85-4

February 21, 1985

Dear Mr. ________:
This is in reply to your letter of February 8, 1985, which was received on February 15, 1985.
The California right to Financial Privacy Act (Government Code Sections 7460 et seq.) by its terms applies to banks, and no provision of the Act provides that the escrow business of banks is not subject to the Act. Moreover, we do not find in the memorandum which was enclosed with your letter any persuasive basis for reading into the Act an exemption for the escrow business of banks. On the contrary, the quotation from ________ set forth in pages 4 and 5 of the memorandum indicates that the principle of the decision logically extends beyond deposit account statements to “all papers which the customer has supplied to the bank to facilitate the conduct of his financial affairs upon the reasonable assumption that the information would remain confidential.” Accordingly, we cannot agree with your view that the Act does not apply to the escrow business of banks.
We regret that we are not in a position to be of assistance in this matter.
Very truly yours,
LOUIS CARTER
Superintendent of Banks
By
JAMES F. CARRIG
Chief Counsel

February 8, 1985

Mr. James Carrig
RE: Request for Legal Opinion
The _______ is responsible for enforcing the provisions of the Mobilehomes/Manufactured Housing Act of 1980 Health and Safety Code Sections 18000, et seq.). Among other things, this Act and accompanying regulations establish requirements for escrows in the sale of mobilehomes and manufactured housing. In carrying out our enforcement duties, we often conduct administrative investigations of mobilehome dealers, salespersons, and individual transactions, including compliance with escrow requirements. One tool which we frequently use in our investigation is a subpoena for the production of records, as authorized by Government Code Section 11181.
Since 1980, when the department assumed the enforcement duties over mobilehome/manufactured housing transactions, we never have had one of our subpoenas refused. Recently, however, a bank refused to honor a subpoena for documents held by the bank in its capacity as escrow agent (see attachment) The refusal was based on the provisions of the California Right to Financial Privacy Act (Govt. Code §7460 et seq.). Pursuant to Govt. Code §7465, the Financial Privacy Act applies to banks and savings and loan associations, but does not apply to escrow companies.
It is the opinion of my legal staff that when a bank acts in the capacity of an escrow company, the bank should no longer be a “financial institution” for purposes of the Financial Privacy Act. However, since the banking industry is more properly within the purview of your department, we would appreciate confirmation of this opinion by your legal staff. (I am enclosing a copy of our own analysis on this issue.)
We would appreciate hearing from you at your earliest opportunity. If you or your staff have any further questions regarding this request, please contact ________ at ________. Thanks for your assistance.
Sincerely,

General Counsel