Since December 4, 2006, consumers have filed dozens of class actions against retailers and other businesses across the country alleging “willful” violations of the Fair and Accurate Credit Transactions Act (“FACTA”) amendments to the Fair Credit Reporting Act (“FCRA”), prohibiting the printing of more than five digits, or the expiration date, of a credit card on receipts provided to the customer. Defendants in those cases have been waiting anxiously for the Supreme Court to rule in Safeco Insurance Co. of America, et al. v. Burr, et al., 551 U.S. _____ (2007), a factually inapposite matter in which the Court granted certiorari to determine whether “reckless disregard” suffices for willfulness under the statute. In a decision that raises as many questions as it answers, the Supreme Court held on June 4, 2007 that “reckless” failure to comply with FCRA can be considered willful. The Court’s opinion begs the question whether it was objectively reasonable for retailers to continue the printing of expiration dates on customer receipts after FACTA took full effect.
Financial Privacy
SEC Ratchets Up Privacy Enforcement Under Regulation S-P
By Proskauer Rose on
Broker-dealer firms are well advised to review and update their privacy policies, in light of the Securities and Exchange Commission’s (“SEC”) recent enforcement and investigation activities arising from Regulation S-P.
According to trade press, recently the SEC informed one independent broker-dealer firm, Next Financial Group, Inc. of Houston, Texas, that it may file a “privacy” suit under Regulation S-P. The suit would be based on the practice, which Next maintains is common among independent broker-dealer firms, of requiring broker recruits from other firms to provide Next with customer information in anticipation of the move. According to the press, the SEC contends that before the brokers left their firms to join Next, they should have asked clients for their consent to use any information at the new firm. Alternatively, Next should have only required brokers to provide this information if the brokers’ prior firms had stated in their privacy policies that departing brokers may take certain customer information to competing firms (and the particular consumers had not opted-out of this policy). The SEC is reportedly considering suing Next for violations of Regulation S-P, as well as for aiding and abetting the violations by the brokers it recruited.
Federal Regulators Propose Federal Privacy Notice and Seek Comments
By Proskauer Rose on
On March 21, 2007, eight federal regulatory agencies (“Joint Agencies”) with jurisdiction over Gramm-Leach-Bliley Act (“GLBA”) regulated “financial institutions” issued an interagency proposal for a new model privacy form. The proposal is the result of a lengthy process the Joint Agencies began in 2001 to improve the format of GLBA privacy notices to make them more comprehensible to consumers. In addition to a lack of clarity, the Joint Agencies and consumer and privacy advocates have been concerned about the length of notices and the overuse of legal terms.
Section 503 of the GLBA, 15 U.S.C. § 1603 and current rules, require financial institutions to provide their customers with a notice that describes, among other things, how they protect nonpublic personal information, the categories of nonpublic personal information collected, the affiliates and the nonaffiliated third parties to whom such information is disclosed, and a description of the customer’s right to prevent certain disclosures to nonaffiliated third parties. These notices must be provided at the outset of the institution’s relationship with a customer and, in the case of long-standing relationships, on an annual basis. Current rules do not mandate a standard format or particular wording for the notices, however, they provide sample clauses that financial institutions can use to satisfy the notice requirements.