Regulator Warns Banks on Selling Customer Data

A top federal regulator warned the banking industry on Monday that it could face new government restrictions if it doesn’t curb the sale of customers’ personal financial data to telemarketers.

“The persistent failure of the industry itself to address abusive conduct creates a fertile seedbed for legislation,” John D. Hawke Jr., comptroller of the currency, said in an unusually forthright speech to bank lending officers in San Francisco.

The remarks were aimed at banks that sell customers’ personal financial data, including account balances and credit card purchases, to telemarketers who use it to pitch customers and charge them without their knowledge when they express interest in a “trial membership” in various schemes, Hawke said.

Under such arrangements, the banks receive a commission on any sales.

The Office of the Comptroller of the Currency and other agencies are reviewing telemarketing sales practices, Hawke said.

“Judging from the calls we receive from state attorney general offices around the country, the scope of the concern may be widespread,” he said.

Hawke also expressed concern about a growing number of lenders who had stopped reporting the credit balances and payment records of “subprime” borrowers--those with troubled credit histories who typically pay higher rates for loans--to credit bureaus in an effort to stop their most profitable customers from being picked off by competitors.