Minnesota Files Suit Against U.S. Bank

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Minnesota Attorney General Mike Hatch filed a privacy suit on June 9 against U.S. Bank., Minneapolis, a subsidiary of U.S. Bancorp, Minneapolis, alleging that the company wrongly released customers' private banking information to a telemarketing company in exchange for a fee of $4 million plus commissions.


The suit, which is filed with the U.S. District Court for the District of Minnesota, said that U.S. Bank violated the federal Fair Credit Reporting Act and engaged in consumer fraud and deceptive advertising by providing telemarketer MemberWorks Inc., Stamford, CT, with its customers' private information.


The suit said U.S. Bank provided MemberWorks with information including names, addresses, telephone number, gender, marital status, home ownership status, occupation, checking account number, credit card number, Social Security number, birth date, account open date, average account balance, account frequency information and credit limits.


"People are appropriately careful about protecting their Social Security number, checking and credit card information," Hatch said. "When a bank hands out this information to the highest bidder, it has to answer to its customers and to the attorney general's office."


Under FCRA, credit bureaus such as U.S. Bank must disclose how a customer's information is being used. Hatch said that while U.S. Bank has a privacy policy printed in its U.S. Bank customer agreement, nothing in the bank's agreement reveals that personal, confidential information is being sold to companies that are not affiliated with U.S. Bank. According to Hatch, since November 1996, U.S. Bank has received more than $4 million commissions from the provision of its customers' private information to MemberWorks. Approximately 70,000 U.S. Bank customers have purchased consumer products offered by MemberWorks ranging from dental care to travel packages.


U.S. Bancorp denied allegations by Hatch.


"These allegations are false," said U.S. Bancorp spokesman Donn Waage in a statement. "In today's world, joint ventures and cooperative marketing programs are common practices in bringing benefits to customers. Our direct marketing program is very carefully managed. Our partners at no time have access to customer accounts."


In addition, he said, "U.S. Bancorp takes customer privacy very seriously and has strict policies in place to protect that privacy."


Hatch is asking that the court prohibit the bank's exchange of customers' personal information and order the bank to pay civil penalties to consumers. Hatch also called upon Congress to enact legislation to protect consumers' rights to financial privacy.


Indeed, this summer the financial privacy issue should pick up steam. The House Banking and Financial Services Committee has scheduled privacy hearings on July 21 and 22.


Reportedly, the hearings will focus on financial privacy in its broadest context, including current evidence of telemarketing abuse, the current information collection and sharing practices of individual institutions and larger financial conglomerates, the potential implications for U.S. financial institutions of the European Union's Directive on Data Protection and potential privacy and security issues arising from rapid change in information technology and growth of electronic banking and commerce


"As the Minnesota court filing underscores, privacy is an issue that demands


continued oversight," said house banking chairman James A. Leach (R-WI) "At issue is enforcement of current law, as well as a review of whether additional protections are needed."
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