Credit unions supposedly are consumers’ best friends within the world of finance. Well, it may come as a rude awakening to many that a far greater percentage of credit unions than banks and thrifts plan to share customer information with affiliates or non-affiliates.
A study by Bankers Systems of St. Cloud, MN, indicates that only 4% of banks and thrifts will be required to send notices to their customers telling them that the bank plans to share information about them with other companies. This compares with 34% for credit unions.
Some 3,900 financial services institutions were included in the survey, including 3,111 banks and thrifts, 752 credit unions and 37 finance companies.
Only 31.2% of banks and thrifts said they would be sharing information with others but 87% of those said they would share it with companies that are "exceptions" under the privacy provisions of the Gramm-Leach-Bliley Act. Under the law, banks need not inform their customers if the information shared is provided only to firms that are excepted. These include processing and servicing firms, service providers and joint marketing arrangements.
If a company shares information with any firm that is not deemed an "exception," the company must give its customers the opportunity to "opt out" of such sharing agreements.
Surprisingly, none of the 37 finance companies in the survey said they would be obliged to send out opt-out information.
But, according to Katie Iverson, a Bankers Systems attorney who specializes in privacy issues, many organizations that would not be required to send opt-out notices to their customers, said they planned to anyway.
The study also indicates that the largest institutions are far more likely to engage in third-party information sharing. Some 63.5% of banks and savings institutions with more than $1 billion in assets plan to disclose that they share, or plan to share, customer information with other companies. In contrast, only 30% of banks and savings institutions with less than $1 billion in assets plan to disclose that they will share information about their customers.