Privacy Notices Called Too Confusing, ComplexPrivacy Notices Called Too Confusing, Complex

Under the Gramm-Leach-Bliley Act, financial institutions such as banks, brokerages, and insurance companies must notify customers of the institutions' data-collection policies and give customers an opportunity to specify that their personal financial data shouldn't be shared with third parties. The law, which applies to data collected online or elsewhere, requires that the notices be mailed to consumers by July 1. But legislators and consumer groups say the notices that consumers have been receiving are so confusing and complex that new rules should be considered.

In a letter to several federal agencies, Rep. John LaFalce, D-N.Y., the ranking minority member on the House Financial Services Committee, said the notices are too long and complex and are hidden within marketing material mailed in the same envelope. "The nature of the privacy notices being sent to consumers by financial institutions raises serious questions as to whether the privacy rights intended by Congress ... are being appropriately implemented and adequately communicated to customers," the letter adds. LaFalce, joined by several other legislators, sent the letter to Alan Greenspan, chairman of the Federal Reserve, Paul O'Neill, secretary of the Treasury Department, and others asking them to consider new rules for the notices.

Consumer groups also believe the notices are too complex and confusing. Citizen Action, the Washington-based consumer advocacy group started by Ralph Nader, along with several other consumer groups, have asked the Federal Trade Commission to require the financial institutions to provide notices that are easier to understand.

In addition to the mailed notices, the law requires that financial institutions must post "clear and conspicuous" notices on their Web sites and give customers an opportunity to "opt out" of third-party data sharing.