New Privacy Law Gives Consumers 'Opt Out' Rights
By Jane Bryant Quinn
You're starting to see the results of the so-called "financial
privacy" law, passed in 1999 and taking effect July 1. Banks, credit
unions, insurance companies and brokerage houses, among others, are mailing
out hundreds of millions of privacy notices.
You're starting to see the results of the so-called "financial privacy" law, passed in 1999 and taking effect July 1. Banks, credit unions, insurance companies and brokerage houses, among others, are mailing out hundreds of millions of privacy notices.
Under the new law, consumers can--in a very few circumstances--block financial institutions from disclosing their personal account information. It's called an "opt-out" right.
If you opt out, you might (might!) get fewer solicitations for financial products. And just as important, you'd be letting the financial industry know that financial privacy is something you care about.
These new privacy notices tell you how to opt out, and you should do it, says Beth Givens, director of the Privacy Rights Clearinghouse in San Diego (www.privacyrights.org). "The more opt-outs there are, the more likely consumers will get privacy-friendly policies," she says.
But watch out: You may miss the notices when they arrive. They generally come as statement stuffers, which most consumers throw away.
The privacy law is part of the Gramm-Leach-Bliley Financial Modernization Act (the law is referred to as GLB and pronounced "glib").
Privacy worries heated up when Congress decided to allow mergers between banks and insurance companies. Previously, they had been kept apart.
Mergers mean that the companies can freely share information about their customers. For example, insurance companies can now get lists of savers whose certificates of deposit are maturing, so they can be solicited for annuities or mutual funds.
At about the same time that the law on mergers was being changed, a privacy scandal hit the newspapers. Some banks were selling their customers' names, phone numbers and credit-card numbers to telemarketers, even though the banks had said that such information was confidential.
Consumer groups proposed a number of restrictions to protect your personal financial privacy. Industry lobbyists beat them back.
In the end, the federal privacy law became little more than a disclosure act, says Edmund Mierzwinski of the U.S. Public Interest Research Group in Washington. You have only the slimmest of privacy rights. Nine states have slightly better laws.
But Congress tossed consumers a few crumbs.
By federal law, financial institutions now have to tell you what kinds of information they gather about you and, in general, how they use it. The law includes automobile dealers and retailers who share financial information about their customers.
You may get privacy notices from a dozen places or more--even from a bank that once turned you down for a credit card.
You'll get the same notice when you open an account with a new institution after July 1. Every customer will get a privacy notice once a year.
Financial institutions still have an absolute right to sell or share your account information with affiliated companies. They can also share it as part of a joint marketing agreement with another firm.
For these purposes, your deposits, transactions, payment history, loan history and account status are an open book.
Institutions can also sell or share your personal information with unaffiliated third parties such as telemarketers, insurance companies and car dealers. This is something you can stop, however, by opting out.
The privacy notice will tell you how. You either check an opt-out box on a form and mail it back, or call a special telephone number (not the bank's main number). A few places let you e-mail.
You have a second opt-out right, granted by the older, Fair Credit Reporting Act. It allows you to stop institutions from sharing--even with affiliated companies--any data gathered from a loan or insurance application. This includes your age, sex, salary, job and net worth.
If you have a joint bank or brokerage account, each of you has to opt out. If only one of you does, the data may still be sold.
John Byrne, senior counsel for the American Bankers Association, thinks that sharing customers' financial information is "very pro-consumer," because you'll hear about products that interest you. (Like it or not.)
Institutions already see ways of selling to people who opt out.
For example, take credit unions. They might share members' names with local car dealerships--from which you could opt out.
But you couldn't opt out if they take the dealers' brochures and send them out directly, says Kathleen Thompson, a senior vice president for the Credit Union National Association in Washington.
Opt out, opt out. Every single message about privacy helps.Jane Bryant Quinn welcomes letters on money issues and problems but cannot offer individual financial advice.