Regulators to design simple privacy notice for US banks

US financial firms are obliged to issue privacy notices under the Gramm-Leach Bliley Act, which was passed in 1999 to protect against the unauthorised access and abuse of personal customer information held by companies operating in the financial sector. Among other things, it gives individuals the right to opt out of information sharing among companies.

But the privacy notices used by firms are often so complex that consumers find them hard to read – if they bother reading them at all.

Six US federal regulators – 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 – are therefore working together to find a better way to provide the notices.

Last week the agencies published a report commissioned from the Kleimann Communication Group.

The report, ‘Evolution of a Prototype Financial Privacy Notice’ concludes that consumers need a context for understanding information in financial privacy notices. It finds that consumers are overwhelmed by complex information, and the simplification of financial privacy notices enhances consumers' ability to read the notices and make informed choices about the use of their personal information.

The research also demonstrates that consumers more easily understand the important information in the notice when good design reinforces the content, and details how researchers modified content and design to create simplified notices in a tabular form.

The six agencies, together with the Office of Thrift Supervision, are now funding a second phase of the project, after which they will consider policy action with respect to financial privacy notices.