American Express Deal Draws Fire
American Express Co. drew fire from privacy groups Wednesday after announcing that it is in a venture to sell extensive information on its cardholders to merchants.
American Express is collaborating with KnowledgeBase Marketing Inc., a company that has compiled records on 175 million Americans.
KnowledgeBase, headquartered in Chapel Hill, N.C., keeps track of such things as a person’s age, whether they recently married, divorced, had a baby or bought a house. In the new alliance, KnowledgeBase’s data would be combined with American Express’ records of credit card purchases.
Under the plan, American Express would compile mailing lists from the information to help companies target their sales pitches to the people most likely to buy their products.
American Express, which announced the alliance Tuesday, said Wednesday that it will not sell information on specific customer transactions.
“There are very strict controls over the list,” said Michael O’Neill, a spokesman for New York-based American Express. “There is nothing about a personal profile or account information. Anybody who touches the list itself has to sign a confidentiality agreement.”
Customers can keep their names off a mailing list by calling or writing to American Express. But American Express does not propose to notify cardholders specifically about this new program, O’Neill said.
That raised protests from personal-privacy activists.
“Customers use the American Express card because they want a convenient way to pay for their purchases,” said David Banisar, counsel to the Electronic Privacy Information Center in Washington. “They don’t use the American Express card to become a guinea pig for American Express’ marketing campaigns.”
Banks are forbidden by federal law to sell or share the financial records of their customers. But the growing use of computers for most types of record keeping has created a new business of culling and reselling related information.
For example, while a bank can’t sell records of a customer’s checking transactions, it can compile and sell lists of customers who live in a specific area or of credit card holders who spend heavily on dining out.
There are no restrictions on the exchange of customer information among subsidiaries of a bank holding company.
Banking groups say most of their members abide by industry principles adopted last fall. Among other things, the guidelines allow a financial institution to use individual customer information only when it believes it would be useful in providing “products, services and other opportunities to its customers.”
The guidelines allow banks to share information with third parties only after telling the customer and giving the customer a chance to get off the list.
