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Question

Difficulty: MediumGramm-Leach-Bliley Act (GLBA) and Consumer Privacy

Samuel, an independent insurance consultant at Horizon Wealth Protection, provides a one-time, fee-based review of Clara's existing personal life insurance policies. Clara pays the consultation fee but does not purchase any new products. Later that month, Samuel sells a long-term care insurance policy to Arthur, who will pay ongoing annual premiums. Regarding compliance with the Gramm-Leach-Bliley Act (GLBA), which of the following statements are correct about Samuel's obligations to Clara and Arthur? (Select all that apply)

  1. Samuel must provide Arthur with an initial privacy notice no later than when the policy is sold, and provide subsequent annual notices for as long as the policy remains in force.Answer
  2. Samuel is not required to provide an annual privacy notice to Clara because her one-time policy review does not establish a continuing customer relationship.Answer
  3. C
    Because Clara paid a direct fee for Samuel's consulting services, she is legally classified as a customer and is therefore entitled to an annual privacy notice.
  4. D
    Samuel must provide both Clara and Arthur with an opportunity to opt out before sharing their nonpublic personal information with the state Department of Insurance for a routine regulatory audit.

Answer

The correct statements indicate that Arthur must receive both initial and annual privacy notices because he is a customer, while Clara does not require an annual notice because her one-time transaction makes her a consumer rather than a customer.
Under the Gramm-Leach-Bliley Act (GLBA), a 'consumer' is an individual who obtains a financial service for personal use, while a 'customer' is a consumer who establishes an ongoing relationship. Because Arthur bought a policy requiring ongoing premiums, he is a customer and must receive both an initial privacy notice (no later than when the relationship is established) and annual notices. Clara only received a one-time consultation; thus, she is a consumer and is not owed an annual privacy notice.

Step-by-Step Solution

1
Analyze Clara's legal status under GLBA based on her interaction with the consultant.
Clara is a 'consumer' because she received a one-time financial service for personal use without establishing an ongoing relationship.
GLBA distinguishes between isolated transactions (consumers) and ongoing relationships (customers).
2
Analyze Arthur's legal status under GLBA.
Arthur is a 'customer' because he purchased a policy with ongoing premium payments, establishing a continuing relationship.
The purchase of a continuing insurance policy meets the GLBA definition of a customer relationship.
3
Apply GLBA privacy notice timing rules to each individual.
Arthur must receive an initial notice and annual notices. Clara does not require annual notices.
Only customers are legally entitled to receive annual privacy notices under the Act.
4
Evaluate the opt-out requirement for regulatory audits.
No opt-out is required for sharing information with the Department of Insurance.
Sharing information to comply with regulatory authorities is a statutory exception to the GLBA opt-out mandate.

Key Concept

GLBA Consumer vs. Customer Distinctions and Disclosure Exceptions
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Topics

Gramm-Leach-Bliley Act (GLBA) and Consumer Privacy

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