Copyright 1999 The Omaha World-Herald Company
Omaha
World-Herald
July 12, 1999, Monday SUNRISE EDITION
SECTION: ;NEWS; Pg. 1
LENGTH: 1552 words
HEADLINE:
Area Has Big Stake in Outcome of Bank-Telemarketing Issue
BYLINE: STEVE JORDON
SOURCE:
WORLD-HERALD STAFF WRITER
BODY:
Lincoln retiree Bob
Gingery figures his bank should never give out his name, address and phone
number - let alone account information - to a company trying to sell him
something.
After all, he said, he didn't open bank accounts so he could
get more junk mail and calls from telemarketers.
"I don't want them to
know about what I do, and you shouldn't want them to know about what you do,"
said Gingery, a 78-year-old retired salesman.
Keith Petersen, an
executive with an Omaha data-processing company that prepares lists for
marketers, says it's fair for banks to give basic information to marketing
companies, unless customers object.
After all, said Petersen, vice
president of CAS Inc. and past president of the Midlands Direct Marketing
Association, consumers voluntarily buy $ 1trillion worth of goods each year from
mail and telephone marketers, and only a handful of customers are mistreated in
the process. "I don't see it so much as taking customer information as working
alongside an organization and providing a service or a benefit for those
customers," he said. "It's a value added, a win-win."
Those two
viewpoints are clashing regionally and on a national scale. The U.S. House this
summer passed a bill that would prohibit banks from selling private customer
information to telemarketers. Closer to home, Minneapolis-based U.S. Bancorp,
which operates a bank that is among the market-share leaders in Nebraska and
Omaha, has been in hot water over its selling of customer information to
telemarketers.
The company paid more than $ 3 million to settle a
lawsuit by the Minnesota Attorney General's Office alleging that the company's
practices violated existing federal law.
How the issue shakes out will
have a profound impact on the banking and telemarketing industries. The stakes
are especially high in Omaha, where direct marketers, telemarketers and data
processors employ thousands of people whose jobs depend at least partly on
whether banks will be able to continue sharing their customer lists.
"People better realize that even though you may work in a grocery store
and think it's terrible, the guy that comes in and buys his groceries at your
store may get his paycheck from affinity marketing," Petersen said. "It's what
makes the economy spin."(7)
"There are a lot of jobs tied up in this
thing," Petersen said. "People better realize that even though you may work in a
grocery store and think it's terrible, the guy that comes in and buys his
groceries at your store may get his paycheck from affinity marketing.
"It's what makes the economy spin."
So-called affinity marketing
- selling to people who already have a connection, or an "affinity," to another
organization - can involve such groups as college alumni and club members. But
today's debate centers on bank customers because the issue involves
privacy of personal financial information.
Connecticut-based MemberWorks Inc., which has a large Omaha call center,
is one of the nation's leading affinity marketing companies, working with many
of the largest U.S. banks. It was mentioned in the Minnesota lawsuit because of
its connection with U.S. Bancorp.
After the lawsuit was reported, the
company's stock price dropped 40percent, as investors worried about the impact
of the privacy issue on the company's business. The price has since bounced part
of the way back, but the stock swoon illustrated at least the perception that
telemarketers could be curtailed by privacy restrictions.
Congress is
working on a law that would require a bank to tell customers that it may give
information to marketing companies and give account holders the choice of
removing their names from marketing lists.
Here's how affinity marketing
now works for banks:
A bank supplies its customer list to a marketing
company, which develops a sales campaign and hires a telemarketer or a
direct-mail company to carry out the program. U.S. Bancorp was accused of
providing more information on its customer list, such as credit-card limits.
The bank gets a share of sales, and it may have the opportunity to
approve or veto the marketing plan and products.
Bank customers get a
mailing or a call saying something like, "Since you're a valued customer of XYZ
Bank, we're able to offer you this special purchase." The offers may include
anything, such as an air conditioner or a magazine subscription.
Customers decide whether to buy, but in some cases, consumers have been
charged even when they don't accept.
For many banks, new restrictions on
these practices wouldn't be an issue. David L. Henricksen, executive vice
president of Great Western Bank in Omaha, said that Great Western has never sold
customer lists and that it carefully protects the privacy of accounts - even
between different departments within the bank.
"We've never even
considered it," Henricksen said. "I would suspect that 98percent of the banks
aren't selling customer lists."
A new federal law wouldn't change his
bank's business, he said, but it could add costs for paperwork and computer
processing to inform consumers and keep track of compliance with the new rules.
Some banks use customer information for marketing but impose their own
limits. First National Bank of Omaha uses its own telemarketers and outside
telemarketing companies to sell credit life insurance - a policy that would pay
off, for example, the credit- card balance of a customer who dies, said Bill
Henry, an executive vice president with the bank.
But rather than
letting an outside company process customer information and choose whom to call,
Henry said, the bank screens the data and creates the lists. The bank does not
sell non-financial goods. It also keeps a list of customers who ask not to be
called, he said, and does not call anyone more than once per quarter.
First National's practices would not be affected by legislation being
discussed in Congress, Henry added.
But for some large banks, new
federal restrictions could cut into revenue. When the Minnesota Attorney
General's Office filed its lawsuit, U.S. Bancorp examined its marketing efforts
and, two days later, stopped offering travel packages and other nonfinancial
products, said company spokesman Donn Waage.
That decision made it
easier to settle the lawsuit, Waage said, and also ended U.S. Bancorp's dealings
with MemberWorks and three other marketing companies.
Even before the
lawsuit, Waage said, some bank customers had called to say they didn't
understand why a bank would sell such items, and some bank officers had
questioned the practice.
The marketing of nonfinancial products
generated $ 3 million in revenue over four years - the same amount that U.S.
Bancorp agreed to pay under the settlement.
The settlement lets the
company continue to market financial services products, such as insurance and
investments, Waage said. The settlement also requires U.S. Bancorp to tell
customers of any marketing plans and to let them remove their names from
marketing lists.
MemberWorks also took action, announcing privacy
guidelines it said would safeguard confidential consumer information. Gary
Johnson, the company's chief executive, said he didn't expect actions by U.S.
Bancorp and other large banks to curtail the company's continued growth.
Marketers have been publicly open to privacy restrictions. In fact, last
week the national Direct Marketing Association announced that it is requiring
members to disclose when they are sharing consumers' private information with
other marketers.
Protecting consumer privacy through legislation will be
difficult, said Nebraska State Sen. Chris Beutler of Lincoln, who has worked on
telemarketing laws.
"The people we're concerned about are that minority
who will not be inclined to follow the voluntary guidelines," he said, and may
not comply with laws, either.
One of the groups most interested in
protecting consumers against predatory marketing is the AARP.
"So many
elderly people are not able to cope with pressure, and telephone calls and
marketing of this nature frequently confuse people," said Mary Jane O'Gara,
president of the group's Nebraska chapter.
Roy Green, a lobbyist with
AARP in Washington, said the pending federal law has only weak privacy
protection, although consumer groups will work to make the rules stronger. If
this year's bill doesn't solve the problem, he said, the issue many come back
during the 2000 presidential campaign.
AARP doesn't oppose sharing
financial information, Green said, but thinks that the consumer should have more
control.
"I doubt that it (the bill) will inhibit the marketplace that
much," he said, "but it certainly would allow individuals to participate in how
the information about themselves is used."
Gingery, the Lincoln retiree,
has been a volunteer AARP lobbyist in the Nebraska Legislature for the past six
years. Consumer privacy has been one of his biggest concerns.
"Generally, older people have savings, and they don't want people to
know about their financial status," he said. "If I were selling something, I'd
like to have that list, too."
GRAPHIC: B&W
Photo/1 PRIVACY ADVOCATE: Lincolnite Bob Gingery, a volunteer AARP lobbyist in
the Nebraska Legislature for the past six years, says his bank shouldn't give
out his personal information to any company trying to sell him something.; Jeff
Bundy/World-Herald/1 -PHID- 1074410
LOAD-DATE: July 12,
1999 
