Financial privacy

Overview
Only transactions in which currency is the medium of payment can be accomplished with some degree of anonymity. Even then, evidence of financial responsibility often is required in order to obtain a service. For example, it may be virtually impossible to rent a car without presenting a credit card even if payment will be in cash.

When checks are used for payment, a record is created of the payor, the payee, the date, and the amount. In addition, documented identification often is required and various identifying numbers (e.g., telephone number, driver’s license, credit card number, employee identification number) may be written on the check by the recipient. The person making payment provides this information willingly in order to have the payment accepted and to enjoy the convenience offered by a checking account. But checks are handled by human tellers and accountants, and the recipient of a check may sign it over to a third party in another transaction.

In order to obtain the further convenience of a credit card, customers are willing to provide additional personal information, such as place of employment, income level, and past financial history. As long as the information is used by the recipient only for the limited purpose for which it was intended, privacy is not usually considered to have been invaded because the information was provided by the subject in order to gain some benefit.

Financial institutions are compelled by law to keep some personal data. The Bank Secrecy Act requires that financial institutions keep copies of all checks over $100 and records of large cash transactions to protect the users of the system. In the same way, the Electronic Funds Transfer Act of 1978, and the Federal Reserve System’s Regulation E that implements it, require that receipts issued by EFT terminals and periodic EFT bank statements indicate the date, time, and location from which a transaction was initiated.

Personal financial data are not found only within financial institutions and service systems. Employers have records of income, and personnel files may contain other information as well. Tax collectors receive reports of wages, interest, and dividends. Social service agencies have records of benefits paid to recipients. Furthermore, people are aware that credit-granting organizations, check and credit authorization services, debt collection agencies, and others collect information about an individual’s financial history, both from the individuals and from a variety of other sources not always known to the subject or acknowledged by the collecting organization. People are less aware of the extent to which this information is shared among such organizations or sold to third parties for a variety of purposes, such as compiling mailing lists.

Generally people accept (not always without some irritation and concern) many acknowledged limitations on their privacy, not only because they may have no choice, but because they recognize that they derive substantial benefits thereby. For example, the increased acceptability of one’s checks and the ability to obtain credit are benefits that depend on willingness to provide personal and financial information. The aggregation of data about many individuals provides other indirect benefits. Such data are useful for the efficient distribution of goods and services and the management of inventories.

Market research may make it possible to design products to meet customer needs and wishes and to identify products that would be rejected in the marketplace, before resources are committed to production. Usually anonymity for individuals can be assured when data are aggregated. However, when data are collected under the expectation that they will be aggregated and then are used on a disaggregated basis (e.g., when survey data become the basis for direct telephone solicitation or lists sold to direct mail advertisers), this may well be considered a violation of privacy, if indeed the individual even becomes aware of the source of the solicitation.