DLA Weblog

Happy to Say: "Not a Financial Institution"

Attorneys are not "financial institutions" within the meaning of Title V of the Gramm-Leach-Bliley Act (GLBA) 15 U.S.C. §§6801-6809, despite the Federal Trade Commission's position otherwise, says the U.S. District Court.

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After press reports indicated that the FTC regarded attorneys doing real estate settlements, tax planning and tax preparation as subject to GLBA's privacy protection rules, the New York State Bar Association wrote to the FTC, formally requesting recognition that attorneys were exempt. The FTC declined in an April 3, 2003 letter and the Bar Association sought a declaratory judgment. The American Bar Association joined in a parallel suit decided at the same time.

In April, 2004, the District Court for the District of Columbia granted summary judgment to the Bar Association. In its opinion, it concluded that the FTC acted beyond its statutory authority and in a manner that was "arbitrary and capricious."

GLBA places on each "financial institution" an obligation to respect the privacy of its customers and to secure the confidentiality of those customers' "nonpublic personal information" or "NPPI". Title V of GLBA imposes requirements of written disclosure of privacy policies at specified times in the relationship and an "opt out" option before disclosing such "NPPI" to third parties.

Decided April 30, 2004, New York State Bar Ass'n v. Federal Trade Commission, 2004 U.S. Dist. LEXIS 7698 (D.D.C. 2004). For an extended discussion of the goals and legislative history of GLBA and the tradition of state regulation of attorneys and the practice of law, see the earlier decision denying the FTC's motion to dismiss the suit at: New York State Bar Ass'n v. FTC, 276 F.Supp.2d 110 (D.D.C. 2003).

Vox clams,

Doug Simpson '70
Wethersfield, CT

(Originally published June 4, 2004 at Unintended Consequences: Happy to Say: "Not a Financial Institution" by Doug Simpson '70. Some Rights Reserved under a Creative Commons License)