WisBar News: Practice alert: Law firms must send privacy notices to clients by July 1, 2001:

State Bar of Wisconsin

Sign In

Top Link Bar

    WisBar.org may be unavailable October 23rd from 5:00PM until 10:00PM for system maintenance.

News & Pubs Search

Advanced
  • WisBar News
    June
    21
    2001

    Practice alert: Law firms must send privacy notices to clients by July 1, 2001

    Share This:
    Provisions of a federal law enacted in late 1999 under the "Gramm-Leach-Bliley Act" became effective on July 1, 2001.

    Practice alert: Law firms must send privacy notices to clients by July 1, 2001

    June 21, 2001

    Practice 
Alert: Law Firms Must Send Privacy Notices to ClientsProvisions of a federal law enacted in late 1999 under the "Gramm-Leach-Bliley Act" became effective on July 1, 2001. The law requires every "financial institution" that provides certain financial services to its individual clients to send them a notice explaining its privacy policies by July 1, 2001.

    To the surprise of many, the Federal Trade Commission (FTC), which has the legal responsibility to enforce the Act's provisions, determined in mid-June that law firms are "financial institutions" under the Act. Therefore, law firms are required to send privacy notices by July 1, 2001, to individual clients who receive covered financial services from them. Covered financial services include tax planning and preparation, certain real estate settlement services, and other types of financial services provided "primarily for personal, family, and household" purposes.

    Even though professional standards of client confidentiality are more stringent than those imposed by the Act, the Act's provisions still apply.

    Sanctions for failure to comply. According to a memo from the Philadelphia Bar, financial institutions may be precluded from divulging any private information if they fail to comply with the notice rules. Since a law firm is already precluded from such actions, that sanction would have no meaning. And while there may be issues with respect to the agency's regulating lawyers' activities, the FTC is empowered to require compliance and may impose a $10,000 fine per failure to comply. The FTC also is authorized to grant exemptions to the regulations.

    The ABA responds. The ABA Board of Governors passed a resolution on June 8 calling for the FTC to issue an administrative ruling exempting the practice of law from the statute's implementing regulations. It is not known when the FTC will respond.

    The ABA Center for Continuing Legal Education and Taxation and Tort & Insurance Practice sections recently offered a teleseminar on the Act, including articles to help law firms identify to whom the Act applies and how to comply, an alert from the Philadelphia Bar with sample model notice, and the Fair Debt Collection Practices Act. To purchase the seminar audiotape or access an online pay per listen version of the program, go to the ABA Web site at www.abanet.org/cle.

    What to do if you missed the July 1 deadline. Law firms should send privacy notices to individual clients as near the July 1 deadline as possible. "The notice needn't be complicated or lengthy for most lawyers. A more difficult issue is determining to whom to send it," says Charles Horn, partner of Mayer, Brown & Platt in the firm's Washington, D.C. office and a panelist for the ABA's teleconference.

    For more information. The State Bar of Wisconsin Taxation Law and Real Property, Probate and Trust Law sections have developed a "Practice Alert" that provides a synopsis of the Act and a sample privacy notice.

    The Gramm-Leach-Bliley Act of 1999 is available at www.ftc.gov/privacy/glbact/glbsub1.htm. The FTC regulations pursuant to the Act are available at www.ftc.gov/os/2000/05/65fr33645.pdf.