Wholesaler-Distributors Extending Credit
Do the Gramm-Leach-Bliley Act Privacy Notice Requirements Apply?
NAW Legal Advisory
August 2001
LA 2001-01
Subtitle A of Title V of the Gramm-Leach-Bliley Act, Public Law 106-102, ("GLB Act") , which became law on July 1, 2001 has privacy provisions relating to consumers' non-public personal information. Under these provisions, businesses that are significantly engaged in a financial activity are required to provide privacy notices to their consumer-customers about their information-collection and information-sharing practices. A consumer-customer is an individual (i.e., a natural person) purchasing for use primarily for personal, family or household purposes. Companies or individuals who buy products for business, commercial or agricultural purposes are not consumer-customers.
Does the GLB Act Cover Trade Credit?
A wholesaler-distributor often extends trade credit (i.e., a sale on open account with payment due within an agreed-to number of days of invoicing) in the sale of products to customers. By extending trade credit, is the wholesaler-distributor significantly engaged in a financial activity - - thus requiring the wholesaler-distributor to give its consumer-customers GLB privacy notices?
The Federal Trade Commission's Division of Financial Practices recently issued its Final Rule on Privacy of Consumer Information. This guidance was silent on the issue of wholesaler-distributor trade credit, so NAW counsel sought guidance directly from the FTC.
According to FTC staff attorney Loretta Garrison, a wholesaler-distributor which extends trade credit is not considered to be significantly engaged in a financial activity. Thus extension of trade credit in and of itself does not require the wholesaler-distributor to comply with the GLB privacy notice requirements.
By contrast, a business that extends credit by issuing its own proprietary credit card directly to consumers purchasing for personal, family or household use is considered by the FTC to be a business significantly engaged in a financial activity, and is required to provide the GLB privacy notices.
More information on the Gramm-Leach-Bliley Act can be found on the FTC website, www.ftc.gov/privacy/glbact/index.html. Questions can also be posed to the FTC's Division of Financial Practices, 202-326-3224.
