ACCORDING TO THE Federal Trade Commission (FTC), a new law requires law firms to comply with privacy notices intended to cover financial institutions. Passed by the 106^th Congress, the Gramm-Leach-Bliley Act of 1999 [(P.L. 106-102) http://www.ftc.gov/privacy/glbact/glbsub1.htm] requires financial institutions to provide current and future clients notice of privacy policies, as well as the opportunity to "opt out" of most disclosures to third parties. On Friday, June 8, the American Bar Association (ABA) Board of Governors passed a resolution calling for the FTC to exempt the practice of law from the statute's implementing regulations.

Title V of the Gramm-Leach-Bliley Act of 1999 (also known as the Financial Industries Modernization Act) requires financial institutions to provide to their customers notice of their policies for the protection of individually identifiable personal information, as well as opportunity to opt out of most disclosures of such information to third parties. Regulations (http://www.ftc.gov/os/2000/05/65fr33645.pdf) were promulgated by the FTC pursuant to the act and implemented on Nov. 30, 2000. Full compliance is required by July 1, 2001. The FTC is authorized to enforce this privacy protection provision.

The Gramm-Leach-Bliley Act applies to financial institutions that form customer relationships with consumers. The FTC interprets "financial institution" to include businesses "significantly engaged in financial activities" of the nature described in the Bank Holding Company Act of 1956 [(12 U.S.C. 1843(k)) http://www.ftc.gov/os/2000/05/65fr33645.pdf] as well as other activities designated and to be designated by the Federal Reserve Board. This broad definition includes such activities as:

• Leasing real or personal property or advising in such leasing;
• Debt collecting;
• Financial advisory activities, including management consulting and counseling activities; and
• Tax planning, preparation and advising.

Law firms and sole practitioners "significantly engaged in financial activities" are considered financial institutions by the FTC and are subject to the requirements of the act.

While institutional or corporate clients are not considered "consumers" under the act, service to such clients may be counted to determine the level of financial activity a law firm or division within a firm is engaged in and whether notice to persons who are clients is required.

The American Bar Association opposes the imposition of these rules upon the legal community:

• Attorneys are already bound both by an ethical duty of confidentiality and by contractual agreements that prevent such use of their client's information.
• Enforcement of these rules would infringe upon the attorney-client relationship and could potentially destroy attorney-client privilege in certain circumstances.
• These rules would impose an undue burden upon small firms and sole practitioners.
• State regulation of the legal profession provides a higher degree of privacy protection than is afforded by this act.

Congress's intent in passing this act is clear: to prevent the indiscriminate use of personally identifiable information for marketing, profiling and other commercial purposes. While the ABA supports strong consumer protection, this federal regulation will not enhance privacy protection for consumers vis-à-vis their attorneys.

The FTC has authority under the statute to grant exemptions to these onerous regulations. The ABA believes that the practice of law should be exempted from these requirements. The ABA's Governmental Affairs Office (GAO) is communicating the ABA's views to the FTC and will seek an administrative solution to this issue.

For further information, please contact Ellen McBarnette in the ABA office at McBarneE@staff.abanet.org or (202) 662-1767.

Home | About the Bar | For Members | For the Public | Legal Links | Publications | Online Store
Lawyer Referral Service | Law-Related Education | NHBA•CLE | NHBA Insurance Agency | NHMCLE
Search | Calendar

New Hampshire Bar Association
2 Pillsbury Street, Suite 300, Concord NH 03301
phone: (603) 224-6942 fax: (603) 224-2910
email: NHBAinfo@nhbar.org
© NH Bar Association Disclaimer