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Home > Privacy and Business > Financial Privacy > Select Laws and Regulations > The Gramm-Leach-Bliley Act > Notice and Opt-Out Under the Gramm-Leach-Bliley Act > Does the Gramm-Leach-Bliley Notice and Opt-Out Protect Privacy?


Does the Gramm-Leach-Bliley Notice and Opt-Out Protect Privacy?

Privacy results when consumers have the power to control information about themselves and when they exercise that power consistent with their values. Privacy is important because control over information fosters one's sense of autonomy and individuality and because privacy often has functional benefits.

The Gramm-Leach-Bliley notice and opt-out provisions protect privacy in only the most marginal sense. In terms of pure privacy, they provide little to people who seek autonomy by restricting the flow of financial information. In terms of functional results, the law is most accurately characterized as a protection from accurate marketing. This has few, if any, benefit to consumers.

In terms of privacy for its own sake, the Gramm-Leach-Bliley opt-out must be examined in context. It allows consumers to prevent information that they are already sharing with certain companies from being shared with certain other companies. The information involved is probably, for the most part, demographic data like age, income ranges, and financial activities, and publicly available data like telephone number and address. Much demographic data can often be inferred from the lifestyles of the consumers themselves.

Opting out of information sharing under Gramm-Leach-Bliley does nothing to prevent unfettered information flows to governments and bureaucrats for administrative purposes like taxation, and for investigative purposes.

In short, the Gramm-Leach-Bliley opt-out pales in comparison to true privacy-protecting self-help, like exiting the financial services marketplace.

There are probably consumers for whom information sharing of any kind is an affront to privacy. This small number of absolutists may exercise the options created by Gramm-Leach-Bliley to conform uses of information ever-so-slightly to their values. It is an open question whether the great mass of consumers not using opt-outs should pay billions of dollars extra for financial services so that this small number of people can be appeased.

The functional benefits of the privacy enabled by the Gramm-Leach-Bliley notice and opt-out are few. Indeed, opting out under Gramm-Leach-Bliley may amount to a functional harm.

The information-sharing practices of the financial services industry are difficult to catalog, but one major use of information that does not appear in the exceptions to notice and opt-out is use for marketing by third parties. Thus, as a functional matter, the power the Gramm-Leach-Bliley opt-out gives to consumers is the power to be free of accurate marketing by parties not affiliated with the financial institutions they do business with.

Even this "protection" is narrower than it sounds. Consumers opting out of information-sharing are not preventing certain companies from marketing to them. They are preventing companies from marketing to them accurately. Thanks to opting out, young people may receive advertisements for annuities, for example, and the poor may get advertisements for tax shelters. The cost of inefficient marketing redounds to consumers in the form of higher prices.

The protections for privacy in the Gramm-Leach-Bliley Act are marginal indeed. Numerous other laws, of course, protect consumers from harms that can be done to them using personal information. The Gramm-Leach-Bliley notice and opt-out requirements advance privacy very little at enormous cost to the vast majority of consumers.


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[updated 12/02/01]



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