Do Banks Protect Your Privacy? New Law Gives Customers Right to Decide

By Berger, James | Daily Herald (Arlington Heights, IL), December 31, 1999 | Go to article overview

Do Banks Protect Your Privacy? New Law Gives Customers Right to Decide


Berger, James, Daily Herald (Arlington Heights, IL)


Byline: James Berger Daily Herald Correspondent

Depending on your point of view, the privacy provision in the new Financial Services Modernization Act is: 1. a truly significant piece of legislation; 2. a smoke screen the financial services industry has created to sell the new law.

Those who believe the provision is needed may point to what recently happened at Charter Pacific Bank in San Fernando Valley, Calif. A convicted felon was able to buy 90 percent of the bank's credit card numbers, and he allegedly ran up $45.7 million in phony charges to consumers worldwide in an X-rated Web site network scam.

On the other hand, a leading financial services marketing organization contends this new law will not significantly change the financial landscape because responsible banks currently don't disclose confidential account information to third parties.

The primary intent of the legislation is to tear down barriers erected in 1933 between banks and brokerage houses and banks and insurance businesses. The original Depression-era legislation was enacted during those dark days when banks were closing and depositors were lining up to withdraw their money. The government wanted to restore confidence in a banking system near collapse.

For years, forces within the financial services industry have been trying to repeal that legislation and allow banks to get involved in more profitable, yet more risky, enterprises, such as selling insurance products and securities.

With the blessing of the nation's leading financial leaders, including Federal Reserve System chairman Alan Greenspan, banks now will be free to offer customers a wide range of financial services.

Bundled into this new law is the bank privacy provision. The key feature, says Nancy Long, executive vice president of operations for Nashville-based FISI Madison Financial Corp., allows customers to decide whether their bank can share account information with a third party.

"Annually, the bank has to provide a notification and option to the customer," Long says. …

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