U.S. Bancorp Charged with Selling Data on Customers

By Barancik, Scott; Anason, Dean | American Banker, June 10, 1999 | Go to article overview

U.S. Bancorp Charged with Selling Data on Customers


Barancik, Scott, Anason, Dean, American Banker


Minnesota's attorney general has accused U.S. Bancorp of selling confidential customer data to a telemarketer, which in turn allegedly debited customers' accounts without their written permission.

The charges were leveled in a four-count lawsuit filed Wednesday in U.S. District Court in St. Paul, and they were forcefully denied by the Minneapolis-based banking company.

The filing, centering on U.S. Bancorp's three-year relationship with the telemarketing firm MemberWorks Inc., fed a growing firestorm over consumer privacy. Comptroller of the Currency John D. Hawke Jr. sparked the controversy Monday with a scathing speech, condemning some industry information practices as "seamy, if not downright unfair and deceptive."

By Wednesday, lawmakers were demanding a legislative crackdown. "It's not whether we should do anything, but what we should do," said Sen. Paul S. Sarbanes, D-Md.

Sen. Charles E. Schumer, D-N.Y., introduced legislation Wednesday that would require bank holding companies to get written customer permission before disclosing information to telemarketers and other outside parties.

Rep. John J. LaFalce, D-N.Y., said he would offer a bill Thursday that would restrict the sharing of credit card information for telemarketing purposes, among other protections.

The House Banking Committee said its financial institutions subcommittee would hold hearings on privacy July 21 and 22.

"As a Minnesota court filing underscores, privacy is an issue that demands continued oversight," said committee Chairman Jim Leach, R-Iowa.

U.S. Bancorp allegedly violated the federal Fair Credit Reporting Act and three Minnesota laws. Donn Waage, spokesman for the $76 billion-asset company, said the charges are false. "U.S. Bancorp takes customer privacy very seriously and has strict policies in place to protect that privacy," he said.

Though industry officials did not want to comment specifically on the U.S. Bancorp case, they are clearly concerned about its potential impact on financial reform legislation.

Edward L. Yingling, chief lobbyist of the American Bankers Association, said Congress should not muddle the reform bill with provisions aimed at protecting customer privacy. "You cannot really address this issue in depth in financial modernization," he said.

"Our biggest concern has always been that (Congress will) go after a perceived abuse, rather than a real abuse, with some broad brush," said Marcia Sullivan, director of government relations at the Consumer Bankers Association.

The Minnesota attorney general, Mike Hatch, claimed that Stamford, Conn.-based MemberWorks paid U.S. Bancorp more than $4 million plus commissions in exchange for information such as checking account and Social Security numbers, as well as data typically obtained from credit bureaus such as bankruptcy scores and other predictors of consumer behavior.

David Ramp, Minnesota's lead attorney on the case, said the bank had been acting like a credit bureau and therefore could not sell customer data for marketing purposes.

If it loses, U.S. Bancorp could be forced to pay hundreds of millions of dollars in damages for the federal law violation alone. Any of the 16 other western or midwestern states served by U. …

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