Everyone Comes Out a Winner

Sending privacy notices to consumers informing them of what types of personal information a financial institution will or will not disclose is a great idea. By law, financial institutions must fully inform the consumer of what personal information they collect and what details about the individual they share with others. These disclosures allow the consumer to decide if they are comfortable with how their financial institution is handling their personal and financial information.

Under current law, a financial institution will provide information about privacy disclosure policies when a customer opens an account. It must also mail that same disclosure, whether it has changed or remained the same, to the account holder once a year.

These privacy disclosures are often lengthy and extremely difficult to read and understand. I venture to guess that the number of people in this country who have read their financial institutions’ privacy disclosure policies is equal to or less than the number of people that have read the Dodd-Frank Act in its entirety.

Clearly, there is room for improvement. Disclosures could be made clearer, and policymakers could find ways to cut unnecessary costs.

I believe protecting an individual’s personal information is very important. You must protect sensitive information against unauthorized release, and you must carefully guard what you are required to provide.

The House recently passed H.R. 749, the Eliminate Privacy Notice Confusion Act, and similar legislation introduced in the Senate, the Privacy Notice Modernization Act, are good, common-sense improvements to the existing privacy disclosure law. While still requiring full privacy disclosure, the bills, if enacted, would require subsequent notification only if there were changes to an institution’s privacy policies.

These changes would reduce time and cost for the financial institution, create less paper for the consumer to read and consider, result in fewer trees cut down, and lower postage costs. Yet, the benefits of privacy disclosures and consumer protection would remain in place.

Hopefully, the final bill—possibly a combination of the two proposals—will achieve the intent of the drafters. Because if it does, we potentially have a situation where everyone comes out a winner.