Bank privacy notices are a joke: Here's why

Peter Dunn | Special for USA TODAY

Dear Pete: What's up with Privacy Notifications? My bank sends them to me every year. The notice first states what they do with "your personal information." Then they list "reasons they can share your personal information." If that makes you see red, then they say you can "limit their sharing" by calling or going online.

What's your advice? Can you limit their "sharing," or will that just screw up your relationship with them? Does any of this (sharing or not sharing) impact your credit score? — Bill

Dear Bill: Privacy doesn't mean what it used to. Just because they call it privacy doesn't mean you have any. It's like turkey bacon.

Last Friday, I decided to read the small print and dig into a handful of privacy notices. I grabbed a coffee from my favorite coffee place, hunkered-down in an overstuffed chair and began reading through the consumer privacy notices of the biggest financial institutions in the country.

Ninety minutes later I awoke.

I'm convinced documents like these are purposefully created to induce REM sleep, almost like a slumber trip-wire. But buried deep inside you will find some bothersome facts. Your data is shared with many, many companies, exposing you to data theft risks left and right. And the most annoying fact? You can do very little to maintain your privacy — not the banks' definition of privacy, but a normal person's definition of privacy.

Your bank reserves the right, which you grant them by accepting their customer agreement, to share your data with basically whomever they want. They share your data with every entity in which the bank owns. They share your data with marketing companies. And you know they obviously share your data with the credit bureaus. What do the credit bureaus do with the data? They share it with other organizations.

So what's shared? I hope you're sitting down. Various data, including Social Security numbers, account balances, transaction history and credit data.

Your bank shares your most private financial information with whoever — whenever.

My favorite line, which I consistently found in privacy notices, is: "All financial companies need to share customers' personal information to run their everyday business." Oh, come on. I'm sure this is true on some level, but the wiggle room within their assertion is as immense as it is vague.

Federal regulation requires financial institutions to provide privacy notices to consumers. The rule was created in the spirit of transparency. While I'm not exactly Webster, I do know the definition of transparency. How is calling a "lack of privacy notice" a privacy notice, transparent? Heck if I know.

Don't get too upset and leave your bank behind. There's no point in doing that. That's because they also reserve the right to share your data after you've left. You see, you have signed your data away for life, simply by agreeing to the customer agreement.

Data privacy is important for a bevy reasons. To begin, it's simply no one's business. I keep a portion of my emergency fund in a savings account at a bank in which I do no other business with. I opened the account five years ago or so, and the money just sits there. I might make one withdrawal and one deposit per year. It's a very simple relationship. Well, it would be a simple relationship if they didn't share my data with everyone under the sun. When I deposited money for the first time and signed the customer agreement, I unknowingly shared my data with too many people.

Federal law does allow you to partially control with whom your bank shares your data. By partially, I mean barely. There are elements of the privacy policy that you can circumvent by opting-out, but there are even more elements you cannot opt out of.

To answer your question, Bill, go ahead and limit the sharing via the means your bank allows. It will not affect your relationship with them, and it will not affect your credit score.

But ... there's a but. Of course there is.

Carnegie Mellon University did a study that suggested some banks don't even follow the very liberal regulations set out in their privacy notices. Darned if you do, darned if you don’t. The university has listed their findings online. They are absolutely fascinating. I highly suggest you look up your bank. http://cups.cs.cmu.edu/bankprivacy/

We are in the 21st century. Data is power. Therefore, our banks have our money and the power. What are we going to do?

Peter Dunn is an author, speaker and radio host. Have a question for Pete the Planner? Email him at Pete@petetheplanner.com.