Indiana lawmakers have ap-proved a bill that would ban the use of banks' names in marketing materials without the banks' permission, and Wisconsin bankers are pushing for similar legislation there.
Since a similar law was passed in Illinois in 2001, state regulators have issued more than a dozen cease-and-desist orders against nonbanks that posed as banks in mailings pitching insurance products or mortgage refinancings. These companies typically get names and mortgage information from public records and then send mailings that look as if they came from the banks where the customers have their mortgage.
The Indiana General Assembly passed a bill last week banning this practice, and it only needs Gov. Frank O'Bannon's signature to become law, said Kerry B. Spradlin, the vice president of government relations at the Indiana Bankers Association.
Meanwhile, Daryll Lund, the president and chief executive officer of the Community Bankers Association of Wisconsin, says bankers there are drafting their own version of the legislation and hope to find a sponsor for it when the Legislature reconvenes for a 78-day session on May 28.
Ted Gurzynski, the executive vice president of $68 million-asset Mitchell Bank in Milwaukee, said bankers are concerned about their reputations, because when customers see their banks' names on materials, they often accept that as an imprimatur.
"Many people feel that because somebody used the bank name, the banker has approved it," Mr. Gurzynski said.
Moreover, many marketers sell their lists, meaning customers will receive even more junk mail, he said.
According to Carl Axness, the president of $46 million-asset Union Bank of Blair: "It's a chance we're going to lose our customers' trust, because they think we're selling their information when we're not."
Mr. Gurzynski says he expects the Wisconsin bill to pass once a sponsor is found "because anything with privacy is a hot-button issue."
In one Illinois example, customers of American Enterprise Bank in Buffalo Grove received letters offering them the option of making mortgage payments once every two weeks. Though the bank's name was on the envelope, a company called Nationwide Mortgage Protection Inc. was offering the product - for a $195 fee, plus $3.50 per transaction.
Nationwide was slapped with a cease-and-desist order last year.
Scott Clarke, an assistant commissioner at the Illinois Office of Banks and Real Estate, said that banks there are reporting fewer incidents of their names being used without authorization since the law was passed. Still, he said it is up to banks to report incidents, because "otherwise we wouldn't know if was being done."
David E. Manning, the senior vice president for government relations at the Community Bankers Association of Illinois, said that there are still companies out there that either are unaware of the law or will simply ignore it, so bankers must continue to watch out for firms using their names illegally. He said that bankers and consumers still send him samples of these solicitations.
"A lot of the bad actors have been contacted, but I think they change from time to time," Mr. Manning said.
