signed into law by President Bill Clinton on 12 November 1999.
Maps Gramm-Leach-Bliley Act
Changes caused by Act
Many of the largest banks, brokers, and insurance companies wanted the Act at the time. The justification is that individuals usually put more money into investing when the economy is doing well, but they save most of their money into savings accounts when the economy turns bad. With the new Law, they will be able to make 'savings' and 'investments' in the same financial institution, which will do well in good and bad economic times.
Before the Act, most financial services companies have offered savings and investment opportunities to their customers. On the retail/consumer side, a bank called Norwest Corporation, which would later join Wells Fargo Bank, led the cost in offering all types of financial services products in 1986. American Express strives to have participants in virtually every field of financial business (although there is little synergy between them). Things culminated in 1998 when Citibank joined Travelers Insurance, creating CitiGroup. This merger violates the Law of Holding Bank (BHCA), but Citibank is given a two-year sentence based on the assumption that they will be able to force changes in the law. The Gramm-Leach-Bliley Act was passed in November 1999, canceling part of the BHCA and Glass-Steagall Act, allowing banks, brokers, and insurance companies to join, thus making the merger of CitiCorp/Travelers Group legal.
Also before the passage of the Act, there is much relaxation into the Glass-Steagall Act. For example, a few years earlier, commercial banks were allowed to pursue investment banking, and before that banks were also allowed to start trading in stocks and insurance brokers. Insurance coverage is the only major operation that they can not do, something rarely done by banks even after the passage of the Act. The law further sets out three provisions that allow the parent banks to engage in physical commodity activity. Prior to the enactment of the Act, such activities were limited to those closely linked to banking to be regarded as coincidences. Under the GLBA depending on the terms of the falling institution, the bank holding company may engage in the trading of physical commodities, tolling energy, energy management services, and merchant banking activities.
Much consolidation has taken place in the financial services industry since, but not on an expected scale. Retail banks, for example, do not tend to buy insurance guarantees, as they seek to engage in a more profitable insurance brokerage business by selling products from other insurance companies. Other retail banks are slow in marketing investments and insurance products and packing them in a convincing way. Brokerage companies have difficulties getting into banking, because they do not have large branches and backshop trails. Banks have recently tended to buy other banks, such as Bank of America mergers and Fleet Boston 2004, but they are less successful in integrating with investment and insurance companies. Many banks have expanded into investment banking, but have found it difficult to package them with their banking services, without the use of a questionable tie-ins that caused the scandal at Smith Barney.
remaining restrictions
The important thing for the ratification of this Act is the changes made to GLB, stating that no merger can be done if one financial institution, or its affiliates, receives "unsatisfactory [ sic ] judgments on the latest CRA exam ", basically means that any merger can only be done with the strict approval of the regulatory body responsible for the Community Reinvestment Act (CRA). This is a hot issue of contention, and the Clinton Administration stressed that "it will veto any laws that will reduce the terms of minority loans."
GLBA also did not remove the restrictions on banks placed by the Bank Holding Company Act of 1956 which prevented financial institutions from having non-financial companies. This in turn prohibits companies outside the banking or financial industry from entering retail and/or commercial banking. Many consider Wal-Mart's desire to turn its industrial bank into a commercial/retail bank eventually encouraging the banking industry to support the restrictions on GLBA.
Some restrictions still provide some separation between investment and commercial banking operations of the company. For example, a licensed banker must have a separate business card, for example, "Personal Bankers, Wells Fargo Bank", and "Investment Consultant, Private Client Service Wells Fargo". Much of the debate on financial privacy is specifically centered around enabling or preventing banks, brokers, and insurance divisions of a corporation to work together.
In the case of compliance, the main rules under the Act include the Financial Privacy Regulations governing the collection and disclosure of personal financial information of customers by financial institutions. This also applies to companies, regardless of whether they are financial institutions, who receive such information. The Protection Rules require all financial institutions to design, implement and maintain safeguards to protect customer information. The Protection Rule applies not only to financial institutions that collect information from their own customers, but also to financial institutions - such as credit reporting agencies, appraisers, and mortgage brokers - that receive customer information from other financial institutions.
Privacy
- GLBA compliance is mandatory; whether financial institutions disclose nonpublic information or not, there should be a policy to protect information from threats that can be expected in the security and integrity of the data.
- Major components are created to manage the collection, disclosure, and protection of nonpublic private consumer information; or personally identifiable information including:
- Financial Privacy Rules
- Protection Rules
- Thinking Protection
Financial Privacy Rules
(Subtitle A: Disclosure of Personal Information Nonpublic, codified on 15 U.S.C.Ã,§Ã,§Ã, 6801-6809)
The Financial Privacy Regulations require financial institutions to provide each consumer with a privacy notice when the customer relationship is established and every year thereafter. The privacy notice should describe the information collected about the consumer, where the information is shared, how the information is used, and how the information is protected. The notice shall also identify the right of consumers to opt out of the information distributed to non-affiliated parties in accordance with the provisions of the Fair Credit Reporting Act. If the privacy policy changes at any time, the consumer must be notified again for acceptance. Every time a privacy notice is re-created, the consumer has the right to opt out again. Unaffiliated parties receiving non-public information are held on the terms of acceptance of the consumer under an initial relationship agreement. In short, the financial privacy rules provide privacy policy agreements between companies and consumers related to the protection of nonpublic personal information of consumers.
On November 17, 2009, eight federal regulatory agencies released the final version of the model privacy notification form to make it easier for consumers to understand how financial institutions collect and share information about consumers.
Financial institutions
GLBA defines financial institutions as: "Companies that offer financial products or services to individuals, such as loans, financial or investment advice, or insurance". The Federal Trade Commission (FTC) has jurisdiction over financial institutions similar to, and includes, these:
- Non-bank mortgage lender,
- Real estate appraiser,
- The loan broker,
- Some financial or investment advisors,
- Debt collector,
- The tax return manager,
- Bank, and
- Real estate settlement service providers.
These companies should also be considered to be significantly involved in financial or production services that define them as "financial institutions".
Insurance has the first jurisdiction by the state, provided that most state laws do not meet GLB. State laws may require greater compliance, but not less than what is required by GLB.
Consumer vs. specified customer
The
Customer is a consumer who has developed a relationship with privacy rights protected by GLB . Customer is not someone who uses an automated teller machine (ATM) or has a check that is cashed in the cash withdrawal business. This is not an ongoing relationship like a customer might have - that is, a mortgage loan, a tax advisor, or a credit financing. Businesses are not individuals with nonpublic personal information, so businesses can not be customers under GLB . A business, however, may be responsible for compliance with GLB depending on the type of business and activities that utilize private nonpublic personal information.
Definition: "Consumer" means an individual obtaining or obtaining financial products or services from a financial institution that will be used primarily for personal, family, or household, or individual legal representation.
Example of customer relationship:
- Applying for a loan
- Earn cash from a foreign ATM, even if it happens on a regular basis
- Unfreeze checks with check firms
- Set up for wire transfer
Definition: "Customers" are consumers who have a "customer relationship" with a financial institution. "Customer relations" is a sustainable relationship with consumers.
Examples of building customer relationships:
- Open a credit card account with a financial institution
- Entering a car rental (on a non-operational basis for an initial lease term of at least 90 days) with car dealers
- Provide personally identifiable financial information to the broker to get a mortgage loan
- Get a loan from a mortgage lender
- Approved for tax preparation or credit counseling services
"Special Rules" for Loans: Customer relationship goes with ownership of service rights.
Consumer/client privacy rights
Under GLB , financial institutions should provide their clients with a privacy notice explaining what information the company collects about clients, where this information is shared, and how the company maintains that information. This privacy notice must be given to the client before entering into an agreement to do business. There are exceptions to this when a client receives a pending receipt from the notification to complete the transaction in a timely manner. This has been somewhat mitigated due to online recognition agreements that require clients to read or scroll through notices and check the boxes to accept the terms.
The privacy notice should also explain to customers the opportunity to 'opt out'. Opting out means clients can say "no" to allow their information to be shared with unaffiliated third parties. The Fair Credit Reporting Act is responsible for 'opt-out' opportunities, but privacy notices must notify customers of this right under GLB. Client can not opt ​​out of:
- information shared with those who provide priority services to financial institutions
- product or service marketing for financial institutions
- when information is deemed legally required.
Acceptance of GLBA notification by consumer
Service notice requirements
Notification requirements may vary. In many cases, the GLBA notification service is not required unless the entity serving the notification intends to "share" the customer information, defined by the FTC as "non-public personal information (NPI)", the customer must be protected under GLBA .
Response to receive GLBA notification
Consumers may respond to the GLBA notification service by:
- No answer
- Shows, on the acknowledgment form that notifications are given (usually for signed documents directly)
- Respond by recommended format in GLBA Notice
- Respond with prepared mail (alone or in-form)
Synergy between GLBA and GDPR
The EU General Data Protection Regulation (GDPR) becomes applicable on May 25, 2018. As applicable to consumers, GDPR includes provisions on the scope of data collection, but also includes access rights, and the right to delete. Due to the multinational nature of some transactions, including data and internet transactions, and the possibility of applying related regulations in some US states, it is likely that businesses and other entities will comply with the GDPR as well as the US GLBA requirements.
Private requests for privacy under GLBA tend to include terms guaranteed by the EU GDPR.
Security Templates
(Subtitle A: Disclosure of Personal Information Nonpublic, codified on 15 U.S.C.Ã,§Ã,§Ã, 6801-6809)
The Safeguards Rule obliges financial institutions to develop a written information security plan that explains how the company is prepared, and plans to continue protecting the client's private nonpublic information. (Safeguards Rules apply to past or current consumer information of financial institution products or services.) This plan should include:
- Show at least one employee to manage protection,
- Create a thorough risk analysis for each department that handles non-public information,
- Develop, monitor and test programs for securing information, and
- Change the necessary protection with changes in how to collect, store, and use information.
The Safeguards Rule forces financial institutions to take a closer look at how they manage personal data and perform risk analysis on their current processes. There is no perfect process, so this means that every financial institution must try to comply with GLBA .
Tortuous protection
(Subtitle B: Fraudulent Access to Financial Information, codified on 15 U.S.C.Ã,§Ã,§Ã, 6821-6827)
Pretext (sometimes referred to as "social engineering") occurs when a person tries to gain access to nonpublic personal information without proper authority to do so. This may require requesting personal information when impersonating account holders, by phone, by mail, by email, or even by "phishing" (i.e., using fake websites or emails to collect data). GLBA encourages organizations covered by GLBA to apply protection against excuses. For example, well-written plans designed to comply with the GLB Safeguards Rule ("developing, monitoring, and testing programs for securing information") will likely include a section on employee training to recognize and fend off questions made on the pretext. In fact, the evaluation of employee training effectiveness may include a follow-up program of random spot checking, "outside the classroom", after completing initial employee training, to check the resilience of a given (randomly selected) student for different types of "social engineering" - may even be designed to focus on any new wrinkles that may have appeared after the [initial] attempt to "develop" the curriculum for the training of the employee. Under United States law, the pretext by an individual may be punished as a common legal crime of Counterfeit Pretenses.
Effects on the usury law
Section 731 of GLB, codified as subsection (f) of 12 USC Ã,§ 1831u, contains a special provision aimed at Arkansas, whose usury limits are set at five percent above the Federal Reserve discount rate by the Arkansas Constitution and can not be changed by the Assembly General Arkansas. When the Currency Finance Supervisory Office decides that the interstate banks established under the Banking Act of Riad-Neal Interstate and the Branching Efficiency Act 1994 may use the usury laws of their country of origin for all national branches with minimum restrictions, the banks based in Arkansas placed at a severe competitive disadvantage for the Arkansas branches in the interstate banks; This led to a takeover outside of several Arkansas banks, including the sale of First Commercial Bank (then the largest bank in Arkansas) to Regions Financial Corporation in 1998.
Under Section 731, all state-based banks covered by the law may impose charges to the highest riba of any country which is headquartered to an interstate bank having branches within a closed country. Therefore, since Arkansas has branches of banks based in Alabama, Georgia, Mississippi, Missouri, North Carolina, Ohio, and Texas, any legal loan under the usury law of either country may be conducted by banks based in Arkansas under Section 731. This section does not apply to intercountry banks with branches within a closed country, but is headquartered elsewhere; However, Arkansas-based interstate banks such as Arvest Bank can export their Section 731 limit to other countries.
Since Section 731, it is generally assumed that Arkansas-based banks now have no usury limit for credit cards or for loans of more than $ 2,000 (since Alabama, the state 'state, has no limits on the loan), with a limit of 18 % (minimum cost of usury in Texas) or more than all other loans. However, after Wells Fargo completed the full purchase of Century Bank (a Texas bank with branches of Arkansas), Section 731 removed all the usury limits for the Arkansas-based banks since Wells Fargo's South Dakota-based main bank, legislation many years ago.
Although designed for Arkansas, Section 731 may also apply to Alaska and California whose constitutions provide the same basic usury margins, although unlike Arkansas, their legislatures can (and usually) set different limits. If Section 731 applies to these countries, then all of their usury limits do not apply to the banks based in those countries, as Wells Fargo has branches in both states.
Controversy
Criticism
This action is often cited as the cause of the 2007 subprime mortgage financial crisis "even by some of its supporters who once existed." President Barack Obama has stated that the GLBA led to deregulation which, among other things, enabled the creation of a huge financial supermarket that could have investment banks, commercial banks and insurance companies, something that has been banned since the Great Depression. In part, critics also say, clearing the way for companies that are too big and intertwined to fail.
Nobel Prize winning economist Joseph Stiglitz also argues that the Act helps create a crisis. In an article in The Nation, Mark Sumner asserts that the Gramm-Leach-Bliley Act is responsible for establishing an entity that takes more risks because it is considered "too big to fail".
According to a 2009 policy report from the Cato Institute written by one of the institute directors, Mark A. Calabria, criticism of the law feared that, with the merger allowance between investment and commercial banks, the GLBA allowed newly joined banks to take on risky investments while at the same time eliminating the requirement to maintain sufficient equity, exposing the assets of its banking customers. Calabria claims that, prior to the passing of the GLBA in 1999, investment banks have been able to hold and trade financial assets claimed to be the cause of the mortgage crisis, and also have been able to keep their books as they have. He concluded that greater access to investment capital as many investment banks go public in the market explain a shift in their ownership to trading portfolios. Calabria noted that after the GLBA passed, most of the investment banks did not join the commercial banks deposits, and that in fact, some banks that combine the crisis better than those that do not.
In February 2009, one of his co-authors, former Sen. Phil Gramm, also defended his bill:
[I] f GLB is the problem, the crisis is thought to have originated in Europe where they never had Glass-Steagall requirements to start. Also, financial companies that failed in this crisis, like Lehman, were the least diversified and survivors, such as J.P. Morgan, is the most diversified. In addition, GLB does not deregulate. It sets the Federal Reserve as a superregulator, overseeing all of the Financial Services Holding Companies. All activities of financial institutions are continuously regulated functionally by regulators who have arranged such activities before GLB.
Bill Clinton, as well as economists Brad DeLong and Tyler Cowen all argue that the Gramm-Leach-Bliley Act softens the impact of the crisis. Monthly Atlantic columnist Megan McArdle argues that if the action was "part of the problem, it would be a commercial bank, not an investment bank, that is in trouble" and the retraction would not help the situation. An article in the conservative publication National Review has made the same argument, calling liberal accusations of the law "people's economy." A New York Times finance columnist and GLBA critic has occasionally stated that he believes the GLBA has nothing to do with the failing institution.
Amendments
Proposed
The HR Act of 2013 (HR 1155; 113th Congress) (HR 1155) is a bill intended to reduce regulatory costs to meet the requirements of some states for insurance companies, making it easier for the same company to operate in several states. The bill would amend the Gramm-Leach-Bliley Act to lift contingent conditions under which the National Association of Registered Agents and Brokers (NARAB) would not be established. The bill will change the National Association of Agents and Registered Brokers (NARAB) into a clearing house that sets its own standards that will be required by insurance companies to do business in other countries. In this new system, however, insurance companies must only meet the requirements of their home country and NARAB (only two entities), not their home country and any other country they wish to operate (various entities). Proponents of the bill argue that it will help lower costs for insurance companies and make insurance cheaper for people to buy.See also
Note
References
Source
- Financial privacy: The Gramm-Leach-Bliley Act, Federal Trade Commission, 1999
- Gramm-Leach-Bliley Act, 15 USC, Section I, Sec. 6801-6809, Nonpublic Personal Information Disclosure, FTC, 1999
- Mike Chapple, Gramm-Leach-Bliley and You, November 18, 2003
- Robert H. Ledig, Gramm-Leach-Bliley Acting Financial Privacy Terms: The Federal Government is Wearing Broad Terms to Overcome Concerns of Consumer Interests
- The Gramm-Leach-Bliley Act: Financial Privacy Regulations, Federal Trade Commission
- At a Glance: The Financial Privacy Terms of the Gramm-Leach-Bliley Act, Federal Trade Commission
- The Gramm-Leach-Bliley Act - "GLBA History", Electronic Privacy Information Center
- The Financial Institution's Privacy Protection Act of 2003 - KONGRES 108, Session 1, S. 1458, "Changing Gramm-Leach-Bliley Deed to provide better protection of nonpublic personal information, including information health, and for other purposes. ", In the United States Senate; July 25 (legislative day, JULI 21), 2003, Library of Congress
- Federal Reserve Governor Laurence H. Meyer: Merchant banking, Federal Reserve Bank Martin McLaughlin, Clinton, Republicans agreed to deregulate the US financial system, the World Socialist Website, November 1, 1999, taken on October 9, 2008
External links
Compliance information
- Gramm-Leach-Bliley Act, 15 USC, Section I, Sec. 6801-6809 - Nonpublic Personal Information Disclosure
Consumer/client rights information
- Nonpublic Personal Information Disclosure
- What You Can Do To Protect Your Privacy
- Privacy Options for Your Personal Financial Information
- Pretext: Your Personal Information Revealed
GLB History
- GLBA History
Records of congressional voting at Gramm-Leach-Bliley Act
- Senate Vote # 354 (November 4, 1999) In the Conference Report (S.900 Conference Report)
- House Vote # 570 (November 4, 1999) Approved the Conference Report: S 900 (106th) of the Law on the Modernization of Financial Services
Source of the article : Wikipedia
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