Privacy Issues in the Banking Industry

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Introduction
With the improvement of technology continuously growing every day, privacy has become one of the most important issues in today’s society. Privacy refers to one’s right to control how your personal information is collected and used by financial institutions. It is the financial institution’s responsibility to provide security to your personal information. Security refers to the obligation of the company that collects and uses your information to ensure that your information is safe against unauthorized uses (Privacy Rights Clearinghouse). For the banking industry, identity theft is a growing concern for customer privacy. Identity theft can occur anywhere including the internet. The technology of online banking is constantly growing and is being recognized globally. Online banking is very important for banks because it is a helpful tool used to provide better customer service and enhance efficiency on the bank’s end. According to a study conducted by HSBC Direct, nearly half of American internet users manage their bank accounts online. Furthermore, “The study revealed 62% of users aged 21 to 34 conduct most of their banking through the Internet. Among the customers aged 45 to 69 40% use their online banking accounts actively” (Ecommerce Journal). Internet identity theft can pose a major risk to the bank’s privacy protection through its online banking system. The question is, what can banks do to help customers lower their risks of having their identities stolen while maintaining their financial information private?

Identity Theft
Identity theft is a crime that occurs when a criminal acquires a piece of the victim’s information to commit fraud without the victim’s knowledge. It is the most common type of credit/debit card fraud (Byron Bank). Based on the FTC 2006 Identity Theft Survey Report, the majority of victims do not know how their information was stolen. According to the FDIC, banks share their customer’s information to help market products specific to their customer’s needs and interests. If the customer does not wish for their bank to share their information with third party affiliates, the customer has the right to “opt out” of this type of information sharing. As of July 2001, the Gramm-Leach-Bliley Act (GLB Act) requires all banks to provide a privacy policy to all of their customers with instructions on how to “opt out” (Federal Deposit Insurance Corporation). Once the information is shared with third party affiliates, the bank cannot guarantee how customer information will be handled. If customer information is being mishandled, the fraudster can utilize the victim’s information to access their personal online banking system which holds all kinds of personal and financial information. The federal Gramm-Leach-Bliley Act gives the consumers certain rights to protect their financial privacy.

The Law
The Gramm-Leach-Bliley Act (GLB Act) requires financial institutions, such as banks, to adopt procedures to safeguard their customer’s personal information, also known as the Safeguard Rule. The Safeguard Rule applies to all businesses. It requires all financial institutions “to develop a written information security plan to protect customer information. The plan must be appropriate to the company’s size and complexity, the nature and scope of its activities, and the sensitivity of the customer information it handles”. In addition to the GLB Act, other federal laws such as the Fair and Accurate Credit Transactions Act (FACTA) also protects the privacy of personal information. This law is also intended to help fight the growing crime of identity theft. The FACTA includes provision on “accuracy, privacy, limits on information sharing, and new consumer rights” (Privacy Rights Clearinghouse). To safeguard against identity theft, the FACTA includes a section that highlights the proper disposal of personal data. This provision of the law was acknowledged by Congress to...
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