09-02-2000

TECHNOLOGY: Banking: Whose Information Is It, Anyway?

When Congress passed sweeping legislation last year that allows banks to
affiliate with insurance companies and brokerages, customer financial data
became a hot commodity, and the heat ignited new concerns about the
privacy of consumers who use consolidated financial companies.


For these new Information Age conglomerates, the question is this: What's
the best way to balance the abstract notion of financial privacy with
customers' demand for seamless services-speedy mortgage approvals,
same-day car loans, ATM withdrawals from anywhere in the country-which
depend on easy access to huge amounts of customer data?


"It's always a question of balance," says Washington lobbyist
Allen Caskie, head of the Financial Services Coordinating Council's
privacy project. "Privacy hawks look at this as an adversarial
process.... In the real world, we're interested in our customers, and we
want to give them service and convenience and ... still be able to earn a
buck in the process."


Congress settled on a formula that will allow financial institutions to
freely share personal customer information, including Social Security
numbers, with their affiliates. These institutions may also share such
data with unaffiliated third parties-provided that the customer does not
expressly forbid it.


That worries activists like Jodi Beebe of the Privacy Rights
Clearinghouse, a nonprofit consumer-advocacy project in San Diego. Beebe
said the potential sharing or sale of Social Security numbers-which she
called "the key to identity theft"-is especially troubling.
"If a bank represents the best interests of a customer ... they
shouldn't give it out at all," she said.


Privacy activists also warn that because financial conglomerates will have
an unprecedented opportunity to compile profiles of customers' buying
habits, hobbies, and health data, already-plentiful mail and telephone
solicitations will increase and entice less informed consumers into buying
financial and other products they may not need.


Industry representatives counter that consumers could deprive themselves
of useful financial opportunities by denying themselves the information in
such solicitations. But Beebe is unconvinced: "Banks ... are saying,
`We can educate customers about an opt-out of affiliate sharing, but we
can't seem to rely on them to opt in to a solicitation that is in their
best interest.' The thing about financial privacy is that even if you are
a customer of a bank, your information is not your
information."


That is precisely right, according to Professor Fred Cate, who is director
of the Information Law and Commerce Institute at the Indiana University
School of Law (Bloomington). "Nobody," says Cate, "puts
money in a bank to get privacy.... If consumers want the benefits, they
cannot have absolute control over their information. In this country, the
First Amendment [says] that if I record information about you, it's
[mine]."


Andrew Shen, a policy analyst for the Electronic Privacy Information
Center in Washington, disagrees: "If I don't want [my bank] to share
with an insurance company, that's my decision ... good or bad."
Retailers also gather and share personal information, but financial
consumers "are in a tougher position," Shen asserted, because
"when you get right down to it, I'm going to have to deposit my money
somewhere."


But Caskie says that industry research shows "people don't really
have a problem with the way we use their information." Instead, he
says, customer concerns revolve around identity theft, credit card fraud,
"and telemarketing calls during dinner."


On one point, some consumer and industry advocates seem to agree: The
market may ultimately determine financial privacy policy. Said Beebe:
"Personally, if a bank said it is not going to share information,
hey, where do I sign up?"


Pamela Barnett

National Journal