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WASHINGTON, D.C. –America’s Community Bankers today told federal banking regulators that it generally supports proposed rules to protect the privacy of bank customers, but raised operational issues that must be addressed to help banks implement the new requirements. [For details, please link to ACB’s comment letters to: Federal Banking Agencies; Federal Trade Commission; National Credit Union Administration; and Securities and Exchange Commission]

“Protecting customers’ confidential financial information is a hallmark of community banking,” said ACB President Diane M. Casey. “ACB has been at the forefront of the privacy issue, supporting enactment of a statutory framework that maintains consumer confidence.

“We are now focusing on ensuring that the regulatory framework properly balances the legitimate business needs of banks to share information with the legitimate privacy needs of customers,” she said. “We all win when banks preserve the trust and confidence of their customers.”

ACB encouraged its member banks in January to develop their own privacy policy and make it available to customers even before they are required to do so by regulators. ACB provided an interim model privacy policy disclosure.

In its comments to the federal regulators, ACB urged inclusion of model privacy notice language in the final privacy regulation as a “safe harbor” example to help reduce banks’ compliance costs and reduce future examination burdens.

ACB also urged the regulators to delay the regulation’s Nov. 13, 2000, effective date to at least May 13, 2001, to give banks and their service bureaus sufficient time to implement changes to computers and operations so that they can properly comply with the new requirements.

If the effective date is not extended, regulators should provide a grace period for compliance for those banks making a good faith effort to comply, ACB said.

The proposal’s requirement that banks mail their first privacy notice to customers within 30 days of the rule’s effective date “is difficult operationally and not required by the statute,” ACB said. If the proposed effective date is not extended, the deadline for a bank’s first mailing should be extended to March 31, 2001, ACB said.

ACB also listed other needed improvements:

-The regulations should not require banks to provide an opt-out opportunity when making lists of customers available that do not include customers’ personally identifiable financial information.

-Regulators should adopt the definition of “publicly available information” proposed by the Federal Reserve Board (Alternative B), which would treat information as public if it is available from a public source, regardless of how the bank acquired the information. The other banking regulators preferred Alternative A, which would make publicly available information “nonpublic” if a bank obtained it from a nonpublic source. ACB said Alternative A would burden banks with having to document the source of information.

-The regulations should clarify that banks will have a “reasonable” amount of time based on computer system and personnel requirements to process customers’ opt-out directives. ACB said the regulations should not impose a rigid time period. Some companies may need 10-12 weeks to make the opt-out election effective, ACB said.

-The regulations should allow banks to disclose account numbers/codes in encrypted or scrambled forms to nonaffiliated third parties if authorized by the customer and necessary to service or process a transaction requested or authorized by the customer.

-The regulations should clarify that annual privacy disclosures are not required if there has been no documented activity, transaction or communication with a customer in the normal course of business within the previous 12 months.