ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release November 19, 2001 #01-82
E-mail: [email protected]

SURVEY SHOWS COSTS OF PROVIDING PRIVACY NOTICES CONSIDERABLY HIGHER AT COMMUNITY BANKS

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WASHINGTON, D.C. — Community banks spent a disproportionately higher amount than larger banks in providing customers with notices of their privacy policies, according to a survey of its member institutions by America’s Community Bankers.

The survey also found that customers rarely exercised the option of prohibiting their bank from sharing customer financial information with non-affiliated third-parties, and that a majority did not find the disclosures useful. ACB will present the survey findings to an interagency public workshop on Gramm-Leach-Bliley Act privacy notices hosted by the Federal Trade Commission on Dec. 4.

The G-L-B Act required financial institutions by July 1 of this year to distribute a statement to each customer accurately reflecting the institution’s privacy policies and practices.

The survey concluded that the costs to comply with the G-L-B Act’s privacy provisions were significantly greater for community banks on both a per-customer and percentage-of-expenses basis.

“The survey clearly illustrates the enormous burden the Gramm-Leach-Bliley Act privacy rules place on community banks, particularly the overwhelming majority of which have assets of less than $1 billion,” said ACB President and CEO Diane M. Casey.

The average compliance cost was $1.37 per customer, with total estimated compliance costs per bank ranging widely from as little as $1,000 to more than $2 million. The survey found the cost per customer averaged 27 cents at banks with assets of $10 billion or more, compared with per customer costs of $2.37 at banks with assets of less than $50 million — almost nine times as much.

As a percentage of non-interest expenses (salaries, employee benefits, occupancy costs, etc.), banks with less than $50 million in assets paid almost four times as much as the group of banks with assets of $10 billion or more.

The survey interpreted these results to mean that larger banks with in-house legal and consulting staff were able to do most of the compliance work themselves, while smaller banks sought outside legal help and consultants.

“We hope the federal bank regulators will soon issue promised guidance on small bank compliance with privacy requirements,” said Casey. “This could help community banks do more in-house and lower their costs of notifying new customers and complying with the annual notice requirement.”

With less than 1 percent of customers electing to opt-out of information sharing with non-affiliated third parties (that are subject to the opt-out provision), Casey said that a reasonable conclusion is that customers trust their financial institution.

“It also confirms that further legislation is not necessary,” she added. “The privacy notice and the opt-out requirements have gone far enough in demonstrating that an institution is mindful of the need to maintain private customer information on a confidential basis as well as to alert customers of their right to prohibit the sharing of certain information.”

One disturbing response, Casey said, was that customers didn’t find the privacy notice disclosures useful. Of those giving banks feedback, 57 percent said the disclosures were “not useful” and another 40 percent said they were only “somewhat useful.”

She attributed the poor reception by customers to the high degree of specificity and complexity of the disclosures required by the federal regulations.

Recognizing the importance of consumer outreach, ACB, through its 1,200 members nationwide, has distributed brochures on privacy, identity theft and checking account fraud. More than 3 million brochures have been distributed.

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The survey was conducted by ACB in October. Responses were received from 186 member institutions. The survey is available on request.

To view the results of the Compliance Survey, click HERE.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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