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American Morning

The Debate Over Financial Privacy Notices

Aired June 22, 2001 - 10:21   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: Consumers out there, you're going to want to listen to this next story. Have you seen this in the mail? It is a privacy notice coming from any number of financial institutions you might do business with. It's an announcement that something's about to change on July 1: how your privacy is protected when it comes to your financial records.

To help us understand more and help us do something about it and give us information, we have two guests with us today. We have Ed Mierzwinski. He is the consumer program director at the U.S. Public Interest Group. He is in our Washington Bureau this morning. Also, on the phone with us is Rob Rowe. He is with the Independent Community Bankers Association. We'll be talking to him by phone in just a minute.

Ed, let's go ahead and start with you. What is going to change on July 1 when it comes to our privacy and our financial records?

ED MIERZWINSKI, CONSUMER PROGRAM DIR., U.S. PUBLIC INTEREST GROUP: Well, Daryn, a new law in 1999 allowed banks to merge with stock brokers and insurance companies and cross-market all kinds of products. The new law gave us limited privacy rights. By July 1, all your banks and other financial institutions have to send you a notice describing how they share or sell your confidential information.

But we think the notices are deceptive because people are throwing them out because they're six or seven pages of gibberish followed by a limited right to say no, but only some of the time. So not only are the notices deceptive, but the law itself is defective and needs to be fixed.

KAGAN: So the basic idea is, when you get this in the mail, you have to read through the whole thing, look at the back, and there's a form that you have to fill out and fill in. If you don't do that, then that company can release your personal information, as you understand it.

MIERZWINSKI: That's exactly right. But your right to say no continues even if you threw the form out. But you should understand...

KAGAN: That's what I was wondering.

MIERZWINSKI: ... even if you did throw the form -- I'm sorry, even if you do say no, your bank still can share your information most of the time. It can share it with affiliates, all its stock brokers, all the insurance companies it's affiliated with and some third-party companies.

There's a limited number of companies you have the right to say no about. That's why we're saying the law is defective as well and needs to be fixed.

KAGAN: OK.

MIERZWINSKI: We should have the right to say yes before they share with anybody.

KAGAN: Let's get to that in just a second.

Let's bring in Rob Rowe, who understands the banking perspective. And Rob is on the phone with us.

Rob, explain to us why this is a good thing for banks and financial institutions to be able to share our personal information.

ROB ROWE, INDEPENDENT COMMUNITY BANKERS ASSOCIATION: Well, I think that there are a number of reasons that it's good to share information. One of the things that I always point to is, it wasn't so long ago that if you moved from one city to another, you had to have a lot of introduction to a new bank because they didn't know you. But if you weren't...

KAGAN: But those -- Rob, those days are long gone when...

ROWE: Well -- but sharing information makes that easy. But I think one of the more important things is that we talk about the availability of credit for consumers and making credit available, especially in lower-income areas. And sharing of information with credit bureaus, for example, has made credit more accessible. And that's an...

KAGAN: But what if that's information that you don't want someone else to know about?

ROWE: Well, it's going to make it more difficult for you to get a loan, I mean, for example.

KAGAN: Explain to me -- well, we were looking at this from a consumer standpoint -- but explain to me why it's good for banks. Obviously, they've been pushing for this. It helps them.

How does it help a bank to be able to share this kind of information -- to create new business?

ROWE: Well, for -- our members are much smaller institutions across the country. And it allows them to provide services. For example, one of the things that our members do is they offer their customers credit cards. They don't have the resources or the manpower internally to have their own proprietary credit card, so that by sharing information and affiliating with another company, they can offer a customer credit card services.

KAGAN: OK, Rob, explain to me the logic in how these forms work. To me, it seems backwards. I have to sign it and send it in if I don't want you to give away my personal information. Shouldn't it be the other way around: that I should sign something and send it you if I want to allow you to do that?

ROWE: Well -- and that's been one of the big controversies about this whole thing. And that's what we call opt-out vs. opt-in. The statute is an opt-out statute, which requires you to say no, affirmatively you do not want the information shared.

There have been a number of studies that have found when consumers understand that there's a benefit to information-sharing that they don't object to it -- if you know what the benefits are. And that's one of the things that we're working with our members to do, is to educate their customers. You know, there are benefits to information-sharing.

KAGAN: I also understand, to a certain amount the banks, and the credit unions, your hands are tied in a certain respect because there's regulations with this law saying that there's a certain way you have to do it.

ROWE: That is correct.

KAGAN: So even if wanted to do it differently, you couldn't necessarily go out and do it differently. That's the law's problem.

ROWE: Yes, a lot of the complaints are coming from language that is mandated in the regulation -- or examples in the regulation. And, in fact, one bank did a focus group with customers of trying to figure out the best way to communicate this new privacy notice to their customers. And the area that the focus group universally objected to was the language that was required in the regulation.

KAGAN: OK, Ed, let's get you back in here. There's a lot of consumers out there who, believe it or not, despite how many of these things have been sent out, are just hearing about this. And you know they're going to be ticked and they want to do something.

What should a consumer do if they don't want their information -- as much power as they do have -- if they don't want that shared? They should go and look for these and send them in?

MIERZWINSKI: Well, Daryn, first of all, even if you say no, the banks can still share a lot of your information. That's why the law is defective. But go to our new Web site...

KAGAN: All right, let us know what that is.

MIERZWINSKI: Privacyrightsnow.com. Privacyrightsnow.com tells you how to opt out even if you mistakenly threw away your right to opt out.

By the way, another consumer group, Privacy Rights Clearinghouse, looked at 34 notices. They all would have failed the law if they were insurance policies in states that require readability standards.

(CROSSTALK)

KAGAN: Real quickly, on a practical matter, do I need to fill one of these out for every company I have a financial relationship with -- every credit card, every bank?

MIERZWINSKI: Every separate company, you need to fill out a separate form. That's another problem with the law. Call Congress as well as calling your bank.

KAGAN: We'll do it with all of our free time that we all have.

MIERZWINSKI: Thank you.

KAGAN: Thanks for bringing it to our attention, Ed Mierzwinski, and also Rob Rowe for giving us the banking perspective. We appreciate it.

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