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Financial Privacy Act
Good News and Bad News
It's called the "Financial Information Privacy Act of 1998", and carries the good intentions of its sponsor, House Banking Committee Chairman Jim Leach.
Basically it says it will be against the law for any person to obtain customer information from a financial institution by knowingly making a false, fictitious, or fraudulent statement to an officer, employee, or customer of the institution; or to provide any document to an officer or employee knowing that the document is forged, counterfeit, lost, stolen, fraudulently obtained, or contains false, fictitious or fraudulent statements.
It goes on to say it shall be illegal for any person to receive customer information if there is any chance the information was obtained from the institution in any manner as described above.
There has been much negative publicity on customer privacy. Hearings held in Washington, DC, have been covered in detail, and reporters have delighted in telling stories about how bank employees are duped or conned into giving out information to people pretending to be official, or who are impersonating customers to get information.
One such story was about a broker who called impersonating the customer and insisted the bank had his mother's maiden name wrong, so the customer service rep changed the name on the records along with the password!
It would seem that protecting customers' privacy in our financial institutions and full support of this legislation is right up there with Mom, apple pie and baseball.
The Other Side Of The Story
But there are other things to consider.
A Visa representative who testified before the House Banking Committee told the group it was important to emphasize and include in the meaning of the bill that it was only a violation if there is an intent to defraud either the customer or the financial institution.
We have bank investigators who could find their ability to do their jobs threatened by the broad meaning of the Financial Information Privacy Act. Law enforcement is exempt from any of the restrictions. It will not hamper their investigations.
But in the case of a fraud against the bank, the FBI may not be interested because the loss doesn't meet their cut-off figure for investigation and prosecution. For instance, in many areas, they will not accept a bank fraud case that is under $10,000. In a few metropolitan areas, the loss must be much higher - to over $1 million. In which case, the bank has no choice but to pursue the criminal at a state or local level in order to try to recover their loss. In order to do that, the bank investigator has to go searching for information.
Our collection departments could have the same problem. They can, in some cases, recover funds that are being hidden by dead-beat customers in other financial institutions. It's their job to find those funds.
Although doing skip-tracing work is not considered to be the best of jobs, we hire them on occasion to track down customers that have caused large losses to the financial institution. They, too, may find it necessary to search for information on an individual.
None of these examples would, in any way, be an attempt to defraud either the customer or the financial institution.
As an industry, we are committed to protecting consumer privacy. And there are already laws protecting individuals from having their identity used fraudulently. This proposed legislation, if not modified, could make a tremendous difference in our ability to protect our financial institutions. It is important that while protecting the consumer, financial institutions are free to protect themselves.
Copyright © 1998 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 8, No. 9, 9/98
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