An opinion issued today by the National Association of Realtors® Legal Affairs Division maintains that most real estate brokerages and property management firms will not be required to comply with new federal privacy disclosure regulations that take effect July 1.

Appraisers who conduct appraisals for consumers and brokerages that engage in ancillary services that are financial in nature such as mortgage lending or mortgage brokering would be required to comply with the new regulations. Brokers who are not involved in providing ancillary services that are financial in nature are not included within the scope of the new regulation. Appraisers who work for banks also would not be impacted by the regulation, although the bank for which the appraisal services are performed will be according to the opinion of NAR?s legal department.

The regulations, issued under the authority of the Gramm-Leach-Bliley Act, require all businesses engaged in financial activities to inform consumers how any information collected, either directly or indirectly, from the consumer in connection with the providing of a financial product or service will be used. A business that intends to share the consumer's personal information with unaffiliated third parties must provide the consumer with notice and the opportunity to opt-out of the information sharing.

Once a consumer establishes a "customer relationship" with a business covered by the regulations, the customer must be provided at the outset of the customer relationship with a copy of the business privacy policy notice and annually thereafter until the customer relationship terminates, regardless of whether the information is being shared with third parties or not.

"Because real estate brokerage and property management are not financial activities, we do not believe that they are covered under the regulations. Only appraisers who conduct appraisals for individuals and brokers who engage in mortgage lending or other financial activities will be required to comply," said Laurie Janik, NAR's general counsel.

Currently NAR is aggressively opposing a regulation proposed by the Federal Reserve Board that would allow banks to enter real estate brokerage and property management on the grounds that these real estate activities are not financial in nature. However, the privacy regulations have no direct relationship to the Federal Reserve rule because they are being implemented by a different federal agency, she said. For more information about the privacy regulations, Realtors® should read the current issue of Letter of the Law, a monthly newsletter written by NAR?s Legal Division and available on OneRealtorPlace.

Published: June 15, 2001

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