Editorial: Privacy lacking at banks

Friday, April 28, 2000 | 9:54 a.m.

Privacy advocates lost a huge battle in Congress last year. That's because, as part of legislation that would allow insurance companies, banks and investment firms to merge, Congress didn't enact provisions prohibiting these newly affiliated companies from sharing sensitive customer information. This means that even Social Security numbers and medical records are fair game to be swapped without a customer's knowledge.

While it might seem that these and other privacy protections are a lost cause, there was at least a glimmer of hope in January when the nation's third largest bank, Chase Manhattan, agreed to no longer share with outside marketers the credit and spending information of its customers. The only way this sensitive data will now be shared is if the customer first gives his consent. Still, it wasn't as if the company arrived at this decision on its own. It was only after the New York attorney general learned that the company was violating its own privacy policies by releasing this information, that the company agreed to this change of heart.

Sen. Richard Bryan, D-Nev., who tried in vain last year to get privacy safeguards written into the financial services legislation, two weeks ago wrote letters to each of the banks that do business in Nevada, challenging them to voluntarily adopt some of the privacy protections that Chase Manhattan and another bank, US Bancorp, have done. Bryan would like banks to get the permission of their customers first before sharing this information with affiliated companies or marketers. While even the privacy protections adopted by these banks are limited, at least they are a start. A Bryan spokesman said Thursday the senator has yet to hear a response from any of the banks.

If financial institutions continue to ignore the concerns of their customers, they will do so at their own peril. After all, a little-noticed provision of the financial services overhaul legislation allows each state to set tougher privacy protections than those set by Congress. While the banking industry contends there are other federal laws that say the states can't go beyond what Congress permits, it wouldn't make much sense for them to invite a bruising battle in state legislatures where their clout may not hold up the same way it did in Congress.