Urging bankers to take the offensive in the fight over financial privacy, American Bankers Association president Hjalma Johnson on Monday challenged bankers to make protecting customer information their top priority.
"Are we perfect? No. But are we trying to be perfect? Yes," Mr. Johnson told reporters after a speech to about 100 community bankers.
Mr. Johnson gave bankers an April 10 deadline for adopting and disclosing a formal privacy policy that explains in simple language what information is collected about customers and what the bank does with it. That would be seven months before the privacy provisions in the financial reform law President Clinton signed Friday are scheduled to kick in.
(The law gives the regulatory agencies six months from enactment to write implementing rules and another six months to put them into effect, or Nov. 12, 2000. However, the agencies could postpone the effective date.)
Beyond posting privacy policies, the law also requires that customers be given a chance to stop their bank from sharing information about them with any third-party company. Congress could push further next year, and individual states also are expected to pursue tougher privacy laws. If on-line privacy policies are any indication, most banks and thrifts have a long way to go to meet Mr. Johnson's challenge.
According to regulators, 64% of banks with an Internet presence collect personal data from customers through their Web sites. Of those, just over half make the bank's privacy policy available on-line; 37.9% offer no privacy disclosure. The remainder offer a watered-down version of a privacy policy that the agencies refer to as an "information practice statement."
In a release last week, the regulators said only 19% of the banks surveyed allowed customers to bar the bank from sharing their personal financial data with non-affiliated third parties.
The survey covered 364 institutions including the 50 largest banks and thrifts that have an on-line presence, and 314 institutions chosen at random from the universe of all bank Web sites. The results are statistically valid for the universe of the survey.
A spokesman for Rep. Edward J. Markey, D-Mass., said, the results "show what a disgraceful state of affairs exists in the banking industry with regard to consumer privacy." The Massachusetts Democrat is among four lead sponsors of legislation introduced last week in the House and the Senate that would require banks to get a consumer's permission before sharing any data.
The industry has argued that such an "opt-in" proposal would be unworkable. As Mr. Johnson described it Monday, bankers would have to quiz customers on all the services currently being provided from paying utility bills to ordering checks to get permission to share his or her information. "They don't want some bank customer service representative taking them through an hour, hour and a half of interrogation," he said. "It's not going to work."
But if bankers want to head off more onerous laws, they should let customers stop any sharing of their information whether it is with outside firms or affiliated companies, Comptroller of the Currency John D. Hawke Jr. said in a recent interview.
"Time after time the banking industry has lost the opportunity to head off legislation by adopting a code of conduct," Mr. Hawke said. "Privacy is just the latest in a long line."
Rob Garver contributed to this story.
