What is the Gramm-Leach-Bliley Act?

What is the Gramm-Leach-Bliley Act?

Passed in 1999, the Gramm-Leach-Bliley Act regulates part of the financial services industry. Tax preparers, whether working alone or in firms, are included as providers of financial services (such as banking products). The act took effect in 2001.

In short, the regulation requires tax preparers and others who provide financial services to provide their clients with a notice that outlines the professional’s privacy policy. Such a notice should be presented in a “clear and conspicuous” written form to the client.

Just what constitutes a “clear and conspicuous” form?

The National Association of Tax Professionals (NATP) asked that question of Clarke Brinkerhoff, an attorney in the Division of Financial Practices of the Federal Trade Commission.

“Clear and conspicuous does not require a separate mailing” Brinkerhoff replied. “If the privacy policy were included in a standard engagement letter I would advise that it be presented as a separate document, a separate page – even if it were a half page.”

Does that mean the privacy policy could be just an additional paragraph in a standard engagement letter? Maybe, says Brinkerhoff, but maybe not.

“We [FTC] recognize that the Act and our regulations may add administrative costs, but that is not necessarily so.  A distinct paragraph within a standard letter may also satisfy the clear and conspicuous rule.  Whatever form the notice is given it should be labeled as the practitioner’s privacy policy.  The label is necessary to draw attention to the policy and distinguish the policy from other information that might be included in a communication like an engagement letter. The same policy language in the same letter, without the use of a heading, would not be clear and conspicuous. Those subject to the Act are required to draw attention to their privacy policy – that is the minimum.”

The NATP provides an example of what a bare-bones privacy statement might entail for those tax pros who don’t provide services beyond return preparation:

Privacy Policy

“We do not disclose any non-public personal information about our customers or former customers to anyone, except as instructed to do so by such customers or as required by law.  We restrict access to non-public personal information to those professionals necessary to [brief description of service provided ] and we maintain physical, electronic, and procedural safeguards to guard your non-public personal information.”

The Federal Trade Commission publishes a three-page guide for small businesses on compliance with the Gramm-Leach-Bliley Act. It also includes a fillable PDF for use by tax preparers who want a little more than the NATP paragraph.