Banks' Privacy Forms Under Fire

June 21 -- Important notices about financial privacy have been mailed to American households this spring, and most people are ignoring them.

Under a little-known law called the Financial Modernization Act, as of July 1, banks, credit lenders and insurance companies will be allowed to share clients' personal financial data with each other — unless you opt out by returning those forms.

Many consumers are astonished to learn that the burden is on them to stop their financial services providers from swapping their data.

"We just found one, and read it," said Lisa Powell, who with her husband David has received 30 of the notices. "I started to explain to David what's going on, and he just thought I was paranoid, but it's our rights."

In a recent survey by the American Bankers Association, only 36 percent of respondents said they had read their banks' privacy notices. Twenty-two percent said they received the notice but did not read it, and 41 percent could not recall receiving it at all.

"The bottom line is we want you to read it. It's not junk mail," said John Byrne, the ABA's senior counsel.

Byrne and other industry representatives say the forms give consumers an unprecedented opportunity to protect their privacy, according to Byrne. "We think that the opt-out requirement puts consumers in the driver's seat," he said.

Consumer advocacy groups fought to stop the companies from sharing their customers' information in the first place, and were not pleased with the opt-out provision.

"It makes the consumer have to do something to protect the consumer's privacy," said Ralph Nader, who has helped organize a Web site telling consumers what they can do. "They should be able to say to the financial institutions: 'Unless we give you the affirmative OK, you can't sell this information about us all over the world.'"

Congress passed the law with the aim of protecting consumers by requiring financial services companies to disclose how they use their clients' personal data.