HR 3320 IH

To amend the privacy provisions of the Gramm-Leach-Bliley Act.

November 10, 1999

Mr. MARKEY (for himself, Mr. BARTON of Texas, Mr. DINGELL, Mr. CAMPBELL, Mr. LUTHER, Mr. WAXMAN, Mr. KUCINICH, Mr. HINCHEY, Ms. ESCHOO, Ms. LEE, Ms. RIVERS, Ms. SCHAKOWSKY, Ms. BALDWIN, Ms. ROYBAL-ALLARD, Mr. LEWIS of Georgia, Mr. TIERNEY, Mr. KILDEE, Mr. OBEY, Mrs. MEEK of Florida, Mr. EVANS, Mr. JACKSON of Illinois, Ms. WOOLSEY, and Mr. BARRETT of Wisconsin) introduced the following bill; which was referred to the Committee on Banking and Financial Services, and in addition to the Committee on Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To amend the privacy provisions of the Gramm-Leach-Bliley Act.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Consumer's Right to Financial Privacy Act'.

SEC. 2. AMENDMENT.

Title V of the Gramm-Leach-Bliley Act is amended to read as follows:

`TITLE V--PRIVACY OF CONSUMER INFORMATION

`Subtitle A--Disclosure of Nonpublic Personal Information

`SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFORMATION.

`(a) PRIVACY OBLIGATION POLICY- It is the policy of the Congress that each financial institution has an affirmative and continuing obligation to respect the privacy of its customers and to protect the security and confidentiality of those customers' nonpublic personal information.

`(b) FINANCIAL INSTITUTIONS SAFEGUARDS- In furtherance of the policy in subsection (a), each agency or authority described in section 504(a) shall establish by rule or order appropriate standards for the financial institutions subject to their jurisdiction, and the Commission shall establish such standards for any financial institutions not subject to such jurisdiction, relating to administrative, technical, and physical safeguards--

`(1) to insure the security and confidentiality of customer records and information;

`(2) to protect against any anticipated threats or hazards to the security or integrity of such records; and

`(3) to protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any customer.

`SEC. 502. OBLIGATIONS WITH RESPECT TO PERSONAL INFORMATION.

`(a) GENERAL REQUIREMENTS- Except as otherwise provided in this subtitle, a financial institution may not, directly or through any affiliate, disclose or make an unrelated use of any nonpublic personal information collected by the financial institution in connection with any transaction with a consumer in any financial product or any financial service, unless such financial institution provides or has provided to the consumer a notice that complies with section 503 and the rules thereunder.

`(b) OPT-IN REQUIRED FOR INFORMATION TRANSFERS-

`(1) AFFIRMATIVE CONSENT REQUIRED- Each agency or authority described in section 504(a) shall by rule prohibit a financial institution that is subject to its jurisdiction from making available any nonpublic personal information to any affiliate or other person that is not an employee or agent of the institution, unless the consumer to whom the information pertains--

`(A) has affirmatively consented in accordance with such rule to the transfer of such information; and

`(B) has not withdrawn the consent.

`(2) FLEXIBILITY OF FORM- A financial institution may, in complying with paragraph (1), present the opportunity to consent in a clear and conspicuous manner that permits the consumer to consent--

`(A)(i) with respect to both affiliates and nonaffiliated persons;

`(ii) separately with respect to affiliates generally and nonaffiliated persons generally; or

`(iii) separately with respect to specified affiliates and nonaffiliated persons; and

`(B) separately with respect to specified financial and nonfinancial products and services that may be offered to the consumer.

`(3) DENIAL OF SERVICE PROHIBITED- The rule prescribed pursuant to paragraph (1) shall prohibit a financial institution from denying any consumer a financial product or a financial service for

the refusal by the consumer to grant the consent required by such rule.

`(c) ACCESS TO AND CORRECTION OF INFORMATION VENDED TO THIRD PARTIES-

`(1) RULE REQUIRED- Each agency or authority described in section 504(a) shall by rule require a financial institution that is subject to its jurisdiction and that makes available nonpublic personal information collected by the financial institution to any person or entity other than an employee or agent of such institution to afford that consumer--

`(A) the opportunity to examine, upon request, all nonpublic personal information that was so made available; and

`(B) the opportunity to dispute the accuracy of any of such information, and to present evidence thereon.

`(d) LIMITATIONS ON THE SHARING OF ACCOUNT NUMBER INFORMATION FOR MARKETING PURPOSES- A financial institution shall not disclose an account number or similar form of access number or access code for a credit card account, deposit account, or transaction account of a consumer to any affiliate or any nonaffiliated third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail or other electronic means to the consumer.

`(e) LIMITS ON REUSE OF INFORMATION- Except as otherwise provided in this subtitle, an affiliate or a nonaffiliated third party that receives from a financial institution nonpublic personal information under this section shall not, directly or through an affiliate of such receiving third party, disclose such information to any other person that is an affiliate or a nonaffiliated third party of both the financial institution and such receiving third party, unless such disclosure would be lawful if made directly to such other person by the financial institution.

`(f) GENERAL EXCEPTIONS- Subsections (a) and (b) shall not prohibit the disclosure of nonpublic personal information--

`(1) as necessary to effect, administer, or enforce a transaction requested or authorized by the consumer, or in connection with--

`(A) servicing or processing a financial product or service requested or authorized by the consumer;

`(B) maintaining or servicing the consumer's account with the financial institution; or

`(C) a proposed or actual securitization, secondary market sale (including sales of servicing rights), or similar transaction related to a transaction of the consumer;

`(2) with the consent or at the direction of the consumer;

`(3)(A) to protect the confidentiality or security of the financial institution's records pertaining to the consumer, the service or product, or the transaction therein; (B) to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability; (C) for required institutional risk control, or for resolving customer disputes or inquiries; (D) to persons holding a legal or beneficial interest relating to the consumer; or (E) to persons acting in a fiduciary or representative capacity on behalf of the consumer;

`(4) to provide information to insurance rate advisory organizations, guaranty funds or agencies, applicable rating agencies of the financial institution, and the institution's attorneys, accountants, and auditors;

`(5) to the extent specifically permitted or required under other provisions of law and in accordance with the Right to Financial Privacy Act of 1978, to law enforcement agencies (including a Federal functional regulator, the Secretary of the Treasury with respect to subchapter II of chapter 53 of title 31, United States Code, and chapter 2 of title I of Public Law 91-508 (12 U.S.C. 1951-1959), a State insurance authority, or the Federal Trade Commission), self-regulatory organizations, or for an investigation on a matter related to public safety;

`(6)(A) to a consumer reporting agency in accordance with the Fair Credit Reporting Act, or (B) from a consumer report reported by a consumer reporting agency in accordance with the Fair Credit Reporting Act;

`(7) in connection with a proposed or actual sale, merger, transfer, or exchange of all or a portion of a business or operating unit if the disclosure of nonpublic personal information concerns solely consumers of such business or unit; or

`(8) to comply with Federal, State, or local laws, rules, and other applicable legal requirements; to comply with a properly authorized civil, criminal, or regulatory investigation or subpoena or summons by Federal, State, or local authorities; or to respond to judicial process or government regulatory authorities having jurisdiction over the financial institution

for examination, compliance, or other purposes as authorized by law.

`SEC. 503. NOTICE CONCERNING DISCLOSING INFORMATION.

`(a) RULE REQUIRED- Each agency or authority described in section 504(a) shall prescribe rules in accordance with this section to prohibit unfair and deceptive acts or practices in connection with the disclosing of nonpublic personal information or with making unrelated uses of such information. Such rules shall require any financial institution, through the use of a form that complies with the rules prescribed under subsection (b), to clearly and conspicuously disclose to the consumer at the time of establishing a customer relationship with a consumer and not less than annually during the continuation of such relationship--

`(1) the categories of nonpublic personal information that are collected by the financial institution;

`(2) the practices and policies of the financial institution with respect to disclosing nonpublic personal information, or making unrelated uses of such information, including--

`(A) the categories of persons to whom the information is or may be disclosed or who may be permitted to make unrelated uses of such information, other than the persons to whom the information must be provided to effect, administer, or enforce the transaction; and

`(B) the practices and policies of the institution with respect to disclosing or making unrelated uses of nonpublic personal information of persons who have ceased to be customers of the financial institution;

`(3) the policies that the institution maintains to protect the confidentiality and security of nonpublic personal information;

`(4) the practices and policies of the institution with respect to providing consumers the opportunity to examine and dispute information pursuant to the rule prescribed under section 502(c); and

`(5) the right of the consumer under such section to examine, upon request, the nonpublic personal information, to dispute the accuracy of any of such information, and to present evidence thereon.

`(b) DESIGN OF NOTICE REQUIREMENTS- In prescribing the form of a notice for purposes of subsection (a), each agency or authority described in section 504(a) shall ensure that consumers are provided a clear and conspicuous disclosure that permits them to compare differences in the measures that the financial institution takes, and the policies that the institution has established, to protect the consumer's privacy as compared to the measures taken and the policies established by other financial institutions. Such form shall specifically identify the rights the institution affords consumers to grant or deny consent to (1) the disclosing of nonpublic personal information for any purpose other than as required in order to effect, administer, or enforce the consumer's transaction, or (2) the making of an unrelated use of such information.

`(c) ADDITIONAL CONTENTS OF RULES; EXEMPTIVE RULES- Each agency or authority described in section 504(a) shall, by rule, and may by order--

`(1) specify the disclosures and uses of information which, for purposes of this subtitle and the rules prescribed thereunder, may be treated as necessary to effect, administer, or enforce a consumer's transaction with respect to a variety of financial services and financial products;

`(2) specify timing requirements with respect to notices to new and existing customers, which shall not require notices more frequently than annually unless there has been a change in the information required to be disclosed pursuant to subsection (a); and

`(3) provide, consistent with the purposes of this subtitle, exemptions or temporary waivers to, or delayed effective dates for, any requirement of this subtitle or the rules prescribed thereunder.

`SEC. 504. ENFORCEMENT.

`(a) IN GENERAL- This subtitle and the rules prescribed thereunder shall be enforced by the Federal functional regulators, the State insurance authorities, and the Federal Trade Commission with respect to financial institutions and other persons subject to their jurisdiction under applicable law, as follows:

`(1) Under section 8 of the Federal Deposit Insurance Act, in the case of--

`(A) national banks, Federal branches and Federal agencies of foreign banks by the Office of the Comptroller of the Currency;

`(B) member banks of the Federal Reserve System (other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured State branches of foreign banks), commercial lending companies owned or controlled by foreign banks, organizations operating under section 25 or 25A of the Federal Reserve Act, bank holding companies by the Board of Governors of the Federal Reserve System;

`(C) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), insured State branches of foreign banks by the Board of Directors of the Federal Deposit Insurance Corporation; and

`(D) savings association the deposits of which are insured by the Federal Deposit Insurance Corporation by the Director of the Office of Thrift Supervision.

`(2) Under the Federal Credit Union Act, by the Administrator of the National Credit Union Administration with respect to any Federal or state chartered credit union.

`(3) Under the Securities Exchange Act of 1934, by the Securities and Exchange Commission with respect to any broker-dealer.

`(4) Under the Investment Company Act of 1940, by the Securities and Exchange Commission with respect to investment companies.

`(5) Under the Investment Advisers Act of 1940, by the Securities and Exchange Commission

with respect to investment advisers registered with the Commission under such Act.

`(6) Under the Federal Home Loan Bank Act, by the Federal Housing Finance Board with respect to Federal home loan banks.

`(7) In the case of any person engaged in providing insurance, by the State insurance authority, if that State has elected to become a participating State, notwithstanding any of the limitations of section 104 of the Gramm-Leach-Bliley Act.

`(8) Under the Federal Trade Commission Act, by the Federal Trade Commission for--

`(A) any other financial institution (other than a person engaged in providing insurance) or any other person that is not subject to the jurisdiction of any agency or authority under paragraphs (1) through (6) of this subsection; and

`(B) any person engaged in providing insurance who is domiciled in a State that does not elect to become a participating State.

`(b) ENFORCEMENT OF SECTION 501-

`(1) IN GENERAL- Except as provided in paragraph (2), the agencies and authorities described in subsection (a) shall implement the standards prescribed under section 501(b) in the same manner, to the extent practicable, as standards prescribed pursuant to subsection (a) of section 39 of the Federal Deposit Insurance Act are implemented pursuant to such section.

`(2) EXCEPTION- The agencies and authorities described in paragraphs (3), (4), (5), (7), and (8) of subsection (a) shall implement the standards prescribed under section 501(b) by rule with respect to the financial institutions subject to their respective jurisdictions under subsection (a).

`(c) STATE ACTION FOR VIOLATIONS-

`(1) AUTHORITY OF STATES- In addition to such other remedies as are provided under State law, if the chief law enforcement officer of a State, or an official or agency designated by a State, has reason to believe that any person has violated or is violating this subtitle or a rule prescribed under this subtitle, other than section 501 or a rule prescribed under such section, the State--

`(A) may bring an action to enjoin such violation in any appropriate United States district court or in any other court of competent jurisdiction; and

`(B) may bring an action on behalf of the residents of the State to enforce compliance with such rule, to obtain damages, restitution, or other compensation on behalf of residents of such State, or to obtain such further and other relief as the court may deem appropriate.

`(2) RIGHTS OF FEDERAL REGULATORS-

`(A) PRIOR NOTICE- The State shall serve prior written notice of any action under paragraph (1) upon the Federal Trade Commission and provide the Federal Trade Commission with a copy of its complaint, except in any case in which such prior notice is not feasible, in which case the State shall serve such notice immediately upon instituting such action.

`(B) RIGHT TO INTERVENE- The Federal Trade Commission shall transmit the notice received under subparagraph (A) to the agency or authority that has jurisdiction of the subject of the complaint, and such agency or authority shall have the right--

`(i) to intervene in an action under paragraph (1);

`(ii) upon so intervening, to be heard on all matters arising therein;

`(iii) to remove the action to the appropriate United States district court; and

`(iv) to file petitions for appeal.

`(3) INVESTIGATORY POWERS- For purposes of bringing any action under this subsection, no provision of this subsection shall be construed as preventing the chief law enforcement officer, or an official or agency designated by a State, from exercising the powers conferred on the chief law enforcement officer or such official by the laws of such State to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence.

`(4) LIMITATION ON STATE ACTION WHILE FEDERAL ACTION PENDING- If a Federal agency or authority has instituted a civil action for a violation of this subtitle, no State may, during the pendency of such action, bring an action under this section against any defendant named in the complaint of the Federal agency or authority or such agency for any violation of this subtitle that is alleged in that complaint.

`(d) DEFINITIONS- The terms used in subsection (a)(1) that are not defined in this subtitle or otherwise defined in section 3(s) of the Federal Deposit Insurance Act shall have the meaning given to them in section 1(b) of the International Banking Act of 1978.

`SEC. 505. FAIR CREDIT REPORTING ACT AMENDMENT.

`(a) AMENDMENT- Section 621 of the Fair Credit Reporting Act (15 U.S.C. 1681s) is amended--

`(1) in subsection (d), by striking everything following the end of the second sentence; and

`(2) by striking subsection (e) and inserting in lieu thereof the following:

` `(e) REGULATORY AUTHORITY-

` `(1) The Federal banking agencies referred to in paragraphs (1) and (2) of subsection (b) shall jointly prescribe such regulations as necessary to carry out the

purposes of this Act with respect to any persons identified under paragraphs (1) and (2) of subsection (b).

` `(2) The Administrator of the National Credit Union Administration shall prescribe such regulations as necessary to carry out the purposes of this Act with respect to any persons identified under paragraph (3) of subsection (b).

` `(3) The Federal Trade Commission shall prescribe such regulations as necessary to carry out the purposes of this Act with respect to any persons identified under subsection (a).'.

`(b) RELATION TO OTHER PROVISIONS- Except for the amendment made by this section, nothing in this title shall be construed to modify, limit, or supersede the operation of the Fair Credit Reporting Act, and no inference shall be drawn on the basis of the provisions of this title regarding whether information is transaction or experience information under section 603 of such Act.

`SEC. 506. STATE ELECTION TO PARTICIPATE.

`(a) REGULATIONS- The Secretary of the Treasury may promulgate such regulations as may be necessary to establish the procedures governing whether the election required under section 504(a)(7) has been made.

`(b) DEADLINE- The deadline for a State to elect to become a participating state is the first day of the first calendar quarter beginning after the close of the first legislative session of the State legislature that begins on or after the date the regulations required by section 504(a) are issued in final form. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature.

`SEC. 507. RELATION TO STATE LAWS.

`(a) IN GENERAL- This subtitle shall not be construed as superseding, altering, or affecting the statutes, regulations, orders, or interpretations in effect in any State, except to the extent that such statutes, regulations, orders, or interpretations are inconsistent with the provisions of this subtitle, and then only to the extent of the inconsistency.

`(b) GREATER PROTECTION UNDER STATE LAW- For purposes of this section, a State statute, regulation, order, or interpretation is not inconsistent with the provisions of this subtitle if the protection such statute, regulation, order, or interpretation affords any person is greater than the protection provided under this subtitle as determined by the Commission or a Federal functional regulator, on its own motion or upon the petition of any interested party.

`SEC. 508. DEFINITIONS.

`As used in this subtitle:

`(1) COMMISSION- The term `Commission' means the Federal Trade Commission.

`(2) FEDERAL FUNCTIONAL REGULATOR- The term `Federal functional regulator' means--

`(A) the Board of Governors of the Federal Reserve System;

`(B) the Office of the Comptroller of the Currency;

`(C) the Board of Directors of the Federal Deposit Insurance Corporation;

`(D) the Director of the Office of Thrift Supervision;

`(E) the National Credit Union Administration Board; and

`(F) the Securities and Exchange Commission.

`(3) FINANCIAL INSTITUTION- The term `financial institution' means any institution the business of which is engaging in financial activities or activities that are incidental or complementary to financial activities, as determined under section 4(k) of the Bank Holding Company Act of 1956.

`(4) NONPUBLIC PERSONAL INFORMATION-

`(A) The term `nonpublic personal information' means personally identifiable financial information--

`(i) provided by a consumer to a financial institution;

`(ii) resulting from any transaction with the consumer or the service performed for the consumer; or

`(iii) otherwise obtained by the financial institution.

`(B) Such term does not include publicly available information, as such term is defined by the regulations prescribed under section 504.

`(C) Notwithstanding subparagraph (B), such term--

(i) shall include any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived using any personally identifiable information other than publicly available information; but

`(ii) shall not include any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived without using any nonpublic personal information.

`(5) DIRECTORY INFORMATION- The term `publicly available directory information' means subscriber list information required to be made available for publication pursuant to section 222(e) of the Communications Act of 1934 (47 U.S.C. 222(3)).

`(6) UNRELATED USE- The term `unrelated use', when used with respect to information collected by the financial institution in connection with any transaction with a consumer in any financial product or any financial service, means any use other than a use that is necessary to effect, administer, or enforce such transaction.

`(7) AFFILIATE- The term `affiliate' means any company that controls, is controlled by, or is under common control with another company.

`(8) NONAFFILIATED THIRD PARTY- The term `nonaffiliated third party' means any entity that is not an affiliate of, or related by common ownership or affiliated by corporate control with, the financial institution, but does not include a joint employee of such institution.

`(9) NECESSARY TO EFFECT, ADMINISTER, OR ENFORCE- The disclosing or use of nonpublic personal information shall be treated as necessary to effect or administer a transaction with a consumer if the disclosing or use--

`(A) is required, or is a usual, appropriate, or acceptable method, to carry out the transaction or the product or service business of which the transaction is a part, and record or service or maintain the consumer's account in the ordinary course of providing the financial

service or financial product, or to administer or service benefits or claims relating to the transaction or the product or service business of which it is a part, and includes--

`(i) providing the consumer or the consumer's agent or broker with a confirmation, statement, or other record of the transaction, or information on the status or value of the financial service or financial product; and

`(ii) the accrual or recognition of incentives or bonuses associated with the transaction that are provided by the financial institution or any other party;

`(B) is required, or is one of the lawful or appropriate methods, to enforce the rights of the financial institution or of other persons engaged in carrying out the financial transaction, or providing the product or service;

`(C) is required, or is a usual, appropriate, or acceptable method, for insurance underwriting at the consumer's request or for reinsurance purposes, or for any of the following purposes as they relate to a consumer's insurance: account administration, reporting, investigating, or preventing fraud or material misrepresentation, processing premium payments, processing insurance claims, administering insurance benefits (including utilization review activities), participating in research projects, or as otherwise required or specifically permitted by Federal or State law; or

`(D) the disclosure is required, or is a usual, appropriate or acceptable method, in connection with--

`(i) the authorization, settlement, billing, processing, clearing, transferring, reconciling, or collection of amounts charged, debited, or otherwise paid using a debit, credit or other payment card, check, or account number, or by other payment means;

`(ii) the transfer of receivables, accounts or interests therein; or

`(iii) the audit of debit, credit or other payment information.

Each agency or authority described in section 504(a) shall, consistent with the purposes of this subtitle, prescribe by rule actions that shall, in a variety of financial services, and with respect to a variety of financial products, be treated as necessary to effect, administer, or enforce a financial transaction.

`(10) FINANCIAL SERVICES; FINANCIAL PRODUCTS; TRANSACTION; RELATED TRANSACTION- Each agency or authority described in section 504(a) shall, consistent with the purposes of this subtitle, prescribe by rule definitions of the terms `financial services', `financial products', `transaction', `related transaction', and `unrelated third party' for purposes of this subtitle.

`(11) STATE INSURANCE AUTHORITY- The term `State insurance authority' means, in the case of any person engaged in providing insurance, the State insurance authority of the State in which the person is domiciled.

`(12) CONSUMER- The term `consumer' means an individual who obtains, from a financial institution, financial products or services which are to be used primarily for personal, family, or household purposes, and also means the legal representative of such an individual.

`(13) CUSTOMER RELATIONSHIP- The term `time of establishing a customer relationship' shall be defined by the regulations prescribed under section 504.

`SEC. 509. EFFECTIVE DATE.

`This subtitle shall take effect 6 months after the date on which rules are required to be prescribed under section 504(a)(3), except--

`(1) to the extent that a later date is specified in the rules prescribed under section 504; and

`(2) that sections 504 and 506 shall be effective upon enactment.

`Subtitle B--Fraudulent Access to Financial Information

`SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF FINANCIAL INSTITUTIONS.

`(a) PROHIBITION ON OBTAINING CUSTOMER INFORMATION BY FALSE PRETENSES- It shall be a violation of this subtitle for any person to obtain or attempt to obtain, or cause to be disclosed or attempt to cause to be disclosed to any person, customer information of a financial institution relating to another person--

`(1) by making a false, fictitious, or fraudulent statement or representation to an officer, employee, or agent of a financial institution;

`(2) by making a false, fictitious, or fraudulent statement or representation to a customer of a financial institution; or

`(3) by providing any document to an officer, employee, or agent of a financial institution, knowing that the document is forged, counterfeit, lost, or stolen, was fraudulently obtained, or contains a false, fictitious, or fraudulent statement or representation.

`(b) PROHIBITION ON SOLICITATION OF A PERSON TO OBTAIN CUSTOMER INFORMATION FROM FINANCIAL INSTITUTION UNDER FALSE PRETENSES- It shall be a violation of this subtitle to request a person to obtain customer information of a financial institution, knowing that the person will obtain, or attempt to obtain, the information from the institution in any manner described in subsection (a).

`(c) NONAPPLICABILITY TO LAW ENFORCEMENT AGENCIES- No provision of this section shall be construed so as to prevent any action by a law enforcement agency, or any officer, employee, or agent of such agency, to obtain customer information of a financial institution in connection with the performance of the official duties of the agency.

`(d) NONAPPLICABILITY TO FINANCIAL INSTITUTIONS IN CERTAIN CASES- No provision of this section shall be construed so as to prevent any financial institution, or any officer, employee, or agent of a financial institution, from obtaining customer information of such financial institution in the course of--

`(1) testing the security procedures or systems of such institution for maintaining the confidentiality of customer information;

`(2) investigating allegations of misconduct or negligence on the part of any officer, employee, or agent of the financial institution; or

`(3) recovering customer information of the financial institution which was obtained or received by another person in any manner described in subsection (a) or (b).

`(e) NONAPPLICABILITY TO INSURANCE INSTITUTIONS FOR INVESTIGATION OF INSURANCE FRAUD- No provision of this section shall be construed so as to prevent any insurance institution, or any officer, employee, or agency of an insurance institution, from obtaining information as part of an insurance investigation into criminal activity, fraud, material misrepresentation, or material nondisclosure that is authorized for such institution under State law, regulation, interpretation, or order.

`(f) NONAPPLICABILITY TO CERTAIN TYPES OF CUSTOMER INFORMATION OF FINANCIAL INSTITUTIONS- No provision of this section shall be construed so as to prevent any person from obtaining customer information of a financial institution that otherwise is available as a public record filed pursuant to the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934).

`SEC. 522. ADMINISTRATIVE ENFORCEMENT.

`(a) ENFORCEMENT BY FEDERAL TRADE COMMISSION- Compliance with this subtitle shall be enforced by the Federal Trade Commission in the same manner and with the same power and authority as the Commission has under the title VIII, the Fair Debt Collection Practices Act, to enforce compliance with such title.

`(b) NOTICE OF ACTIONS- The Federal Trade Commission shall--

`(1) notify the Securities and Exchange Commission whenever the Federal Trade Commission initiates an investigation with respect to a financial institution subject to regulation by the Securities and Exchange Commission;

`(2) notify the Federal banking agency (as defined in section 3(z) of the Federal Deposit Insurance Act) whenever the Commission initiates an investigation with respect to a financial institution subject to regulation by such Federal banking agency; and

`(3) notify the appropriate State insurance regulator whenever the Commission initiates an investigation with respect to a financial institution subject to regulation by such regulator.

`(c) STATE ACTION FOR VIOLATIONS-

`(1) AUTHORITY OF STATES- In addition to such other remedies as are provided under State law, if the chief law enforcement officer of a State, or an official or agency designated by a State, has reason to believe that any person has violated or is violating this subtitle, the State--

`(A) may bring an action to enjoin such violation in any appropriate United States district court or in any other court of competent jurisdiction;

`(B) may bring an action on behalf of the residents of the State to recover damages of not more than $1,000 for each violation; and

`(C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and reasonable attorney fees as determined by the court.

`(2) RIGHTS OF FEDERAL REGULATORS-

`(A) PRIOR NOTICE- The State shall serve prior written notice of any action under paragraph (1) upon the Federal Trade Commission and provide the Federal Trade Commission with a copy of its complaint, except in any case in which such prior notice is not feasible, in which case the State shall serve such notice immediately upon instituting such action.

`(B) RIGHT TO INTERVENE- The Federal Trade Commission shall have the right--

`(i) to intervene in an action under paragraph (1);

`(ii) upon so intervening, to be heard on all matters arising therein;

`(iii) to remove the action to the appropriate United States district court; and

`(iv) to file petitions for appeal.

`(3) INVESTIGATORY POWERS- For purposes of bringing any action under this subsection, no provision of this subsection shall be construed as preventing the chief law enforcement officer, or an official or agency designated by a State, from exercising the powers conferred on the chief law enforcement officer or such official by the laws of such State to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence.

`(4) LIMITATION ON STATE ACTION WHILE FEDERAL ACTION PENDING- If the Federal Trade Commission has instituted a civil action for a violation of this subtitle, no State may, during the pendency of such action, bring an action under this section against any defendant named in the complaint of the Federal Trade Commission or such agency for any violation of this subtitle that is alleged in that complaint.

`SEC. 523. CRIMINAL PENALTY.

`(a) IN GENERAL- Whoever knowingly and intentionally violates, or knowingly and intentionally attempts to violate, section 521 shall be fined in accordance with title 18, United States Code, or imprisoned for not more than 5 years, or both.

`(b) ENHANCED PENALTY FOR AGGRAVATED CASES- Whoever violates, or attempts to violate, section 521 while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period shall be fined twice the amount provided in subsection (b)(3) or (c)(3) (as the case may be) of section 3571 of title 18, United States Code, imprisoned for not more than 10 years, or both.

`SEC. 524. RELATION TO STATE LAWS.

`(a) IN GENERAL- This subtitle shall not be construed as superseding, altering, or affecting the statutes, regulations, orders, or interpretations in effect in any State, except to the extent that such statutes, regulations, orders, or interpretations are inconsistent with the provisions of this subtitle, and then only to the extent of the inconsistency.

`(b) GREATER PROTECTION UNDER STATE LAW- For purposes of this section, a State statute, regulation, order, or interpretation is not inconsistent with the provisions of this subtitle if the protection such statute, regulation, order, or interpretation affords any person is greater than the protection provided under this subtitle as determined by the Commission, on its own motion or upon the petition of any interested party.

`SEC. 525. AGENCY GUIDANCE.

`In furtherance of the objectives of this subtitle, each Federal banking agency (as defined in section 3(z) of the Federal Deposit Insurance Act) and the Securities and Exchange Commission or self-regulatory organizations, as appropriate, shall review regulations and guidelines applicable to financial institutions under their respective jurisdictions and shall prescribe such revisions to such regulations and guidelines as may be necessary to ensure that such financial institutions have policies, procedures, and controls in place to prevent the unauthorized disclosure of customer financial information and to deter and detect activities proscribed under section 521.

`SEC. 526. REPORTS.

`(a) REPORT TO THE CONGRESS- Before the end of the 18-month period beginning on the date of the enactment of this Act, the Comptroller General, in consultation with the Federal Trade Commission, Federal banking agencies, the Securities and Exchange Commission, appropriate Federal law enforcement agencies, and appropriate State insurance regulators, shall submit to the Congress a report on the following:

`(1) The efficacy and adequacy of the remedies provided in this subtitle in addressing attempts to obtain financial information by fraudulent means or by false pretenses.

`(2) Any recommendations for additional legislative or regulatory action to address threats to the privacy of financial information created by attempts to obtain information by fraudulent means or false pretenses.

`(b) ANNUAL REPORT BY ADMINISTERING AGENCIES- The Federal Trade Commission and the Attorney General shall submit to Congress an annual report on number and disposition of all enforcement actions taken pursuant to this subtitle.

`SEC. 527. DEFINITIONS.

`For purposes of this subtitle, the following definitions shall apply:

`(1) CUSTOMER- The term `customer' means, with respect to a financial institution, any person (or authorized representative of a person) to whom the financial institution provides a product or service, including that of acting as a fiduciary.

`(2) CUSTOMER INFORMATION OF A FINANCIAL INSTITUTION- The term `customer information of a financial institution' means any information maintained by or for a financial institution which is derived from the relationship between the financial institution and a customer of the financial institution and is identified with the customer.

`(3) DOCUMENT- The term `document' means any information in any form.

`(4) FINANCIAL INSTITUTION-

`(A) IN GENERAL- The term `financial institution' means any institution engaged in the business of providing financial services to customers who maintain a credit, deposit, trust, or other financial account or relationship with the institution.

`(B) CERTAIN FINANCIAL INSTITUTIONS SPECIFICALLY INCLUDED- The term `financial institution' includes any depository institution (as defined in section 19(b)(1)(A) of the Federal Reserve Act), any broker or dealer, any investment adviser or investment company, any insurance company, any loan or finance company, any credit card issuer or operator of a credit card system, and any consumer reporting agency that compiles and maintains files on consumers on a nationwide basis (as defined in section 603(p)).

`(C) SECURITIES INSTITUTIONS- For purposes of subparagraph (B)--

`(i) the terms `broker' and `dealer' have the meanings provided in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c);

`(ii) the term `investment adviser' has the meaning provided in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)); and

`(iii) the term `investment company' has the meaning provided in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3).

`(D) FURTHER DEFINITION BY REGULATION- The Federal Trade Commission, after consultation with Federal banking agencies and the Securities and Exchange Commission, may prescribe regulations clarifying or describing the types of institutions which shall be treated as financial institutions for purposes of this subtitle.

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