Are North Carolina banks violating privacy?

By Chris Serres

Mar. 19— With sophisticated software, some of North Carolina’s largest banks have begun measuring the profitability of each of their customers. And they are using that data to determine what level of service to provide, and to whom.

Consumer advocates say the technology — used by such banks as Bank of America, RBC Centura Banks, and Central Carolina Bank — could lead to discrimination and invasions of privacy. The banks say it’s no different from airline frequent flier miles or supermarket loyalty cards.

For instance, RBC Centura of Rocky Mount, which has 243 branches in the Carolinas and Virginia, has created three classes of customers: “A,” “B” and “C.”

Those in the “A” category are considered “highly profitable” and might qualify for lower rates on loans and credit cards. “B” customers are somewhat profitable; they can get some fees waived on occasion. And “C” customers are barely profitable or cost the bank money, which means they can expect more direct mail offers and sales calls as the bank tries to move them up to “A” or “B.”

Phil Jeffries, an RBC customer from Garner, suspects he’s a “C.” On three occasions over the past several months, the retired tow truck driver has opened his mailbox to find mail from RBC. He also has received a telephone call from an RBC banker who wanted to discuss his financial future.

“I knew something was up because my bank never contacts me,” Jeffries said.

For banks, profit measuring is new territory — and it’s stirring up controversy. There is still a widespread view that banks should provide comparable service to everyone — from the millionaire retiree to the minister. After all, critics argue, banks are supported by taxpayers through the Federal Deposit Insurance Corp., which guarantees $100,000 in deposits per customer in case a bank or thrift fails.

“Once banks start measuring the dollar value of each customer, they will start denying service to the very people — low-income households, primarily — that need it most,” said Edmund Mierzwinski, consumer program director with the US Public Interest Research Group based in Washington, DC.

Privacy is also a concern. To measure profitability, banks are gathering and storing more data on their customers and their transactions; that information can be distributed throughout the bank and can be sold to other companies — including telemarketers.

Banks insist they aren’t trying to sell information to third parties or to penalize money-losing customers. The primary goal is to identify their best customers and do a better job of keeping them. What’s more, bankers say, the software enables them to target their marketing, which should reduce the number of mailings and sales calls customers receive.

In December, NCR Corp. of Dayton, Ohio, unveiled a software package — Teradata Value Analyzer — that can attach a dollar value to every customer, based on their accounts and transaction behavior. The bank can enter a person’s name and find out how much that person made or lost for the bank over a given period.

A dozen banks in North America, including Bank of America in Charlotte, have Teradata. One of Teradata’s first customers was RBC Centura. Last fall, RBC used it to analyze the profitability of its 650,000 customers in the Carolinas and Virginia — and found that it was losing money on 55,000 of them.

RBC then sent a list of the unprofitable customers to branch managers, who were asked to call each one. With conversation-starters such as, “How can we help you reach your goals and objectives?” RBC hoped to nudge customers into changing their type of account or using more bank services such as IRAs or home equity loans. The result was RBC’s most successful marketing campaign.

But customers don’t always benefit from profitability analysis. In some cases, banks use the data to justify higher fees.

In 1998, Wells Fargo & Co. of San Francisco discovered that it was losing a lot of money on older customers who were on Social Security. To recoup some of it, the bank raised checking and overdraft fees for Social Security recipients.

Other problems involve privacy issues. Since Congress passed new bank privacy regulations in 1999, banks have created elaborate privacy policy statements designed to make their customers feel more secure. But information continues to leak into the wrong hands.

Last month, Citigroup paid $1.7 million to settle a lawsuit filed by 27 states accusing the bank of sharing customer data with telemarketers. According to the suit, those telemarketers then charged customers for products and services — such as discount buying clubs, dental plans and roadside assistance —that they never agreed to buy.

“Banks are so giddy about the technology, about their new ability to gather and analyze data, that they haven’t thought enough about the privacy issues,” said Kim Collins, research director at Gartner, a technology consulting firm in Stamford, Conn. “The bottom line is, the more information that banks collect the greater the possibility that it will land in the wrong hands.”

Source: Charlotte News & Observer

Bush delighted by military training to gun down protesters

Fort Bragg, North Carolina, Mar. 20— President Bush got a first-hand look on Friday at how Army special operations forces break up a mock riot — complete with attack helicopters — as he prodded Congress to pass his $379 billion defense budget without delay.

On a visit to Fort Bragg to rally troops for an expanded “war on terror,” Bush watched an extraordinarily graphic training exercise in the fictional country of “Pineland.”

As he arrived, the presidential motorcade passed a quiet tree-lined road and a quaint “Welcome to Pineland” sign. Bush came face-to-face with two burned-out school buses and entered a make-shift city overrun with menacing “rioters,” who taunted the president as they swarmed over a destroyed tank.

From his perch on top of a cinder-block “US Embassy,” Bush donned a baseball cap, protective goggles and large ear muffs to watch an elaborate training exercise.

Six special forces parachuted from 10,000 feet (3,050 meters) with oxygen, commandos rappelled from a Blackhawk helicopter, and two M-47 Chinooks dropped off armed Army Rangers -- two on motorcycles, seven in a souped-up Land Rover, and others on foot.

Kicking up dust amid the explosions and commotion, an MH-6 “Little Bird” helicopter fired blanks into the crowd that shook sticks at Bush and chanted “Go home USA! Go home USA!”

As Bush watched, special forces went room-to-room in an adjacent building using explosives and machine guns to root out rioters where they hid. Army Rangers kept watch from nearby rooftops, and a refueling plane passed overhead, its gas lines tethered to two helicopters.

After about 15 minutes, Bush radioed to the commander that the battle was over. Bodies and shells littered the ground as silence fell over “Pineland.” “That was exciting. I think they’re well trained,” Bush said. “I’m glad they’re on our side.”

Source: Reuters