DISCLOSURE OF CUSTOMER INFORMATION TO 3RD PARTIES - WHEN IS THE BANK LIABLE

In connection with deposits, loan applications, and other more complex financial transactions, people provide financial information to banks. Faced with third-party requests for this information, a bank has to consider two sometimes conflicting legal duties: (1) its duty of confidentiality to its customer and (2) its duty in special circumstances to disclose customer information to third parties. These duties, developed by the courts, often go beyond the traditional contractual duties of debtor and creditor. The authors examine the case law interpreting these duties and explain what the bank must do when it is caught in a conflict between the duty of confidentiality to its customer and the duty to disclose information to a third party. Also discussed is the choice of law issue: What state's law is controlling when the bank is in one state, the customer in another, and the third-party in yet another?