| Regulations issued by the Federal Trade Commission ("FTC"), for privately insured credit unions, and the National Credit Union Administration ("NCUA"), for federally insured credit unions, implementing the privacy provisions of the Gramm-Leach-Bliley Act ("the GLB Act") became effective on July 1, 2001. The purpose of this statement is to explain how the ESI Excess Share Insurance Policy ("Policy") issued to your credit union currently exceeds the requirements of both FTC and NCUA privacy regulations and demonstrates ESI's strong commitment to protect the confidentiality of the information provided us. In addition, we want to advise you that, after consultation with counsel, we have determined that no additional contractual provisions are necessary at this time regarding privacy.
For the most part, the information provided to ESI relates to the financial condition of the insured credit union and does not contain any nonpublic personal information regarding individuals. Therefore, this financial information provided ESI is not covered by the privacy requirements of the GLB Act, and the implementing regulations.
In the course of providing financial information to ESI, nonpublic personal information regarding your members is also included. This occurs, for example, where such information is made available to us during the course of our examination of your credit union, or when reporting those credit union members with accounts in excess of $100,000 and covered by our Policy. All of the information which insured credit unions are required to submit to ESI is either specifically required by law, or has been determined by ESI to be appropriate and necessary in order to assess a credit union's safety and soundness, adherence with the company's Risk Eligibility Standards and continued insurability. These purposes clearly fall within the exceptions provided for in Sections 502(e)(1)(A) and 502(e)(4) of the GLB Act and the implementing regulations of the FTC and NCUA. (See 16 CFR 313.14(a), (a)(1) and 313.15(a)(3) of FTC's Regulations and 12 CFR 716.14(a), (a)(1) and 716.15(a)(3) of NCUA's Regulations.)
Because any nonpublic personal information provided ESI by insured credit unions falls under these exceptions, credit unions are not required to provide members with notice and the opportunity to opt out, nor are they required to enter into contractual agreements with ESI regarding nondisclosure or the use of such information. ESI understands that it is bound by Section 502(c) of the GLB Act, which places limits on its ability to reuse any nonpublic personal information provided by its insured credit unions.
Notwithstanding the fact that the information provided by our insured credit unions either is not covered by or is exempt from notice, opt out and the contractual requirements of the GLB Act and the implementing regulations of the FTC or NCUA, our Policy also contains provisions ensuring strict confidentiality and nondisclosure.
Under the terms and conditions of our Policy, ESI is bound to keep all information obtained from insured credit unions confidential. Section XVIII of ESI's Policy reads as follows: "The Insurer shall not release any information obtained from an Excess Insured to any third party, except as requested by the Insurer's regulatory authority, its independent auditors or as ordered by a court of law." In conclusion, the information provided by insured credit unions to ESI as a condition of providing excess share insurance coverage of member accounts is either not covered by the provisions of the GLB Act or is exempt from the requirements to provide notice and an opportunity to members to opt out, and there is no requirement for credit unions to enter into separate or additional contractual agreements regarding confidentiality and the use of such information. Since ESI's Policy contains terms and conditions concerning confidentiality and the use of information by ESI, there is no need for ESI to modify its existing Policy or to enter into any type of additional agreements regarding confidentiality or nondisclosure of information at this time. In addition, you should be aware that ESI has established procedures and practices designed to safeguard information provided the company under its Policy.
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