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Answer :
Final answer:
Financial institutions are required by law to inform customers about their information practices and security measures. This is essential for protecting personal data and maintaining customer trust. Thus, the statement is true.
Explanation:
Understanding Customer Information Policies in Financial Institutions
Financial institutions are indeed required to inform customers about how they gather information, with whom they share it, and what measures they take to safeguard it. This obligation stems from various consumer protection laws aimed at ensuring the privacy and security of personal information.
Legal Requirements
For instance, the Financial Services Modernization Act of 1999 mandates that financial institutions provide a privacy policy. This policy must clearly state the practices regarding the collection and sharing of customer information. Moreover, institutions are required to implement security measures to protect sensitive data from unauthorized access.
Importance of Transparency
Transparency is crucial as it builds trust between the institution and its customers. By being open about their policies, banks help individuals understand their rights regarding their personal information. Additionally, laws such as the Fair Credit Reporting Act and the Privacy Act further protect consumers' financial data and limit unauthorized disclosures.
In conclusion, the statement in the question is true: financial institutions have a legal responsibility to inform customers about their information gathering and sharing practices as well as their security measures.
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