What Effect Could Proposed Consumer Credit Privacy Protection Legislation Have on Banks?

American Banker, April 25, 1994 | Go to article overview

What Effect Could Proposed Consumer Credit Privacy Protection Legislation Have on Banks?


Consumer Banking: Compliance

MARTIN E. ABRAMS Director of privacy TRW Information Systems Orange, Calif.

PRIVACY IS AN ISSUE DRIVEN BY progress. First, communications technology has made it possible to move data much faster. The second area of progress is computer structure. Computer data bases are now much easier to use to predict behavior. Third is the issue of data storage. Storing data can be done very inexpensively, so credit granters can now look at a lot of data before making a credit decision. And fourth is statistics. Data bases now contain even more historical information, which can also be used to predict behavior.

All of this progress has revolutionized the way banks market. And while consumers like choices, they don't want any harm to come to them. They want their information to be used in new ways to give them new opportunities and new products and services without being harmed.

If your business is increasing the use of information to make decisions, then privacy is an issue to you. There isn't a financial institution in the United States that isn't doing that.

ED MIERZWINSKI Lobbyist U.S. Public Interest Research Group, Washington, D.C.

MY VIEW IS THAT THE TWO CURRENT bills on the Fair Credit Reporting Act would weaken consumer privacy, not strengthen it.

The worse part is that both bills carve out a sweeping exception, known as the affiliate sharing exception. According to banks, this exception would be used to make cross sales efforts -- if you already have a credit card, here's an offer for a mutual fund. But under the affiliate sharing exception, banks could bypass the credit bureau entirely by sharing information throughout the entire banking organization.

We have a strong difference of opinion with banks on what they're asking for, what they say they're asking for, and what the effect will be. Banks have completely postured that all they want the credit reports for is target marketing. But what they really want is the right to deny credit, without the denial triggering any adverse effects for them. That's where we really disagree with them.

NORM MAGNUSON Director of public affairs Associated Credit Bureaus Washington, D.C.

THE HOUSE BILL THAT DEALS WITH the Fair Credit Reporting Act has a number of amendments to the act, including affiliate sharing. That amendment says that if I'm a holding company of a number of banks, I can use information from any of the affiliates and share credit reports. The banks would not have to send a letter saying that the consumer has been denied credit. …

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