Consumer Privacy

By Aaron, Elizabeth A. | Independent Banker, January 1999 | Go to article overview

Consumer Privacy


Aaron, Elizabeth A., Independent Banker


Electronic age urgently calls for extra steps in protecting consumer information

Stories in the press about abuses of consumer privacy, usually in connection with the handling of electronic information, have never been more prevalent. With information fast becoming the new currency in the burgeoning world of electronic commerce, consumers feel increasingly vulnerable to prying eyes. In fact, 90 percent of consumers are either "concerned" or "very concerned" about today's threats to their financial privacy, according to a 1998 Harris/Westin survey.

Consumers are not the only ones worrying. Privacy has become a priority for policy makers in Washington, D.C., from the legislative and executive branches to the front lines of various federal agencies, including the regulators watching over the financial industry.

The FDIC and the OCC have already issued advisories to assure that banks safeguard their customers' privacy during online transactions. Disclosing consumer privacy principles and information-sharing practices are at the heart of the steps all banks need to take. "Until meaningful and effective consumer privacy protections are implemented in the marketplace, consumers may remain wary of engaging in electronic commerce and the market will fail to reach its full potential," warns Robert Pitofsky, Federal Trade Commission chairman.

Banks, long the trusted keepers of people's personal financial affairs, must take heed. They must act now to ensure that self-regulation in the private sector wins out before the heavy boot of government steps in.

According to a June report by the FTC on privacy, 97 percent of financial-related Web sites collect personal information from consumers. Yet only 16 percent include privacy statements or disclosures on how the information they collect is used. To date, some consumer and privacy advocates believe that businesses, including banks, are not effectively self-regulating themselves when it comes to developing and enforcing privacy standards, several government agencies agree.

BANK INDUSTRY EFFORTS

Recognizing the longstanding commitment banks have always had to successfully balancing the need for personal information to service their customers with the privacy concerns of those customers, IBAA and other national bank groups have taken steps to support the banking industry in its efforts at self-regulation.

In September 1997, the IBAA, along with the American Bankers Association, the Bankers Roundtable (and its division, the Banking Industry Technology Secretariat), and the Consumers Bankers Association, endorsed a uniform set of Privacy Principles for the banking industry.

IBAA President Bill McQuillan has also been vocal on the issue of privacy. In September, he sent a letter to IBAA members urging them to make customers aware of, and comfortable with, the way their banks handle their records in this age of electronic communications. …

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