We’ve had a couple of major developments this month, so this month’s column is devoted to updating you on the happenings around Washington, D.C.
First, privacy continues to be a hot topic. However, I think we are seeing some welcome news from the Fed and other agencies that have rulemaking responsibility for that pesky Gramm Leach Bliley Act (GLB). No, they haven’t done away with the requirement to give your customers a copy of your privacy policy, and you still need to keep your information safeguarding programs up to snuff. What they have done is publish a proposed rule that should make your privacy policies a lot simpler to construct and manage.
In a recent notice of proposed rulemaking (NPR), eight federal regulatory agencies have requested comment on the format and content of a new model privacy policy they developed after a year-long consumer testing process. The NPR proposes that the use of the model privacy policy would satisfy the disclosure requirements for privacy notices required under GLB, which would allow you to take advantage of a legal “safe harbor.” This is lawyer speak for, “If you use this format and this language, then you’ll be in compliance with the rule.” Of course, the language has to work for your business, meaning there will be some inevitable tweaking that you’ll need to do. But all in all, I think life is getting simpler with respect to privacy policies. It will be awhile before any final rule becomes effective, but we’ll give you plenty of advance warning.
While we’re on the topic, this might be a good time to remind you that you are required to give a copy of your privacy policy to your customers if selling cars on credit. I’ve been a little surprised in the last month by more than one dealer who believed that as long as they sell the installment sale paper to a bank or finance company, GLB doesn’t require them to have a privacy policy. Nothing could be further from the truth! I really thought everyone understood this. In any event, if you’re one of those dealers, it’s time to start paying attention to the law and get your privacy policy together!
The second big thing is that the Department of Defense (DOD) issued proposed regulations to implement the Talent Amendment (known more officially as Section 670 of the John Warner National Defense Authorization Act for FY 2007). For those of you who aren’t glued to CSPAN on a daily basis, the Talent Amendment authorized the DOD to make rules to limit the APR that service members and their families could be obligated to pay to 36 percent.
There was much sturm
und drang and wringing of hands here in
Washington over the Talent Amendment,
because Congress essentially gave regulatory authority traditionally limited to
the banking agencies to the DOD. Because of that, there was much worried
speculation that any rules the DOD came up with would conflict with
well-established regulations (e.g., the Truth in Lending Act and Reg. Z) that
we compliance nerds in Washington like to think keep the wheel of our economy
turning. Fortunately, the DOD consulted carefully with the banking agencies and
other interested parties, and it seems a crisis was avoided.
You may be wondering, what does all this have to do with
you? Well, part of the hand wringing was that Congress left it to the DOD to
define “credit” for purposes of the Amendment. It was not at all clear whether
their definition would include motor vehicle retail installment sale contracts. If it did, the burden
would be placed on you, dear readers, to determine which of your customers were
covered by the rule (e.g., Is your buyer active military, or the family of
active military? Who is the “family” of active
military? How do you calculate APR for purposes of the
Talent Amendment?, etc.) Let’s just say this would have been a big burden with
bad consequences if you got it wrong.
Happily, the proposed DOD regulations are limited to payday loans, vehicle title loans and tax refund anticipation loans. As far as the rules go, your friendly auto dealers have dodged a bullet. If anything changes when the final rule gets published, we’ll let you know. It is anticipated that a final rule will be in effect before October 2007.
I’ve run out of space (my editors only give me so much space), so this column must come to an end. Thanks as always for your e-mails, and let me know if there is a particular topic you’d like me to cover.
Michael Benoit is a partner in the Washington, D.C., office of Hudson Cook LLP. He is a frequent speaker and writer on a variety of consumer credit topics. He can be reached at michael.benoit@bobit.com. Nothing in this article is intended to be legal advice and should not be taken as such. All legal questions should be addressed to competent counsel.
