BNA Report
No. 120
Friday June 22, 2001
Page A-6 ISSN 1523-567X
Regulation, Law & Economics

Privacy
Consumer Groups Plan to Petition FTC About Privacy Notices Issued by Banks

A coalition of consumer groups June 21 announced they will petition the Federal Trade Commission to require financial services companies to rewrite their privacy and information sharing policies in clear language that can be better understood by average citizens.

The groups also have met with the staff of new Senate Banking Chairman Paul Sarbanes (D-Md.) about amending the financial services modernization legislation passed in 1999 to require better privacy policy notification and new mechanisms for consumers to block the sharing of their personal information.

"Sen. Sarbanes has often spoken out for privacy protections," said consumer advocate Ralph Nader at a press conference. "But in the last Congress he frequently told consumer groups that he could do only so much about their needs since he was in the minority and did not control the agenda. Now he has the power to place privacy protection at the top of the committee's agenda."

The consumer groups are asking that Congress change the law so that financial firms cannot share customer information unless the customer has opted-in by giving specific permission for the sharing of such information.

A Sarbanes spokesman did not return phone calls seeking comments. The consumer group coalition includes the Consumer Federation of America, the Electronic Privacy Information Center, the Privacy Rights Clearinghouse, Public Citizen, and U.S. Public Intererst Research Group.

Under the 1999 law, financial services companies are required by July 1 to notify customers of their rights to block the sale and sharing of personal information. Customers must notify the companies that they wish to "opt-out" of any plans by the company to share their personal information. If the customer does not take action to opt-out, then the financial firm may use the customer's information for marketing purposes or sell the information to other companies.

Millions Already Spent on Notices

The industry has spent millions of dollars to mail notices of customer privacy rights during the past several months. But the consumer groups charged those notices are written in legal language that requires a college education to understand, and thus does not serve as an effective notice to customers of the privacy rights granted by the 1999 bill.

Ed Mierzwinski of U.S. PIRG said the notification language used by financial firms sometimes has three double-negative constructions in one sentence, which is difficult for customers to understand. The language is often not specific about how the information will be shared, with what companies it will be shared, and for which purposes it will be used.

Mierzwinski said even internal sharing of information among affiliates of the same company can result in customer information going to an affiliate that does not live under the same privacy rules, which then sells the information to outside companies.

David Vladeck of Public Citizen said the consumer groups will petition the FTC to require financial firms to re-write the notices they send out next year in a manner that can be understood by average citizens. "We need to bring these notices within line of Congress' original intent" to protect privacy, Vladeck said.

Consumer Bankers Association Vice President Marcia Sullivan disagreed, saying in a statement that financial firms have carried out the privacy notifications in good faith. The Consumer Bankers Association represents retail banks and most of the nation's largest bank holding companies.

"Language used in the privacy notices reflects a balance between the need to clearly explain complex provisions to consumers and satisfy legal requirements of the regulations," Sullivan said in a statement. "In many ways these historic privacy protections are working better than anticipated. Regulated financial companies have made a number of changes to internal structures, products and policies to safeguard information...The rules have been implemented with short deadlines and high costs."

The consumer groups have set up a Web site (privacyrightsnow.com) to educate the public about their privacy rights under the new financial services law. Speakers at the press conference encouraged consumers to print out a draft letter on the Web site to send to the financial firms requesting that their information not be shared. The letter requests privacy protections beyond those required by the financial services modernization law.