Federal Regulators Issue Report on Improving Financial Privacy Notices for Consumers
Posted by Stuart Louie
In the wake of the Gramm-Leach-Bliley Act (GLBA) requiring financial institutions to provide their customers with certain notices about their privacy policies and practices, federal regulators observed that such privacy notices were often too lengthy, dense in content, and contained complex language such that most consumers neither read nor understood them. In response to these observations, six federal agencies tasked with enforcing the GLBA (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission) initiated a multi-phase project to explore the development of a prototype financial privacy notice that would be easier for consumers to understand and use. The report entitled “Evolution of a Prototype Financial Privacy Notice,” which was prepared by the Kleimann Communication Group, was released on March 31, 2006.
The report’s findings suggest that by modifying the content and design of the privacy notice such that good design reinforces the notice’s content, the ability of consumers to read, understand and use the privacy notices increases. The report also concludes that consumers require a context for understanding information contained in financial privacy notices. Simplifying the notices permit consumers to understand and make informed decisions about the use of their personal information.
The second phase of this project will involve interviewing large consumer groups throughout the United States to evaluate the effectiveness of certain sample notices as well as the prototype financial privacy notice developed in conjunction with this report. The federal agencies sponsoring this report have declined to take any policy action with respect to financial policy notices until this next phase of the project is complete.
To read the press release or the report prepared by the Kleinmann Communication Group: http://www.federalreserve.gov/boarddocs/press/bcreg/2006/20060331/default.htm