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Press Release Tuesday, April 3, 2001 |
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CU URGES CONGRESS TO HELP CONSUMERS PROTECT PRIVACY
WASHINGTON, D.C. - Frank Torres, legislative counsel for Consumers Union, testified today before the House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection at a hearing on existing federal law to protect consumers' privacy. The following is a summary of Torres' comments:
"Consumers are fed up with aggressive intrusions on their private lives. Often a consumer is forced to provide personal information to obtain products or services. Many times information that has been provided for one purpose is then used for another reason, unbeknownst to the consumer. Financial institutions, Internet companies, and marketers have been caught crossing the line.
"The right to be left alone appears to have been trumped by the pressure exerted by businesses to protect and expand their ability to gather personally identifiable information from consumers. No part of life is left untouched by data collection activities. Financial and medical records, what you buy, where you shop, your genetic code, are all exposed in a privacy free-for all. Complete strangers can, for a price, have access to your most intimate secrets.
"This means that consumers have lost control over the ability to being left alone. Often, consumers have no choice in whether or not information is collected and no choice in how it is used. Today, any information provided by a consumer for one reason, such as getting a loan at a bank, can be used for any other purposes with virtually no restrictions.
"The ability to collect, share and use data in all sorts of ways boggles the mind. Consumers, in many cases, aren't even aware that data is being collected, much less how profiles about them are created. The information collection overload is particularly troublesome when it becomes the basis for decisions made about an individual -- like how much a product or service will cost.
"What protections do consumers have today? Not many. For all the talk about giving their customers what they think they want, the marketplace is not willing to give their customers what they really want -- privacy. Privacy laws are either non-existent or are so riddled with loopholes that in most cases consumers will not have to be told that their sensitive information is being shared, or be given the ability to stop the sharing of their information.
"Privacy invasion isn't only happening online. Cross industry mergers and consolidations have given financial institutions unprecedented access to consumers' personal data. Technology has made it possible and profitable to mine that data. No law prevents financial institutions from using data to choose between desirable borrowers and less profitable consumers the institutions may want to avoid. Special software helps guide sales staff through scripted pitches that draw on a customer¹s profile to persuade the account holder to buy extra, and in some cases junk products
"The much ballyhooed privacy provision of the Gramm Leach Bliley Act does not protect consumers' privacy. And because the underlying bill is bad, the implementation of regulations provides little hope for consumers seeking to keep their personal information private. While states were given the ability to enact stronger protections, those efforts have met fierce resistance by the financial services industry.
"Consumers across the country are receiving privacy notices from their financial institutions. These notices were required under GLB. Consumers should respond by opting out of the use of information to send a message that they care about their privacy. Unfortunately these opt outs, in reality, will do little or nothing to prevent the sharing of your information with others.
"What about privacy policies? Won't those do the trick? Privacy policies are not a substitute for privacy protections, especially when some companies don't even follow what is in their policies. Just because a company has a privacy policy does not mean that they follow Fair Information Practices. And consumers are skeptical about self-regulation. Only 15% of those surveyed in the Business Week poll supported letting groups develop voluntary privacy standards. Nor has industry shown the will power to adopt adequate self-regulatory programs.
"Some tout the use of technology to allow consumers to choose their preferences - even "opting-in" using a privacy thermometer. Will the technology allow a consumer to shutout all intrusions? Unfortunately, the usefulness of technology often depends on knowledge of the user. Technology may be of some use, but may prove lacking where it unfairly pushes the burden on the often-unsuspecting consumer. If you are not in the know, you will likely lose your privacy because you won¹t know how to keep it private. And if the preferences can be circumvented, then the usefulness of a technological solution without baseline protections will be completely lost.
"Will consumers benefit from all this data sharing? Financial institutions promised that in exchange for a virtually unfettered ability to collect and share consumers' personal information, that consumers would get better quality products and services and lower prices. This is why, they claimed, consumers shouldn't have strong privacy protections like the ability to stop the sharing of their information among affiliates, or access to that information to make sure its accurate. Let's look at reality.
"Bank fees for many consumers continue to rise. Information about financial health may actually be used to the consumer's determent if it is perceived that the consumer will not be as profitable as other customers will. Both Freddie Mac and Fannie Mae say between 30 and 50% of consumers who get subprime loans, actually qualify for more conventional products, despite all the information that is available to lenders today. Credit card issuers continue to issue credit cards to imposters, thus perpetuating identity theft, even when it seems like a simple verification of the victim's last known address should be a warning. Instead of offering affordable loans, banks are partnering with payday lenders. And when do some lenders choose not to share information? When sharing that information will benefit the consumer -- like good credit histories that would likely mean less costly loans.
"Maybe the right approach is to let institutions that want a consumer's information to be put in a position to convince that consumer that some benefit will be derived from a willingness to give that information up to the institution. Such an approach may increase trust in financial institutions and let consumers have control and choice over their own personal information. The same technology that enables vast amounts of data to be collected can be used to give consumers access to that data. It is a simple thing to tell consumers what is collected and how it is used.
"Sound and comprehensive privacy laws will help increase consumer trust and confidence in the marketplace and also serve to level the playing field. These laws do not have to ban the collection and use of personal data, merely give the consumer control over their own information.
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Consumers Union, publisher of Consumer Reports magazine,
is an independent nonprofit testing, educational and information organization
serving only the consumer. We are a comprehensive source of unbiased advice
about products and services, personal finance, health, nutrition and other consumer
concerns. Since 1936, our mission has been to test products, inform the public
and protect consumers
