Agencies Post Privacy Form Model

A consulting firm looked at how well survey participants could provide logical reasons for choosing one bank over another based solely on privacy notices, and the firm also analyzed the participants’ ability to understand differences between banks, such as differences in information collection and sharing practices, using the notices.

The current notice performed poorly on all measures, and the form developed by Kleimann did well, officials at the agencies that developed the model form report.

The Kleimann version presented information using a table, and the consulting firm “concluded that the table format is likely a key explanation for the improvement in comprehension demonstrated by the study participants who saw the table notice as compared to those who saw the other notice styles – especially for difficult perceptual accuracy tasks,” officials write.

The federal agencies received 110 unique comments on the proposed model form effort, and one of the comments came from the National Association of Insurance Commissioners, Kansas City.

“There was general support by many commenters for additional consumer research and testing,” officials at the agencies write. “While some industry commenters provided substitute language or submitted alternate forms of the notice, none submitted other research findings. However, the NAIC submitted a consumer study on notices with research findings that the agencies did consider.”

The NAIC found, for example, that consumers dislike seeing the phrase “as permitted by law” in a privacy form, because they are not sure what it means and how “what is permitted by law” might change, officials report.

Insurance companies, which may sell products such as annuities that are regulated both by federal agencies and state insurance departments, pointed out that the model form originally proposed did not allow for insurance-specific terminology.

“The agencies fully intend that differently-regulated entities can provide a single joint notice to consumers by using the final model form,” officials write. “The agencies have consulted with the NAIC, which submitted a letter with proposed modifications to certain sections of the form. The agencies have incorporated into the final model form two menus of terms adaptable to the wide range of financial institutions. The menus include both the SEC’s and the NAIC’s proposals, and enable a variety of institutions, including securities firms and insurance companies, to use the model form, either individually or jointly with other types of financial institutions.”

The federal agencies refer to the American Council of Life Insurers, Washington, and other financial services trade groups mainly in footnotes.

The agencies report that, in response to industry group comments, the Fed board and the FTC will work together to develop a Web version of model privacy form.