ABA Challenges The Banking Industry 100 Days To a Privacy Policy

by John J. Byrne, Esq.

It's over!

Or is it?

President Clinton signed the long-awaited financial modernization bill into law on November 12. With all of the talk about moving into the 21st century with a progressive financial services industry, most of the media focused on the privacy provisions that were added to this bill very late in the game.

What will these new changes mean for banks, thrifts and savings institutions around the country? What should we be doing in order to meet the letter of the law?

Well, for one thing, we will have to wait for the banking agencies to issue regulations on much of the bill.

Regulators' Challenge
For now, it is important to know what the bill directs the agencies to do. Section 501 of the bill directs the Federal regulators for the financial industry and the State regulators for insurance companies to create regulations to establish appropriate standards for the security and confidentiality of customer information, and to protect that information from changes or unauthorized access.

As reported in the Hotline earlier, other sections apply to "opt-out" requirements, the prohibition of sharing account numbers, the disclosure of the institution's privacy policy, the ability of State laws to preempt the federal law, and the ban on pretext calling.

Our Challenge
All of these new requirements will place a challenge on our industry-the challenge to prove to our customers that we still are the industry that protects information better than any other sector, public or private.

On November 15, ABA President Hjama Johnson gave a major speech on the importance on privacy proficiency in the financial services sector. He pointed out that "Like so many issues, privacy requires a careful balancing. Our job must be to protect privacy first, while passing on to customers the benefits of information technology, such as lower costs and increased convenience."

He added that: "We have a real opportunity as an industry to demonstrate leadership on this issue, and I believe we not only should, we must. Privacy is the cornerstone of banking, the heart of our relationship with customers. My message to bankers this year is "embrace technology, preserve trust." And nowhere do these two goals come together more clearly than in protecting our customers' financial information. "

President Johnson outlined the following activities:
The ABA has put together a checklist to help bankers evaluate if they have the right level of data protection measures in place. We should all use it to evaluate our data-protection measures. ABA will shortly have a pamphlet available that expands on this information.

Our industry had led in pushing for tougher identity-theft laws, and ABA offers resources to help educate consumers on the topic. One good tool for both customers and bank employees is a video covering how to prevent identity theft and defend against information brokers who utilize pretext calling. The ABA has also joined with leading associations in the securities and insurance industries to work cooperatively on the broad issues of financial privacy.

Finally, he ended his speech with a challenge. "During the first 100 days of 2000, I would like to see every bank in the country develop a formal privacy policy and make that policy publicly available - 100 percent of banks in 100 days, beginning Jan. 1, 2000."

Our industry has our customers' trust. We have to work to keep it. That is the challenge.

John Byrne, Esq., a Bankers' Hotline advisor, is Senior Federal Legislative Counsel for the American Banker's Association

Copyright © 1999 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 9, No. 11, 11/99