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The Privacy Act and Appraisers

Numerous articles and analyses have been published regarding the Gramm-Leach-Bliley Act (G-L-B Act) and its impact upon various industries. Only a very few of those discussions, however, explored the Act's relationship to the appraisal profession. In researching such data in my capacity as counsel to the Philadelphia Chapter of ASA, I reached the conclusion that the most succinct commentary was prepared by The Appraisal Foundation in an Article published in June 2001 and titled "The Appraisal Foundation White Paper: Privacy Regulation and the Appraiser." This Chapter Newsletter intends to basically summarize the Appraisal Foundation's advice to appraisers in that publication; but an interested reader may wish to obtain a copy of the entire article by contacting that office.

The purpose of the G-L-B act is to protect consumers' personal information from being disclosed or released by a financial institution without notice and without permission. Compliance with that law became mandatory on July 1, 2001.

The Federal Trade Commission (FTC) thereafter adopted regulations to implement the Act. Those regulations apply to activities including "appraising real or personal property;" i.e., the Act can be enforced against persons who are not financial institutions but receive protected information from a financial institution. Accordingly, an appraiser who receives non-public personal financial information from a financial institution or directly from a consumer who is a client in the course of performing an appraisal assignment will be held responsible for compliance with the Act and its regulations.

In an appraisal practice, publicly available information could include publicly recorded deeds and mortgage notes, dates of sale as publicly recorded, parties to a sale as publicly recorded, and sales price in jurisdictions that publicly disclose such information. Conversely, for commercial property and business valuations, the disclosure of financial statements that include personally identifiable information would be covered by the Act and its regulations.

When a lender is the appraiser's client, the lender will be required to provide an appropriate "Privacy Notice" with an opt-out provision to the consumer; and the lender should inform the appraiser as to any privacy related restrictions or information provided to the appraiser relative to the FTC Regulations and G-L-B Act. The lender should specify any information for which a consumer has exercised an opt-out right (meaning the consumer has directed the lender not to share information with outside organizations). Thus, in order to comply with the Privacy Rule; the appraiser must take steps necessary to ensure that information obtained from a lender client has been obtained in conformance with the Rule and then must ascertain the status of that information as public or non-public and if the consumer opt-out privilege applies (including specific restrictions on re-use of that information). This analysis is also in conformity with the 2002 version of USPAP, whose current draft definition of confidentiality directs compliance with "privacy laws and regulations applicable to an assignment."

On the other hand, when the consumer directly contracts with the appraiser, the appraiser is responsible for providing a Privacy Notice with an opt-out provision. The Notice should clearly specify which re-uses of the non-public personal information are contemplated. In this situation, the appraiser should develop forms containing a Privacy Notice with an opt-out provision per the FTC Privacy Rule, and provide it to his or her client.*

In essence therefore, the appraiser should ask lender-clients as to what information provided in the context of an appraisal assignment is protected by the FTC Privacy Rule and G-L-B Act and of that information, what disclosure is prevented pursuant to the provisions of the Rule and Act. Like wise, when an appraiser contracts directly with a consumer, the appraiser should take steps to ensure that the consumer's non-public personal information is protected and that the consumer is provided with the necessary Notice regarding disclosures.

* For further interpretation of the Act or FTC Regulations, contact Chapter Counsel, Chuck Basch, Esq. (phone: 215-887-9000, fax: 215-887-1670). Chapter counsel will also be available to draft the appropriate "Privacy Notice" for Chapter members at a modest cost.

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