WASHINGTON The Consumer Financial Protection Bureau issued a proposal Tuesday that would allow financial institutions to post their privacy notices online rather than by paper delivery under certain circumstances.
The move was largely seen as a positive by the industry because institutions would no longer have to print and mail out the often lengthy annual privacy notices so long as they limit sharing consumer data with outside firms.
"Consumers need clear information about how their personal information is being used by financial institutions," CFPB Director Richard Cordray said in a press release. "This proposal would make it easier for consumers to find and access privacy policies, while also making it cheaper for industry to provide disclosures."
By law, financial institutions are required to send an annual privacy notice to customers and give them an option to opt out if the bank shared information with a third party.
Under the CFPB's proposal, institutions could post such privacy notices online so long as they do not share consumer data in a way that would trigger the required opt-out provision. Institutions would still have to notify the consumer of any change to online disclosures in a separate mailed communication, such as an insert in a monthly billing statement.
The CFPB said that the proposal is meant to create a more efficient process in ensuring consumers can easily see privacy notices online while still receiving paper notices if terms change. The agency said it would give financial institutions incentive to restrict data sharing with third parties in order to reduce costs by going online. The CFPB estimates that the industry could save $17 million annually through the online disclosure method.
Several trade groups for banks and credit unions immediately praised the move, saying it brings certain regulatory requirements up to speed on technology.
"Many consumers already access account notices and documents via the Internet," Richard Hunt, president and chief executive of the Consumer Bankers Association, said in an emailed statement. "Today's announced proposal would allow banks the ability to continue to serve customers in a 21st century manner, while reducing waste and carbon impacts associated with snail mail."
Michael Coleman, director of regulatory affairs at the National Association of Federal Credit Unions, also said it would provide some regulatory relief.
"NAFCU has been seeking relief on this issue in Congress," Coleman said in an emailed statement. "We are pleased that the CFPB has begun to take steps to provide credit unions relief from these outdated notices via the regulatory process."
The CFPB will accept comments on the proposal for 30 days after it's published in the Federal Register.