You've seen the news. The mail has been used as a tool for bioterrorism and we're all acutely aware of the exposures, infections, and even deaths, among mail openers and postal workers. At BankersOnline.com, we believe the events of September 11 and its aftermath, including the anthrax contamination, will have both immediate and long term consequences for the financial services industry -- both negative and positive. In the first installment of this article, we set forth our observations about the dark clouds, along with some brief thoughts about silver linings. In the second installment, we'll explore each of the silver linings in more depth. We invite you to continue the discussion by sharing your views on Bankers' Threads.
Effect on the Postal Service Attack fallout felt in multiple ways. The U.S. Postal Service (USPS) became a victim of the terrorist attacks on September 11 when damage was inflicted to its Church Street Station in New York City, located near the World Trade Center. Estimates on that damage range from $25 million to $61 million. USPS revenue in the first 5 weeks after the attacks was as much as $500 million below their budget projections, and mail volume was down 5% in September over the same period last year. As the public becomes fearful of mailed items, many businesses plan to reduce their mailings, which will further reduce USPS revenue.
Anthrax and More. Now, authorities have confirmed several cases of anthrax contamination linked to mail. Two postal workers have died from inhalation anthrax merely from handling sealed envelopes, two others are confirmed to be suffering from inhaled anthrax, and DC General Hospital alone estimates it will be treating 5,300 postal employees. Two USPS employees in NJ and one employee in KY are hospitalized with blisters. Exposure and infection reports among postal workers continue to surface. Among mail recipients or mail openers, one American Media employee expired from the inhaled form of the disease, another was hospitalized, and a third tested positive for exposure. Three news organizations have employees that have contracted cutaneous anthrax, a Senate media worker has been hospitalized, and a state department employee appears to be the latest to suffer infection. Just this morning there were reports of contamination by an unidentified bacteria in an office of the New York Post and salmonella being mailed to the office of former President Clinton.
More than 80 possible anthrax incidents were reported Tuesday, Oct. 23 at postal facilities nationwide. Eight resulted in partial or whole closure of facilities, from North Myrtle Beach, South Carolina to Cheyenne, Wyoming. Postal inspectors have responded to a total of 3,961 incidents nationwide thus far. [See the USPS Fact Sheet for more details.]
What this means for our mail. This week, the U.S. Postmaster General advised Americans to wash their hands after handling their mail. He also made the extraordinary admission that the safety of the mail cannot be guaranteed. The ramifications are already being felt. The longterm effects are more uncertain, but are potentially huge. Here's how we see them:
Higher Rates. In addition to the costs attendant to the damage of its Church Station facility, the USPS will incur enormous costs (and therefore greater losses) due to the purchase of safety precautions, such as gloves and masks, the cost of facility shutdowns, expense of new equipment to be utilized in an effort to sanitize mail, manpower needed to respond to the thousands of incidents being reported, increased health care costs, greater turnover, and damage control. Higher postal rates are inevitable, and this directly affects the bottom line of financial institutions because it increases their cost of doing business.
Delivery delays. Mail delivery slowdowns should be anticipated, at least as far as
certain geographic areas are concerned. As a result of the September 11 attacks, the Federal Aviation Administration issued an edict that only first class mail under 16 ounces can travel on commercial jets. Other mail must instead be transported by truck, slowing its time to destination. Some mail in affected post offices has been quarantined, at least for a period of time. Additional delays are caused by post office locations being closed for investigations. Lost employee time due to medical tests, illness of existing workers, absences from work due to anxiety, installation of new equipment, retraining, retooling, and changes in procedures will also contribute to delays. This will affect financial institutions in multiple ways, as detailed later in this article.
The Office of the Comptroller of the Currency announced October 25 that it, along with other agencies and
businesses in Washington, D.C., has not received
mail from the U.S. Postal Service for the last three
days, while the Postal Service deals with the
anthrax crisis. The mail problems mean that, for many, it is far from "business as usual."
Fear Factor. As anthrax anxiety mounts, we're hearing reports from all over the country of individuals and businesses trashing nonessential mail or unsolicited mail without ever even opening it. For many, the belief is that it's easier to throw it away than to deal with it, and they simply don't want to take what may be a life-threatening risk for a piece of what could turn out to be junk mail. The medical experts have a shifting understanding of the way anthrax works and that contributes greatly to the public's general unease. Originally, the CDC did not believe it was possible to contract the disease from a sealed envelope. The deaths of two postal workers proved them wrong.
The FBI and postal service have issued advisories to the public about how to spot suspicious letters and packages, but there's a general concern that the terrorists can read too, and there's nothing to stop them from altering their practices in order to avoid rousing suspicion. If a letter without a return address is considered suspicious, the terrorists will supply a return address. Between the Brokaw letter and the Daschle letter, they had figured that out, and put the address of a ficitious fourth grade elementary school class. The indicia of danger will mutate. If you continue to spend money on direct mail marketing campaigns, will that be a prudent investment?
Changes in business practices. Many businesses and agencies are establishing new policies for how they want to receive communications. Some newspapers, for example, are only allowing Letters to the Editor to be transmitted via email or fax. Organizations that formerly distributed unopened mail to the addressees are now rethinking that practice and centralizing the mail opening function in a special room and having all mail opened, examined, and rubber stamped by employees who are specially trained and equipped for the task. Others are asking employees not to use their work address for the delivery of personal packages. As BOL Guru Dana Turner noted, mail is only one kind of delivery service. Businesses and individuals must be vigilant about taking precautions with packages and letters from whatever source. And even if a business or individual does not believe that it would be a likely target, the possibility of contamination through contact with mail being sent to another source as it goes through the system cannot be overlooked. Financial institutions need to think through their own procedures and policies with respect to both sending and receiving mail. For example, if you have formerly communicated important information about your institution via printed press releases to media outlets, you may find they will no longer be accepted in this form. Investigate alternatives.
How Financial Institutions Will Be Impacted
We believe financial institutions will be affected in both positive and negative ways. First, the dark clouds:
Impact on regulatory deadlines. Banking laws and regulations are filled with timing requirements. The timeliness of action is sometimes determined by when a particular notice or document is placed in the mail (such as the RESPA requirements on good faith estimates being mailed or delivered within three business days of the application being made). In other cases, however, the timing requirements are not explicit about whether you look to the date you (or the customer) receive the document or from the date it is mailed. In the past, that hasn't been much of an issue because institutions have just padded the time periods by two or three days to be certain they won't incur a violation. Now, with the extended delivery times on some mail, it may spell trouble. Institutions need to take a hard look at how mail slowdowns could impact timing on transactions, how procedures may need to be altered, and even how a customer's rights might be affected. Examples:
On a transaction that is subject to the right of rescission, a consumer has three business days to rescind. Take special precautions to ensure the consumer has not rescinded (in case they placed their rescission form in the mail to you and it was delayed) before you fund the loan or take other prohibited steps;
Regulation B gives an applicant a right to either receive a copy of an appraisal used in connection with an application to be secured by a dwelling, or to request a copy. If you simply inform the applicant of his right to request a copy, then the rule provides that you, as the creditor, need not provide a copy when the applicant's request is received more than 90 days after the creditor has provided notice of action taken on the application under Sec. 202.9 of this part or 90 days after the application is withdrawn. Take into account the possibility of any postal delays before you rule that an applicant's request has been received out of time.
In many instances where a federal government authority makes a request for customer financial information, the federal Right to Financial Privacy Act requires that the federal entity provide the customer a notice and an opportunity to challenge before the records can be turned over to it. Although you are required to immediately begin researching and compiling the records in accordance with the request, you cannot turn them over until you are certain the customer's challenge period has expired and the customer has not mounted a challenge (or has been unsuccessful in a challenge). Do not assume that a challenge has not been made simply because you have not received word of one. Because of the possibility that notice of the challenge might be delayed due to delivery problems, confirm the facts before you release any information about the customer to the federal authorities. (This applies only when the notice and challenge procedure is applicable. There are 26 exceptions to it.)
Under the Equal Credit Opportunity Act and Regulation B, an applicant/borrower has a right to ask for a statement of reasons for adverse action. Once again, there are specific timing rules set forth in Section 202.9. Do not deny the customer's right to receive a statement of reasons due to what may, on its face, appear to be an untimely request until you have checked out the circumstances and confirmed that it could not have been placed into the mail on time by the customer.
If a customer notifies you by mail of an error under Regulation E, it may be unfair to the consumer to start the liability clock running from the date of receipt of their notice if the notice was delayed by the Postal Service, since their liability could be affected by the timing of their notice. Also, if you require written confirmation of the error notification, exercise prudence in the timing on it as well.
If your institution is required to provide an opt out right under the GLB privacy rules (for sharing with nonaffiliated third parties) or under the FCRA (for affiliate sharing), keep in mind that the consumer must be given a reasonable opportunity to opt out. While that is generally considered a thirty day period, if there are mail delays you may want to take that into consideration. [This would come into play with your new customers, or if your institution has had to supply a revised privacy notice to provide an opt out right recently.]
Your customers may incur additional overdrafts if they are accustomed to mailing in checks and having them credited to their accounts within a certain number of days and their checks now end up taking much longer to reach you and be posted.
Look at the notices or documents you are required to provide within certain time frames. Answers to garnishments. Responses to levies. TISA disclosures mailed in responses to requests. Adjust your time frames to accomodate delays in the case of documents which must be received within a certain deadline window and be extra generous in anticipating how long it will take customer to receive mailings you send to them. Don't take action before the proper time period after receipt may have expired.
Late payments. Think through what your position is going to be on late payments on
credit cards and loans. Keep in mind that although your local post office may not suffer a shut down, the borrower or credit cardholder could very well have mailed the payment from a location that undergoes a shut down or quarantine. You should not make any assumptions. In some cases, for example, mail collection boxes have been quarantined, and your customer may not even be aware that his payment has not made its way to you. You have a range of options, of course. You could quietly relax the due dates and waive late fees. You could publicly state your intention to relax due dates and waive certain late fees. Or, you could simply look at where the payment is coming from and make allowances based upon affected areas, or examine the postmark to see when the payment appears to have been mailed. Another alternative is to waive late fees only upon request by people who say "I mailed that in plenty of time, but the postal service problem delayed it."
Direct Mail marketing. In the face of increased postal costs, plus the malicious mail fears, it's time to ask: What are we sending via mail, to whom, and why? Publishers Clearinghouse had the misfortune to mail out laundry detergent -- in powder form -- in response to requests from consumers. Its mailings were in progress at the time the anthrax scares began. The Direct Marketing Association (DMA) has put out Suggestions To Address Security Issues In Direct Mail Campaigns. Imagine, however, that you are a consumer. You get yet another preapproved credit card offer in the mail. In the past, you might simply chuck it into the shredder. Now you fear that if you do so, you could aerosolize anthrax spores that might be clinging to the envelope. What's your response as a consumer? Anger at being forced to choose between possible anthrax contamination (however remote) resulting from the shredding, or identity theft if the information falls, unshredded, into the wrong hands. Not a pretty choice. Rethink your mailings. If you must conduct them for certain transmissions, review the DMA guidelines to see if you can benefit from them. Now's a great time to consider email marketing. It's cheap, it's quick. It can be very effective. Have you been gathering your customers' email addresses? Revise your forms (applications, etc.) to begin doing so, if you haven't already.
Silver Linings
Here's a brief overview of some of the silver linings we see in the situation. (More detail will be furnished on each in Part 2 of this article.)
The anthrax contaminations are likely to speed the electronification of America. This could be an opportune time to promote:
online banking;
direct deposits of payroll for corporate customers;
ACH payments;
online bill payment;
electronic bill presentment services;
online cash management services;
Only one thing do we know for sure: business as we know it will be changed by these events. The challenge will be to deal effectively with the negative changes and embrace the positive ones. Just think: your customer may be less likely to open solicitations from your competitors. Surely that should bring at least a little smile to your face.
Copyright, 2001, BankersOnline.com All rights reserved. This article was a collaborative effort by several members of the BankersOnline.com team, including: Carin Eisenhauer, Mary Beth Guard, George Milner, Michele Petry, and Sam Ott.
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