Academic journal article ABA Banking Journal

Why Privacy Regs Represent an Opportunity

Academic journal article ABA Banking Journal

Why Privacy Regs Represent an Opportunity

Article excerpt

Implicit in the proposed privacy rules is the opportunity for banks to dispel public fears about loss of privacy, communicate the bank's privacy policies simply and clearly, and give customers a choice in the matter. This is true whether you share customer data outside the bank or don't share.

The initial and annual privacy notice rules will affect all financial institutions, but the disclosure and opt-out requirements will apply only to those institutions that share or intend to share information with nonaffiliated third parties.

Under the proposal, if you don't share information with anyone but departments within your own institution, you may simply state this fact without further elaboration. The proposed notice requirements give you a regular opportunity to tell your customers that the bank respects their privacy and diligently guards their financial information. Moreover, if you don't share and don't intend to share nonpublic personal information with nonaffiliated third parties, you are freed from all the other requirements of the privacy rule having to do with the content of the required customer disclosures and the opt-out mechanism.

One caveat, however: don't be too quick to promise that the bank does not and will never share information. Your bank may have a long-standing but little-used agreement with a credit card or discount brokerage agent that includes a clause allowing the agent to obtain lists of names and other information about the bank's customers. Be sure to determine whether any such agreements exist when establishing and announcing your information sharing policy. More than one community bank CEO has been surprised by information sharing going on that was unknown to them.

What if you do share?

Even if you share customer information on a limited basis, the proposed rules present an opportunity for you to communicate honestly and clearly with your customers and, in the process, assuage their fears about loss of privacy in the electronic age. …

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