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What is Financial Privacy?

Article Details
  • Written By: Diane Goettel
  • Edited By: W. Everett
  • Last Modified Date: 02 July 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Financial privacy is a blanket term used to describe a set of protections and rights that are offered to customers of financial institutions. In the United States, these protections and rights are largely defined by the Right to Financial Privacy Act of 1978. This act requires a government agency seeking a person's financial information to notify the person of these actions. The act also requires the agency to give the person in question a chance to object to this action. Financial privacy is also often used in discussions surrounding whether banks and other financial institutions should be able to sell information about their customers.

In the United states, the Right to Financial Privacy Act was amended twice: once in the 1980s and once by by the Patriot Act of 2001. The Patriot Act allowed government agencies to access personal financial records as part of investigations related to international terrorism. Most amendments to this act have to do with allowing government agencies swift access to such records in the instances of criminal investigations.

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Another United States act that is closely related to the issue of financial privacy is the The Gramm-Leach-Bliley Act, which is also known as the Financial Services Modernization Act of 1999. As part of this act, financial institutions are requires to provide every customer with a privacy notice. In addition to providing this notice when a person becomes a customer of the financial institution, the notice must also be provided on a yearly basis for as long as the person is a customer of the financial institution. The information in this notice must include what pieces of information the financial institution gathers about the person as well as how the information is used and shared. It is also required that the financial institution inform the person of how this information is protected. In every case, the person must be provided with an opportunity to stop the financial institution from sharing this information.

For many people, financial privacy has become an important issue because of a regular household nuisance: telemarketers. There have been a number of cases in which financial institutions have shared information about their customers with telemarketing companies. The companies then use the information as sales leads. By using the financial information provided by the banks, telemarketing companies could target their sales efforts toward certain groups of the financial institution's customers.

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