WASHINGTON — New model privacy notices offered by regulators not only would be too big, costly, and bland, but they also would kill the environment.
That's what bankers contended in comment letters responding to the proposed model, which they said does not give them sufficient flexibility to communicate with their customers.
In raising problems with the plan, bankers often submitted a very detailed analysis of how much they expect the new notice to cost, both to themselves and the world around them.
For example, Theresa Clarke, vice president of ShoreBank of Chicago, said a requirement that the notice of up to three pages be printed on one side of paper would require her bank to use an extra 4.3 trees, 500 kilowatt hours of electricity, 750 gallons of water, and 7.5 pounds of air pollution a year. She, like many other commenters, recommended allowing banks to print the notice on both sides of a piece of paper, estimating that doing so would save her bank 36,000 sheets of paper.
"ShoreBank has $2 billion in assets. Imagine the above conservation savings that would be realized by a Bank of America or Wells Fargo, or all banks for that matter that would be required to use an extra sheet of paper to produce a new notice," Ms. Clarke said.
Though she was one of the most specific in her objections, Ms. Clarke was hardly alone. The federal banking agencies proposed the new model notice in March but included several new specifications. The model form was two white, single-sided, 8.5 by 11 inch pages with at least a 10-point font and a third optional page for an opt-out option. The proposed disclosure uses a tabular format, includes a glossary of financial terms, and highlights how consumers can block the sharing of their personal information with nonaffiliate parties.
Though use of the new model form is optional, regulators said banks that adopt it will be given added protection in case of litigation.
But some bankers made it clear they would balk at using the new form in its current format. In 47 comment letters, bankers said that the size of the paper and the font type were too large, that the notice was too long, and that they wanted freedom to use colored paper. Ultimately, they concluded that the new, bigger form would raise their costs.
Carl Howard, general counsel of bank regulatory at Citigroup Inc., wrote in his company's letter that the cost for the new format would be $30 million for a mailing of 100 million notices. Peter McCorkell, senior counsel for Wells Fargo & Co., wrote in a May 29 letter that the new format would double the cost of shipping and printing the notices and cost an additional $3 million of postage.
"We believe the agencies should develop a model that can be printed on a single sheet of paper (not necessarily 8.5" x 11") with modifications to the existing textual requirements," Mr. McCorkell wrote. "If the agencies are not willing to explore such an approach, we believe it is unlikely that many of the larger financial institutions will adopt the model in any form, thus defeating the goal of comparability across institutions."
Christopher Curtis, associate general counsel of policy affairs at Capital One Financial Corp., wrote that the form simply had too many pages, which would lessen its impact with consumers.
"In our experience, a document with greater bulk is less likely, not more likely, to be read and absorbed," he said.
The complaints were not limited to the form's aesthetics, however. Bankers were also concerned about the content of the proposed disclosure, which they called too prescriptive, including language describing affiliates, affiliate sharing, transaction description, and affiliate marketing.
"Dictating a single colloquial description of information sharing practices cannot capture variability of many underlying arrangements," Richard Riese, director of the American Bankers Association's Center for Regulatory Compliance, wrote in a May 25 letter. "Instead it may obscure or gloss over differences valuable to customers."
Consumers, lawmakers, and even some banks have said for years that existing privacy notices were ignored because they were too hard to understand. But many banks, fearing they would open themselves up to legal liability, were reluctant to stray from the standard language offered by regulators soon after the Gramm-Leach-Bliley Act of 1999 required the annual disclosures.
The new form, required by the regulatory relief bill enacted last year, is based on an earlier effort by the Office of the Comptroller of the Currency.
Jodi Golinsky, vice president and regulatory and public policy counsel for MasterCard Inc., wrote that institutions should be allowed to change the form to fit their own privacy practices without losing the safe-harbor protection.
"We request that the agencies address this tension between simplicity and precision by clarifying that the safe harbor fully protects institutions against liability for using the model form and making it clear that a financial institution that uses the model form is permitted to use and disclose information in any manner permitted under the GLBA" and the Fair Credit Reporting Act, Ms. Golinsky wrote in a May 29 letter.
Bankers also widely disagreed with a provision signaling that institutions must delay information sharing for 30 days from the date of the privacy notice unless a consumer opts out. Christina Favilla, the president of Morgan Stanley's Discover Bank, said this statement is inaccurate and not required by law.
"Like many financial institutions, we do not include a date on our privacy policy, so this reference would be confusing to the consumer," she wrote.
Jeff Stewart, a vice president and cashier of the $178 million-asset Bank Frankewing in Tennessee, went a step further.
"It is ridiculous to continue bombarding our customer base with the same notice every year, when the majority of them will not read it," he wrote in a May 18 letter. "That is one of the most unnecessary costs that our bank has to pay."
