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Federal Reserve Bank of Dallas 2200 N. PEARL ST. DALLAS, TX 75201-2272 April 13, 2006 Notice 06-23 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Report Issued on Improving Financial Privacy Notices for Consumers DETAILS Federal regulators have released Evolution of a Prototype Financial Privacy Notice, a report by Kleimann Communication Group summarizing consumer research commissioned by the regulators as part of their ongoing efforts to develop improved financial privacy notices. The report’s release concludes the first phase of an interagency project by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission to explore alternatives for financial privacy notices that would be easier for consumers to read, understand, and use than many of the notices consumers currently receive from financial institutions. ATTACHMENT A copy of the joint press release is attached. A copy of the report can be obtained at www.ftc.gov/privacy/privacyinitiatives/ftcfinalreport060228.pdf (11.9MB). Please note: This is a large file that may take a considerable amount of time to open. For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. -2- MORE INFORMATION For more information, please contact Diane van Gelder, Banking Supervision Department, (214) 922-6282. Previous Federal Reserve Bank notices are available on our web site at www.dallasfed.org/banking/notices/index.html or by contacting the Public Affairs Department at (214) 922-5254. Joint Press Release For immediate release Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Federal Trade Commission National Credit Union Administration Office of the Comptroller of the Currency Office of Thrift Supervision Securities and Exchange Commission March 31, 2006 Report Issued on Improving Financial Privacy Notices for Consumers Federal regulators today released Evolution of a Prototype Financial Privacy Notice, a report by Kleimann Communication Group summarizing consumer research commissioned by the regulators as part of their ongoing efforts to develop improved financial privacy notices. The report's release concludes the first phase of an interagency project by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission to explore alternatives for financial privacy notices that would be easier for consumers to read, understand, and use than many of the notices consumers currently receive from financial institutions. These six agencies were among those that jointly issued regulations in 2000 implementing the financial privacy provisions of the Gramm-Leach-Bliley Act, but survey data indicate that many consumers neither read nor understand the notices financial institutions provide under those regulations. The report's findings indicate that it is possible for financial privacy notices to include all of the information required by law in a short document that consumers can readily understand. The report fully describes the extensive research that underlies these findings and the development of a prototype simplified privacy notice. Over a 12-month period, researchers conducted focus groups and in-depth individual interviews with consumers throughout the United States. Based on consumers' reactions to sample privacy notices, the researchers modified content and design to create notices in a tabular format that improved consumers' ability to read, understand, and use the notices, as well as to compare the information sharing practices of different financial institutions. The report concludes that consumers need a context for understanding information in financial privacy notices. The research shows that while there is a general awareness of information sharing practices, most consumers do not understand them. According to the report, consumers are overwhelmed by complex information, and simplification of financial privacy notices enhances consumers' ability to read the notices and make informed choices about the use of their personal information. The research also demonstrates that consumers more easily understand the important information in the notice when good design reinforces the content. The six agencies, together with the Office of Thrift Supervision, will fund a second phase of the project, to be contracted separately. This research will involve interviewing a much larger group of consumers throughout the United States to measure the effectiveness of the prototype and other examples of notices. The agencies have deferred consideration of policy 1 of 2 action with respect to financial privacy notices until the next phase of consumer testing is completed. At that time, the agencies expect to consider a full range of options for improving financial privacy notices in light of all their consumer research. The agencies' efforts to improve these notices complement efforts to improve the effectiveness of privacy notices worldwide, as well as other government efforts to improve financial literacy. Media Contacts: Federal Reserve FDIC FTC NCUA OCC OTS SEC 2 of 2 Deborah Lagomarsino David Barr Jacqueline Dizdul Cherie Umbel Bryan Hubbard Chris Smith John J. Nester (202) 452-2955 (202) 898-6992 (202) 326-2472 (703) 518-6337 (202) 874-5770 (202) 906-6677 (202) 551-4125
