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Zip your lenders' lips with opt-out notices

Stop! Don't throw out any "junk" mail from your bank, credit union or other financial institutions for the next few months without carefully inspecting it. Your chance for privacy is on the line.

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Everyone in America who has an account with a bank, credit union, savings and loan or a mortgage company, or who has an insurance policy or an investment account, can expect to get a fistful of notices that will let him or her limit the amount of personal information those companies can share or sell.

It's part of the Gramm-Leach-Bliley Financial Modernization Act of 1999.

The law gave financial institutions greater leeway in conducting business, but also put some constraints on them regarding consumer privacy.

In general, there are three things the institutions have to do:

1. Tell customers what kinds of information they collect and the types of businesses to which they sell or give that information.
2. If the institution intends to sell or give your information to a company outside its corporate family, it has to give you a way to "opt out" or say, "No, I don't want you to share my information."
3. The institution has to tell you how they protect the confidentiality of your information.

An opt-out illusion?
The notices that enable you to opt out may be just another piece of paper stuffed in with your monthly statement or they may arrive in a separate envelope.

There's no particular format the institutions have to follow, but the word "privacy" should be fairly prominent. Don't fling the notice into the garbage unless you don't mind being contacted by companies trying to sell you things.

"A big problem is whether consumers will recognize the notices when they come," says Tena Friery of the San Diego-based Privacy Rights Clearinghouse.

"Most are in with account statements and ads. I hate to be a pessimist on this but I've talked to a number of people about this and I always get the same response: a blank look. People aren't even aware that these things are coming."

Many banks and the like began mailing the notices in January, but Friery says she expects our mailboxes will be flooded with them in May and June. The American Bankers Association says many households could get 15 or more notices.

Bank of America, one of the nation's biggest banks, is sending out 66 million notices, one for every account. Spokesman Scott Scredon says they haven't gotten many responses. He attributes this to the fact that the bank began a policy of not sharing information with unaffiliated third parties almost two years ago.

"We did it because we thought it was the right thing to do and we think it gives us a competitive edge," says Scredon.

Friery agrees.

"I applaud them if they don't sell to third-party nonaffiliates. Any company that has adopted that practice is heads-up in terms of consumer confidence."

Gramm-Leach-Bliley lets you, in most cases, stop a company from sharing your information with nonaffiliated third-party companies and individuals. Your bank can still share your information with a company that's in its corporate family.

There are exceptions to the nonaffiliated third-party rule. Your information can be shared with a third party if it's needed to conduct normal business. For instance, if your bank uses a third party to print account statements -- or if sharing the information will protect against fraud or if there's reason to believe the information is publicly available -- in the phone book, in court records, etc.

You're also being given the chance to opt out of having information about your creditworthiness shared with your financial institutions' affiliates.

"In passing Gramm-Leach-Bliley, Congress revisited the Fair Credit Reporting Act and said FCRA notices have to be included with GLB," says Friery.

Privacy rights by the books
Here's what it boils down to, according to the Privacy Rights Clearinghouse:

  • Gramm-Leach-Bliley allows you to stop institutions from selling or sharing nonpublic personal information about you with nonaffiliated companies.
  • The Fair Credit Reporting Act allows you to stop institutions from selling or sharing credit-worthiness information about you with affiliated companies.

Karen Alnes of San Francisco-based Wells Fargo, which is sending out about 30-million notices, says complying with the law is a major communications job for the financial institutions.

"My greatest concern is making certain everyone understands what we're doing, how we're doing it and what choices are available to the customer so we can provide a consistent level of customer service. So, if a customer asks me or a mortgage officer or a teller a question, they get the same answer."

More than likely, the notices you get will have a tear-off sheet that you can mail back to the bank or a toll-free number to call if you wish to opt out. A handful of financial institutions are offering e-mail or online responses, says Peggy Wilson of Bankers Systems in St. Cloud, Minn.

If you realize you've tossed a notice out by mistake, call the institution and tell them you want to opt out. As of July 1, institutions will have to inform you of your opt-out rights when you open an account and remind you annually of your rights. Even if you don't decide to opt out now, if you change your mind in six months, call your bank.

How important is Gramm-Leach-Bliley to your financial privacy? That depends on where you live and where you bank.

While the law creates a nationwide standard, Wilson says her company's survey of 3,900 financial institutions shows almost 69 percent of banks and savings associations don't share customer information with nonaffiliated third parties outside of the exceptions. On the other hand, 65 percent of the credit unions surveyed said they share information with nonaffiliated third parties.

"Most credit unions are very small and don't have the resources to provide the services themselves, so they develop a relationship with someone else," says Wilson. "Credit unions are nonprofit so they don't sell lists to generate revenue -- only when they feel it brings additional value to the members."

Wilson also says there are 21 states that have privacy laws in addition to Gramm-Leach-Bliley, and nine of them have very "serious" limitations on what can be shared. The nine states are North Dakota, Maryland, Illinois, Florida, Mississippi, Massachusetts, Alaska, Louisiana and Vermont.

Where's my opt-out notice?
If you haven't received any privacy notices yet, don't worry. Here's the latest status survey from Bankers Systems. With more than 500 financial institutions responding:

  • 9.3 percent have sent out privacy notices.
  • 27.9 percent say their privacy policies have been drafted and printed.
  • 51.6 percent are in the process of developing their privacy policies and notices.
  • 11.3 percent have just begun to study the requirements.

Financial information privacy is important to American consumers. That's been shown in many polls, says Tena Friery of the Privacy Rights Clearinghouse.

"Many people feel they have a zone of privacy ... if they give information to the bank, that information should be used for their car loan or mortgage or credit card. They feel that the information is theirs.

"The property issue is a real debate. Who does this information belong to -- the consumer or the institution -- once the consumer hands it over? Most consumers feel they have more rights than they actually have. People have a level of confidence about their personal information that really doesn't exist any more."

-- Posted: April 10, 2001




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