GDPR Update Part II January 2018

This is the second of two updates on GDPR primarily aimed at firms regulated by the Financial Conduct Authority but in the main it is applicable to most firms. The updates are intended to give you an oversight into some of the actions required of you now and what will be required of you later in the year. May is only a short time away. If you missed the first update you can find it here.

Having read these two updates, you may begin to come to the conclusion that GDPR is a big thing. It is without a shadow of a doubt but with appropriate action  in good time, there should be  no problem in delivering a compliant approach in small firms despite the scaremongering that is flying about at the moment.

Verbal Disclosure at the outset on the Telephone

You will be expected to tell anyone whose data that you will be handling a number of things relating to what you intend to use the data for, who it might be shared with, the data subjects rights in respect of their data, how long you plan to keep it for. The list is not exhaustive here and will be summarised in a future update. You will also need to keep a record of when you gave this information to the data subject. Before proceeding to explain this, it is worth noting that this does not mean expressly that firms will need to record telephone calls as has been suggested in a number of ‘updates’ that I have seen.

There area number of elements to demonstrate that appropriate disclosure has been made. The first of these is a record that the person communicating the information to the data subject has been trained accordingly in the new requirements. This means that their training log should reflect this where there is a training log (as good as mandatory in the Financial Services industry). There should also be an approved document that is to be used to communicate with the data subject. This is likely to be the firm’s privacy statement (PS) together with a script, if appropriate, to aid in the delivery of the PS. The PS is a controlled document and should be included somewhere formal in the firm’s systems of control. Although it is not technically a financial promotion, the most obvious place to keep it under control is in the Financial Promotions Register.

Financial Services firms have obligations in terms of initial disclosures under the FCA Conduct of Business rules and, so it makes absolute sense to ensure that these disclosures are married to the PS and delivered at the outset. Firms using a Terms of Business Letter (TOB) as an initial disclosure document (IDD) could expand the content to include the PS without too much angst and could extend their initial conversations to include their obligations under GDPR. Firms that continue to use the old style IDD originally put forward by the FSA and now pretty much obsolete in its current form, should consider transferring to a TOB prior to May 2018.

It should be noted that GDPR avoids the term express consent but does make it clear that there is a requirement to demonstrate that the client has been adequately informed and that they have given their consent to the use of their data. It would be advisable to get confirmation from the data subject either by way of signature, email or some other unique identifier before processing their data.

Where collection of data is going to undertaken by telephone, then there needs to be documented procedure, evidence of training and a suitable script to ensure that disclosure requirements are delivered before the firm starts to collect and process data. It goes without saying that the collection and handling of data only starts once you start to document or record data in your firm’s systems.

New rights for Data Subjects

GDPR provides a number of rights for individuals, some of which exist under current regulations (but are enhanced) and others that are entirely new. The following is a list of the rights: -

·       The right to be informed

·       The right of access

·       The right to rectification

·       The right to erase

·       The right to restrict processing

·       The right to data portability

·       The right to object

·       Rights in relation to automated decision making and profiling.

I am not proposing to go into detail on each of these rights in this document other than to say that some of these are new and are potentially problematic, especially the right to erase. These rights must be made clear to the data subject (client, AR, introducer and so on) before you start to process their data under GDPR.

Consent for Guarantors and persons incidental to the client’s data processing

There are a number of different areas for firms to identify as a lawful basis for handling data. These may vary firm to firm and can vary within different data subject groups within the firm.  One of the purposes of carrying out a data mapping exercise is to establish the correct legal base of legal processing.

For most intermediary firms, it is likely that you will use ‘Consent’ as the lawful basis for processing data for your clients in almost all cases and this means that in addition to obtaining consent from your clients, you will need to obtain consent from any other person involved in the transaction. This may include guarantors, adults over the age of 17 living in the property, children – a particular area where care must be taken. Data is data and, so it matters not whether the client is the data subject or the guarantor or whoever is the data subject, GDPR applies the same in all cases.

A final point here is that the lawful basis for processing may differ for employees and for introducers of business. Whichever option you go for, your privacy notice will need to explain this.

Agreements with third parties e.g. AR agreements and Introducer, Employment Contracts

Within the agreements that you hold with third parties where these are individual data subjects, you will need to ensure that you have obtained consent to handle and process their data. This includes Appointed representatives and their staff if applicable, introducers & locums. The same will apply to employment contracts. You will need to review existing documents to ensure that these will satisfy GDPR – they probably will not.

Equally, you will want agreements with third party suppliers to satisfy the requirements of GDPR in relation to any data that you might pass on to them either for yourself, your employees and ARs, introducers, clients etc.

Web Pages

GDPR has come in in part to deal with the issues of the digital age and therefore web, internet and other ethereal activity will have to be looked at very carefully. Because this is such a big subject, it is going to be dealt with in its own bulletin at a later stage.

There is a lot of scaremongering in the press about the use of emails after GDPR. I have not yet completed my research on this but I would offer the following observations at the present time.

It is down to each firm to undertake its own Data Protection Impact Assessment (DPIA) on the issue of email communication and to establish whether this poses an undue risk in transmitting client data. The outcome of such an assessment might be that unencrypted emails are not safe for the firm to use with client data. However, firms can exercise no impact on the clients view of the world and if they choose to send on unencrypted emails then arguably you will have no control over it.

For more on emails, please see future bulletins. The same applies for further in formation on DPIAs,

A Potential issue (right to be forgotten and complaints handling)

One of the areas that I see as being an issue to start with or at least until we have some case precedent to frame the requirements relates to dealing with complaints after a client has exercised a right to erasure. Given that most firms are going to use ‘consent’ as the basis for handling and processing client data, the data subject will have the right to be forgotten or to be more precise, the right of erasure.  This raises quite a significant potential problem for firms in the event of complaint handling. The risk is as follows: -

A past client exercises their right for data subject access (DSAR) and obtains a copy of all their data. They then exercise their right of erasure (which must be complied with unless it falls into certain categories that are unlikely to apply in his scenario). The firm, as long as it complies with FCA requirements for data handling (technically three years for advised completed mortgage sales) must comply with the request and arrange for the data to be deleted. The client then raises a complaint about a past issue from the information that it holds from the DSAR and presents the complaint to the firm. The firm now holds no data about the client and therefore is unable to defend the complaint. Client therefore in a good position to be successful in the complaint either directly with the firm or when it goes to the Ombudsman.

Watch this space as this issue could run a bit but obviously an important matter to consider amongst everything else is how your firm will respond to requests exercising the right to erasure.

Next Steps.

The purpose of these two brief notes on GDPR is to invigorate the subject now that we are less than five months away. For my clients I will be following the 12 Step Plan that the ICO have put out a few months ago and I have today publicised that within the MI System that some of you are using. Over the coming weeks, I will be issuing documents and undertaking actions for my clients in order to prepare for GDPR in a timely manner. There will be a number of significant updates to the MI system including, of course, a new area for Data Protection to cover the GDPR changes.

GDPR 2018 Update Part I

THIS IS THE FIRST OF A TWO PART UPDATE ON GDPR FOR MORTGAGE INTERMEDIARIES. THE SECOND PART WILL BE ISSUED  BEFORE 5th  JANUARY 2018.

There is a lot of activity in relation to GDPR  in the industry at the moment as well as almost everywhere else! It is hardly surprising, as the new  data protection rules coming in in May 2018 for the European economic Area (EEA) are probably the most far reaching on the planet. Brexit will have  no bearing on the changes coming in and so the new rules are no doubt here to stay.

So what has to be  done? Below are a few things that we need to do.

Carry out a data mapping exercise.

This is not as heavy as it sounds. Basically, we just need to establish where you get data from, how you process it and who you pass it to (and whether any of these locations are outside the EEA). There are a number of convolutions around this but I will be providing some guidance on this during December, together with a basic model for a mortgage broker that should fit most firms.

The reason for the data mapping is to carry out an audit on where personal data goes so that you can identify who and where and then check that these potential data processors on your behalf are registered and tooled up to handle data (in terms of competence, security and back up). The model that I will produce should cover most of the firms or types of firm that you will be  dealing with and if there are any outside this, then we can discuss separately.

Data mapping also allows us to improve the completeness and coverage of our Privacy Statement (see below).

Privacy Statement and Consent

GDPR is going to require you so set out and explain to your clients who is processing their data, how you will process it and for what purposes, who you will share their data with, their rights and how you will keep their data safe. This is best done by documenting a Privacy Statement. This could be a standalone document or it could be incorporated into your Initial Disclosure Document (IDD). Although you don’t technically have to get the client to sign your Privacy Statement, you are required to keep a record of the fact that you have explained the key information required by GDPR and this is best demonstrated by getting a signature or email confirmation of receipt.

Under the existing rules, your client consents to you processing their data by the fact that they have contacted you to arrange a mortgage or insurance for you (and a member of staff, where applicable, by becoming your employee, Appointed Representatives and Introducers also). Under the new rules, the consent has to be evidenced. This could be a record that a conversation has been had and a Privacy Statement issued when combined with documented procedures that explain how consent is to be obtained and training for appropriate staff. However, the safest way to evidence consent is by having a document signed or otherwise uniquely confirmed (e.g an email) by the client. Such evidence could be a signature on a copy of the Privacy Statement or on a suitably documented IDD. It could also be a confirmation of some form contained within an email from the client’s personal email account. It should be noted that where one client is signing on behalf of a joint application there is a potential exposure if the other party then claims that there was no permission to sign on the other persons behalf. Suitable wording for joint applications could in part address this but it is recommended that where possible, all data subjects document their consent. As an aside here, there is a potential issue for adults living in the property to be mortgaged because their data will also be  recorded  in your files even to the extent that it is only name, age and address details. Therefore, where you are processing data relating to adults who are not party to the mortgage application but are resident or in any way involved in the transaction (another example would be  dependents or members of the family in Lifetime Mortgages) you will need to be  able to evidence that they have consented to processing their data in the same way. Please refer to the section below for further details. Web pages will also be dealt with below.

I have  produced a sample Privacy Statement and will be  issuing this document shortly. It will also be  available  from 1^st January in the MI System.

Initial Disclosure Document

Rather than issue two documents to a client, I would suggest that the existing IDD is expanded to incorporate the Privacy Statement. I believe that the Data Protection part should be visually separate from the IDD text  but signature of the single document could be  taken for signature of both parts. Many firms still obtain signatures on the IDD as part of routine processing and so this will not be a big deal in most cases. I would emphasise that the date of the signature is also important as this is the date that the client consented to processing their data. This could mean that it is possible that you may begin recording client data before they have signed a consent but that can be delat with by making sure that the client is aware of the matter at the start of your conversation. The fact of issuing an IDD including the Privacy Statement within say 5 working days should be  adequate to satisfy GDPR as long as some verbal explanation has been given at the outset.

I have  produced a sample IDD in the form of a Terms of Business Letter as I do not believe the old IDD format originally put forward by the FCA is appropriate to comply with the GDPR requirements. Firms currently using the old style IDD should consider moving over to a Terms of Business in order to streamline their process. ICOBS allows a terms of business letter for insurances as long as it includes certain key data and the TOB that I have documented is also designed to comply with the current insurance disclosure requirements. It will also be  available  from 1^st January in the MI System.

Appointing a person responsible for Data Protection and undergoing training within  the firm

GDPR requires that each Data Controller which may be an individual or a firm depending upon corporate status) appoints an individual with responsibility for Data Protection. That is no particular issue in its own right but with the new rules on their way some time next year for Senior Managers and Certification (SM & C), it means that there will need to be a robust document and that the individual will have been appropriately trained and competent. For most small firms this will not however be an issue as the sole Director, proprietor or senior partner will be the named person. Training can be  in any form. This document in its own right is a training document and, if you use the MI system, will be recorded in your training log there.

Where there are any other persons in the firm, all of them will need to be trained in the new rules. Whilst this document deals with much of the new requirements , a further GDPR Training Session will be issued in the new year and made available through the MI system for training to other members of staff. A recommendation would be that all staff, directors and business partners are trained, including Ars where applicable and their staff. It is also recommended that any introducers of business are provided with a suitable update (the Training Document to be provided at a later date, for example).