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Federal Register / Vol. 86, No. 234 / Thursday, December 9, 2021 / Rules and Regulations
NADA, supported eliminating the references to HIPAA and FERPA, agreeing that these provisions would not apply to automobile dealers.28 Given that it received no other substantive comments, the Commission adopts the changes as proposed.
2 Section 313.3
To help companies understand whether and how the rule applies to them, the current rule includes examples of financial institutions in 313.3k2, examples of consumers in 313.3e2, examples of what would constitute establishing a customer relationship in 313.3i2i, and examples of what is not a customer relationship in 313.2i2ii. The Proposed Amendments to 313.3
removed examples not likely to apply in the context of motor vehicle dealers.
NADA was the only commenter who opined on this issue. It agreed the examples proposed for removal do not apply to motor vehicle dealers and supported their deletion. Accordingly, the final rule deletes these examples as proposed.
NADA advocated for removal or modification of additional terms or examples that it asserted would not apply in the motor vehicle context. The Commission declines to make the changes suggested by NADA, for the reasons described below.

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a. Loans NADA argued the examples in the final rule should not include the word loans because motor vehicle dealers do not generally issue loans, but instead provide financing assistance or enter into retail installment sale contracts or leases. NADA suggested the term loan be replaced with financing, or finance or lease contract. 29 The Commission declines to modify existing examples in this manner. It believes the Privacy Rule should be substantively identical to Regulation P so financial institutions within the Commissions enforcement authority are subject to the same requirements, regardless of whether they are subject to Regulation P or the Privacy Rule. Although the Commission recognizes some examples it has retained may not apply well to the motor vehicle context,30 changing the 28 National Automobile Dealers Association comment 9, at 34.
29 NADA comment 9, at 4.
30 The Commission notes that while the term loan may not be applicable to all motor vehicle dealers transactions with their customers, most extensions of credit or the arranging of credit will play the same role as loans for purposes of this amendment, and dealers may generally apply these examples accordingly.

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language of an example, as opposed to completely removing it, could be read as a change to the substance of the rule.
Accordingly, the Commission declines to change an existing term in the final rule.31
b. Examples of Continuing Relationships NADA suggested removing the term investment accounts from the example of a continuing relationship 313.3i2iA, as such accounts are not offered by motor vehicle dealers. As discussed above, however, the Commission declines to modify existing examples and does not adopt this change in the final rule. NADA also took issue with 313.3i2iD, which states a consumer has a continuing relationship with a financial institution when the consumer enters into an agreement or understanding with the financial institution in which the financial institution undertakes to arrange credit to purchase a vehicle for the consumer. NADA noted when motor vehicle dealers arrange credit for a consumer, they then assign that agreement to a third party and do not continue the relationship with the consumer.
Although motor vehicle dealers may transfer the credit agreement to another financial institution, a continuing relationship is formed by the agreement and persists for as long as the motor vehicle dealer retains the agreement.
The continuing relationship between the motor vehicle dealer and the consumer will end upon the transfer of the agreement, but until that transfer occurs, the consumer is the motor vehicle dealers customer for purposes of the Privacy Rule. Accordingly, the Commission declines to remove this example from the final rule.
NADA also argued the term understanding in paragraph i2iD is confusing because it is not clear what an understanding would mean in this context, and motor vehicle dealers do not enter into informal relationships to arrange credit for consumers. The Commission believes, however, while informal understandings may be unusual for 31 The Proposed Amendments did modify existing examples in two instances. In 313.3i2iA and 313.5b2ii, references to mortgage loans were removed. Although the Commission continues to believe that mortgage loans are unlikely to be involved in the motor vehicle dealer context, as discussed above, the Commission recognizes that there is value in maintaining consistency with Regulation P, and that particular examples provided may not be applicable to every type of financial institutions activities. Accordingly, the final rule retains the references to mortgage loans in these provisions.

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motor vehicle dealers, it is possible some dealers may engage in such practices and the example should continue to make clear that such arrangements create continuing relationships. In addition, as discussed above, the Commission declines to change the language of examples retained in the final rule.
c. Examples of No Continuing Relationships NADA argued the example in 313.3i2iiA does not apply to motor vehicle dealers. This example states no continuing relationship is created when a consumer obtains a financial product or service from the financial institution only in isolated transactions, such as cashing a check with the financial institution or making a wire transfer through the financial institution. NADA argued motor vehicle dealers generally do not engage in these activities, and while it is theoretically possible that a dealer somewhere may offer, under unique circumstances, to cash a check for a customer, NADA is not aware of that service being offered by dealers and the possibility is attenuated at best. 32 The Commission does not agree that this example should be removed. Although check cashing and wire transfer transactions may be unlikely at motor vehicle dealerships, these are helpful examples of the types of isolated transactions that do not create an ongoing relationship and, even for motor vehicle dealers that do not engage in these particular activities, they illustrate the principle well. The final rule retains this example.
NADA also questioned the inclusion of 313.3i2iiC, which states a continuing relationship is not created when a consumer obtains one-time personal appraisal services from the financial institution. NADA asked whether this would apply when a motor vehicle dealer appraises a consumers used vehicle for trade-in value. The Commission believes that is precisely the type of appraisal suggested by the example. NADA also questioned how such appraisal activity by a dealer could, as an initial matter be deemed to create a Customer relationship. 33 The Commission believes, however, negative examples are useful to clarify the definition and, therefore, the final rule retains this example.
32 NADA
33 NADA

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comment 9, at 5.
comment 9, at 5.

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