Privacy Rule

Can you believe the Privacy Rule has been around for almost 20 years?  While it’s undergone a few changes here and there, the bulk of it has remained mostly unchanged. While most institutions have a pretty good handle on the requirements, we still see some misconceptions as to what the Privacy rule does and doesn’t allow.

One common misconception is that you are prohibited from verifying funds on a check.  This is simply not true; although there are many institutions out there that refuse to verify funds and cite customer privacy as the reason behind their decision.

Privacy essentially states you cannot share non-public personal information about your customers to a non-affiliated third party, but there are a lot of exceptions.  With respect to check verification, the Privacy FAQs state:

…you do not need to allow your customer to opt out of a disclosure made in connection with processing or clearing checks… or for the purposes of preventing actual or potential fraud, unauthorized transactions, claims, or other liability…  Therefore, if you have notified your customer that you make disclosures as permitted by law, you may disclose whether your customer’s checking account has sufficient funds to cover a check, regardless of whether or not the customer has exercised his or her opt-out rights.

Be aware of the possibility that the caller may be attempting to obtain information about your customer through false or fraudulent statements to you.

In other words, you can verify funds, you just need to be reasonably assured that the person calling has a right to know that information.  So, how do you determine that?  By asking questions.  One way would be to ask for the check number.  If they can’t provide one or give you one that doesn’t appear to be in the same range as other recent check numbers, it may be a cause for concern.

Get a refresher on the Privacy Rule, or hear about other common misconceptions, please join us for our Privacy webinar on July 7!


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Amy Kudlacek

Amy brings many years of banking and compliance experience to Banker’s Compliance Consulting. She has worked for both large and small financial institutions and spent time working in every area of a bank. She started out as a teller in college and eventually became a branch manager. Her love, however, was always compliance. Amy began her career with Banker’s Compliance Consulting in 2000. Her knowledge and experiences have allowed her to develop a well-rounded and practical approach to regulatory compliance. Amy is CRCM certified, has a Bachelors Degree in Business Administration and is a graduate of the ABA Compliance School. Amy & her husband have two children at home and stay busy following their activities. They spend a lot of time in the bleachers!

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