Hoping to turn the brewing consumer privacy controversy in its favor, Bank of America Corp. pledged Friday that it would no longer allow outside telemarketing firms to make product offers to its customers.
Acting two days after U.S. Bancorp of Minneapolis was sued over its information-sharing practices, and while privacy was moving to the forefront of the Washington financial reform debate, Bank of America also said that it would not let confidential customer data out of its hands, except to assist check printers and similar service providers.
The Charlotte, N.C., banking company said it was taking "an industry- leading privacy position" that had been in the works long before the events of last week.
"If anyone does any selling of products to Bank of America customers, it will be done by the Bank of America or its affiliates," said Gail Magnuson, senior vice president for information policy and marketing.
Also Friday, U.S. Bancorp said it would sever its relationships with telemarketing companies and no longer market nonfinancial products to its customers. That company was sued by the state of Minnesota for selling $4 million worth of customer data to MemberWorks Inc., a Stamford, Conn., telemarketing firm that in turn allegedly debited customers' accounts without getting written permission.
"Less than 0.1% of our revenue comes from marketing," said U.S. Bancorp spokesman Donn Waage. "Why would we want 99.9% of our bank to be concerned about the other 0.1%? It's not worth it."
The two bank announcements came at the end of a week in which political debate raged over privacy-and government action was threatened.
Comptroller of the Currency John D. Hawke Jr. made a scathing speech condemning customer-data sales as "seamy, if not downright unfair and deceptive." Aware of Bank of America's then-unannounced plan, he urged the industry to tighten its privacy policies before Congress did it for them.
By Thursday, after the Minnesota attorney general accused U.S. Bancorp of Fair Credit Report Act and other violations, the House Commerce Committee approved a financial reform bill that would require banks and thrifts to give their customers the right to "opt out" of having any personal information shared with bank affiliates.
Ms. Magnuson of Bank of America said the timing of its privacy announcement was coincidental. The bank did not specify how long it would take to fully enforce the restrictions on telemarketers.
"It is a result of proactive customer listening and research over the course of the last 18 months," she said. She added that the company's research project included focus groups and the development of "customer- centric language."
"This is the right thing to do for our customers," Bank of America chairman Kenneth Lewis said in a statement. He said the company wants to "remove any doubt" in their minds about confidentiality.
Bank of America and U.S. Bancorp are just two of the many large financial institutions that sell customer data to third parties.
MemberWorks, which is entangled in the U.S. Bancorp case, has telemarketing contracts with 17 of the top 25 issuers of bank credit cards, according to Rep. John J. LaFalce, D-N.Y. Bank of America is one of the 17, a company spokeswoman confirmed.
It remains to be seen how other such banks will respond.
Banks "were so focused on what they saw as the revenue potential that (they) had a real insensitivity or unawareness of customer concerns," said Bert Ely, a financial services consultant based in Alexandria, Va.
Marcia Sullivan, director of government relations at the Consumer Bankers Association, said she expects more banks will announce tougher policies.
"There isn't a large bank in this country that is not looking to see what their practices are," she said. "As an industry, we are going to look into the third-party business."
Bank of America made "a good market decision," said John J. Byrne, senior compliance manager at the American Bankers Association. "That shows the market works."
Mr. Waage of U.S. Bancorp said he did not know whether the company's announcement, heralded Friday in Minnesota newspaper ads, would convince the state's attorney general to drop its lawsuit.
The attorney general's office did not return calls Friday seeking comment. In an interview Thursday, lead attorney David Ramp said the state was seeking not only to make U.S. Bancorp curtail its relationship with MemberWorks, but to determine the enforceability of the federal Fair Credit Reporting Act.