Amid criticism that banks are not doing enough to protect confidential customer data, the Office of the Comptroller of the Currency on Friday announced it is preparing guidance to help the industry do a better job.
"The nation's financial institutions must take prompt and effective action to assure consumers that their legitimate privacy concerns are being respected," said acting Comptroller of the Currency Julie L. Williams.
The OCC's initiative follows a June 11 meeting between financial industry executives and officials from the Treasury and Commerce Department as well as the OCC.
At the meeting, Treasury Under Secretary John D. Hawke Jr. warned that unless the financial industry does a better job of self-policing it will face unwanted legislation from Congress.
A recent survey by the Federal Trade Commission found that only 14% of commercial Internet sites, including those operated by financial firms, post any notice of information collection practices.
To improve the performance of national banks, the OCC has established a Privacy Working Group that will develop model disclosures that national banks can use to inform consumers about how data will be used and whether it will be shared with outside parties. Customers must also be notified of their right to stop information from being shared with a bank's affiliates.
The working group will recommend internal controls banks should use to ensure that confidential information is not disclosed improperly and to prevent "identity theft," which occurs when criminals pose as bank customers and drain their accounts.
The Privacy Working Group will be headed by J. Christopher Lewis, senior adviser to the comptroller, and Amy Friend, assistant chief counsel.
Banking industry officials insisted they are improving privacy protections, but applauded the OCC's initiative anyway.
"We don't want consumers to fear electronic commerce," said John J. Byrne, senior counsel at the American Bankers Association. "Having the banking agencies give sample disclosures and instruct banks on how to provide consumers with a chance to opt out of information sharing will help us assure customers."
Karen Thomas, regulatory counsel for the Independent Bankers Association of America, said industry trade groups have established sufficient guidelines for protecting customer privacy, but many banks have not implemented them fast enough.
America's Community Bankers president Paul A. Schosberg on Friday urged the House and Senate Banking committees to hold hearings on identity theft.
Protecting confidential information is becoming a hot topic on Capitol Hill. House Banking Committee Chairman Jim Leach has pledged to introduce legislation that would limit disclosure of consumer account information.
Rep. John J. LaFalce, D-N.Y., has urged Rep. Leach to hold hearings on the threat to customer privacy posed by large financial conglomerates.