What You Should Know about Financial Privacy Notices

You're probably accustomed to the annual privacy notices or privacy policies you receive from your insurance company, credit card, bank and others, by snail mail or online. If you assume these items are junk mail and ignore them, you may want to think twice. Privacy policies actually contain important information about your financial accounts and personal data.

Here are a few common questions and answers to help you understand the importance of taking these notices seriously.

What's in a privacy notice?

Since 1999, with the passage of the Gramm-Leach-Bliley Act (also called the Financial Services Modernization Act), financial institutions have been required to send these documents to their customers annually or to post them conspicuously on their websites. The notices tell you exactly how your bank, insurance company, or other financial service provider intends to share your personal information.

For instance, if your bank offers investment services, it might share your name and contact details with their brokers. In turn, the investment division may send you marketing and sales messages. Financial firms may also send data about, for example, your creditworthiness, to companies with which they have joint marketing agreements, such as credit card issuers.

Do I have a choice about sharing my information?

Yes, and that's the role of the privacy notice. The sender uses the notice to inform you how they will share your personal data, and what rights you have to limit that exchange.

In most cases, the document will give you a toll-free phone number, website, or mailing address to contact if you don't want your information shared. You have to make a proactive decision to "opt-out," removing yourself from these shared customer lists. If you do nothing when you get the notice, your financial institutions are allowed to assume that you agree to the information-sharing.

Exception: There's no limit on data shared for "everyday business." The privacy policy you receive should clearly spell out that the sender may disclose — without your approval — information about you and your account needed to transact routine business. That could include reporting your transaction history to credit bureaus, processing your transactions through both outside and internal services, and responding to court orders requesting certain details.

Will "opting out" have any negative effects, like preventing me from being approved for other financial services?

Not at all. The law prohibits this kind of penalty. You will continue to qualify for loans, credit cards and other financial services based on your own credit history. Keep in mind, though, that opting out won't prevent future privacy notices from landing in your mailbox. Companies you do business with are required to continue sending them to you annually.

Also, you don't have to wait to receive a privacy notice to opt out. You can do this anytime, though you'll have to contact the firm, such as your insurance company or bank, to ask how to do that.