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When should a bank provide its privacy notice for participation loans?

All lenders participating in a loan provided by multiple lenders, (i.e, a participation loan) must provide the notice. The lead bank must provide the notice when it establishes the relationship. However, the regulation allows a delay for participant banks that are not the lead bank.

If a person is the bank’s customer under a participant relationship, it is arguably not at the customer’s election. Therefore, see §1016.4(e) of the Bureau’s Regulation P:

(e) Exceptions to allow subsequent delivery of notice. (1) You may provide the initial notice required by paragraph (a)(1) of this section within a reasonable time after you establish a customer relationship if:

(i) Establishing the customer relationship is not at the customer's election; or

(ii) Providing notice not later than when you establish a customer relationship would substantially delay the customer's transaction and the customer agrees to receive the notice at a later time.

(2) Examples of exceptions. (i) Not at customer's election. (A) In the case of financial institutions other than credit unions and financial institutions described in §1016.3 (l)(3), establishing a customer relationship is not at the customer's election if you acquire a customer's deposit liability or the servicing rights to a customer's loan from another financial institution and the customer does not have a choice about your acquisition.

(B) In the case of financial institutions described in §1016.3 (l)(3), establishing a customer relationship is not at the customer's election if you acquire a customer's loan or the servicing rights from another financial institution and the customer does not have a choice about your acquisition.

(November 2018)

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