Financial Trade Groups Ask CFPB to Help Guard Consumer Information
CUNA and NAFCU were among the financial trade groups pushing for CFPB involvement in an odd case related to consumer privacy. Learn why.
CUNA and NAFCU among organizations pushing for bureau involvement in odd case related to consumer privacy.
Normally, financial trade groups urge the CFPB not to do something.
Overdraft fee rules, etc.
But in a strange case in a New Jersey state court, financial trade groups—including CUNA and NAFCU—are urging the bureau to step in and take action. Without the CFPB’s help, they contend, a bank might be required to turn over all customer information to a person seeking a seat on its board.
That, they argue, would violate the privacy provisions of the Gramm-Leach-Bliley Act.
Background and Context
Lawrence Seidman has been battling the Spencer Savings Bank for years. He wants a seat on the board of directors. The directors don’t want him on the board.
It’s a long and sordid affair.
“The disputes between Seidman and the Board have engendered multiple litigations and five prior appeals,” the state’s Superior Court of Appeals said, in summarizing the case.
The latest problem is that the board wants to convert the bank from a mutual savings and loan association to a mutual savings bank. Seidman contends that the conversion plan is “another effort to entrench the CEO and the Board,” according to the appeals court, while, “The Board contends that the conversion is necessary for the Bank's growth and profitability.”
A lower court said that the conversion plan was an effort to keep Seidman and another man off the board. That’s because as a mutual savings and loan association, members vote for the board of directors; that’s not the case with mutual savings banks.
The lower court also said that bank employees had sent proxy materials to all of the bank’s members giving them notice of a vote on the conversion plan. That notice said that for the conversion plan to pass, two-thirds of the members voting at a special meeting would have to approve it.
However, the court further found that in trying to convert the bank, directors were aiming to entrench their positions. And, much to the financial trade groups’ consternation, the court ruled that the names of all the bank’s customers should be turned over to Seidman’s proxy solicitor.
The state Supreme Court has stayed that ruling, pending resolution of an unrelated lawsuit.
Letter From Trade Groups
Meanwhile, financial trade groups, including the American Bankers Association and the two credit union associations, have written to CFPB Director Rohit Chopra for help.
“Specifically, we ask that the CFPB issue guidance that provides no state legislature, regulator, executive, or court may circumvent the requirements in [parts of Gramm-Leach-Bliley] that FIs provide consumers adequate financial privacy notices and generally prohibit FIs from disclosing consumers’ nonpublic personal information to nonaffiliated third parties without consumers’ notice or consent, with certain well-defined exceptions,” they wrote in a letter last week.
In addition, they asked Chopra to consider taking direct legal action to prevent the disclosure of consumers’ information.
“No state should be permitted to subject any FI to data privacy or information security standards that are inconsistent with those established by the GLBA,” they said.
They added that it is apparent many state financial regulators lack the capacity to effectively enforce the privacy law and suggested that the CFPB partner with those state financial regulators to help with enforcement.