Opt Out of the Assault on Privacy

If you've been throwing away those offers from the Gardens of Faith Perpetual Calendar and Plate Collection, Precious Moments Porcelain Figurines, Franklin Mint Presidential Commemorative Coins and other worthless junk that arrives inside your bank and credit card statements and insurance bills, you might want to go back through the trash. Hidden within that detritus was another piece of paper, one with an important message. If you missed it, you may have unintentionally waived your right to protect the privacy of your personal financial information.

The assault on privacy is being mounted on several fronts simultaneously, and as of last month, your personal financial information is now fair game.

For example, the company that handles my homeowners insurance is also a real estate brokerage and has recently become a mortgage lender, meaning that all of the information about the value of my home and its contents is available to anyone in that company and its numerous affiliates, including a broker from NYLife, who has been coming in weekly and accessing their computer files. News to me. And I only know because I asked.

The driving force behind the dissemination of personal financial information is the Gramm-Leach-Bliley Act (Financial Services Modernization Act of 1999), which went into effect on July 1, 2002. Although the law purports to set new safeguards for consumer protection, in practice it means that either you defend your privacy or you lose it.

Gramm-Leach-Bliley requires banks, mortgage companies, insurance companies, credit-card, issuers, financial planners and tax preparers, to "protect against hazards or unauthorized access" to their customers' personal information by allowing customers to opt out of information sharing.

But you have to be vigilant and knowledgeable to take advantage of that protection. Under the new law, financial institutions must offer you a disclaimer yearly, but it is often confusingly worded, hidden within a morass of garbage and printed in type smaller than the letters at the bottom of the eye chart. Read the fine print. Get out your microscope and you will see that you have the option of refusing to allow them to divulge your records. But in order to opt-out you must notify each and every company in writing.

A brief backstory of the new law. Following the stock market crash of 1929, the Glass-Steagall Act (Banking Act of 1933) was passed in an effort to restore confidence in the banking system. Glass-Steagal was predicated on the idea that "America's financial house (would) best be kept in order if bankers and brokers stay in separate rooms."

Glass-Steagall reshaped America's financial landscape, first by establishing the Federal Deposit Insurance Corporation to insure customer accounts. Second, it required banks to either accept deposits or underwrite securities, but not both. Banks had to decide whether to become commercial banks that accept customer deposits in checking and savings accounts, or investment banks that engage in "the riskier business of corporate underwriting, involving the purchase of new securities from the corporate issuers and their resale to the public."

This separation between stability and risk worked well for 66 years, until soon-to-be-retired Texas Republican Senator Phil Gramm decided to bestow a parting gift on the banking community.

The Gramm-Leach-Bliley Financial Services Modernization Act effectively repeals the Glass-Steagall Act. Under its new provisions, banks, securities firms and insurance companies are no longer prohibited from forming affiliations. More to the point, they can freely exchange your private financial information with their cohorts.

According to financial planner David Root: "If you're providing information to one institution, it's going to be shared down the line. Not only would your credit report be fair game, your entire banking history, credit card numbers and Social Security numbers could be traded and sold to any business that wants to get their hot little hands on it."