Democrats Defend Customer Privacy
By MARCY GORDON .c The Associated Press
WASHINGTON (AP) - Many privacy notices that banks and brokerages have been sending to customers are confusing and shortchange consumers' privacy rights, Democratic lawmakers are telling regulators.
Rep. John LaFalce of New York, senior Democrat on the House Financial Services Committee, is gathering signatures from Democratic colleagues for a letter to Treasury Secretary Paul O'Neill, Fed Chairman Alan Greenspan and other bank regulators complaining about the privacy notices.
The letter contends that many of the notices have ``a general tone that minimizes the importance'' of a consumer's right to block, by written request, financial companies from sharing their personal data with other firms.
``While a number of financial institutions have worked constructively to create effective privacy notices ... too many others appear to have used the privacy notices to confuse their privacy obligations,'' the letter says.
Democratic Reps. Maxine Waters and Barbara Lee, both of California, had signed it as of Thursday afternoon.
Regulators at the central bank and other agencies were constrained by the law in what sort of language they could suggest for the notices, said Oliver Ireland, a former Fed associate general counsel who is now in private practice.
Many banks ``made a very sincere effort to make those disclosures clear and accurate,'' Ireland said Thursday in a telephone interview.
Many of the privacy fliers are printed in type ``that is too small to be easily read by middle-aged eyes and almost impossible for the elderly to read without the assistance of a magnifying glass,'' it says. ``Congress never intended that privacy notices be of this length and difficulty to read.''
That right was spelled out by sweeping legislation enacted in November 1999 that allowed creation of financial ``supermarkets'' by removing Depression-era barriers keeping banks, securities firms and insurance companies out of each other's businesses.
Banks and other financial companies are required to send the privacy notices to all their customers by July 1. They most often come as envelope stuffers with customers' statements and bills.
Consumer groups have criticized the notices, too.
``The banks don't speak English and they do it on purpose,'' Ed Mierzwinski, consumer program director for Public Interest Research Group, said Thursday. He called the notices ``unintelligible, hiding your limited right to say 'No' at the end of pages and pages of gibberish.''
Only 5 percent of the notices have been returned, said Ralph Nader, consumer advocate and former presidential candidate, leaving most of them ``tossed in the trash unread.''
The banking industry defends its notices.
``This is a legal document that is being sent out by the banks,'' said Catherine Pulley, a spokeswoman for the American Bankers Association. ``Banks have to please their customers but they also have to please the regulators.''
She called the mailing of some 500 million notices by banks ``a huge, daunting'' and expensive task. A very small percentage of customers have chosen to block the sharing of their data, the bankers' group has found.
Spokesmen for the Securities Industry Association, which represents the nation's brokerage firms, didn't immediately return a telephone call seeking comment.
In his letter, LaFalce asked the regulators to begin a review of consumers' complaints about the privacy notices, with a view to revising the agencies' rules to make privacy notices more ``conspicuous'' and more respectful of privacy rights.
A Federal Reserve spokesman declined immediate comment because Greenspan had not yet received the letter. Treasury spokesmen didn't immediately return a telephone call seeking comment.
On the Net:
Rep. John LaFalce:
American Bankers Association: http://www.aba.com
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