Don't ignore those financial privacy notices: Always opt out

Staying Ahead

May 20, 2001|By JANE BRYANT QUINN | JANE BRYANT QUINN,Washington Post Writers Group

YOU'RE starting to see the results of the so-called "financial privacy" law, passed in 1999 and taking effect July 1. Banks, credit unions, insurance companies and brokerage houses, among others, are mailing out hundreds of millions of privacy notices.

Under the new law, consumers can - in a very few circumstances - block financial institutions from disclosing their personal account information. It's called an "opt-out" right.

If you opt out, you might (might!) get fewer solicitations for financial products. And just as important, you'd be letting the financial industry know that financial privacy is something you care about.

These new privacy notices tell you how to opt out, and you should do it, says Beth Givens, director of the Privacy Rights Clearinghouse in San Diego ( "The more opt-outs there are, the more likely consumers will get privacy-friendly policies," she says.

But watch out: You may miss the notices when they arrive. They generally come as statement stuffers, which most consumers throw away.

What's more, they're headlined something like "Notice of Privacy Policy," which sounds bureaucratic and boring. You don't realize that there's an action you should take.

The privacy law is part of the Gramm-Leach-Bliley Financial Modernization Act (the law is referred to as GLB and pronounced "glib").

Privacy worries heated up when Congress decided to allow mergers between banks and insurance companies. Previously, they had been kept apart.

Mergers mean that the companies can freely share information about their customers. For example, insurance companies can now get lists of savers whose certificates of deposit are maturing, so they can be solicited for annuities or mutual funds.

At about the same time that the law on mergers was being changed, a privacy scandal hit the newspapers. Some banks were selling their customers' names, phone numbers and credit-card numbers to telemarketers, even though the banks had said that such information was confidential.

Consumer groups proposed a number of restrictions to protect your personal financial privacy. Industry lobbyists beat them back.

In the end, the federal privacy law became little more than a disclosure act, says Edmund Mierzwinski of the U.S. Public Interest Research Group in Washington. You have only the slimmest of privacy rights. Nine states have slightly better laws.

But Congress tossed consumers a few crumbs.

By federal law, financial institutions now have to tell you what kinds of information they gather about you and, in general, how they use it. The law includes automobile dealers and retailers who share financial information about their customers.

You may get privacy notices from a dozen places or more - even from a bank that once turned you down for a credit card.

You'll get the same notice when you open an account with a new institution after July 1. Every customer will get a privacy notice once a year.

Financial institutions still have an absolute right to sell or share your account information with affiliated companies. They can also share it as part of a joint marketing agreement with another firm.

For these purposes, your deposits, transactions, payment history, loan history and account status are an open book.

Institutions can also sell or share your personal information with unaffiliated third parties such as telemarketers, insurance companies and car dealers. This is something you can stop, however, by opting out.

The privacy notice will tell you how. You either check an opt-out box on a form and mail it back, or call a special telephone number (not the bank's main number). A few places let you e-mail.

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