North Dakota Voters Reject Referendum To Allow Banks to Sell Customer Information Without Written Permission

In the nation’s first vote on bank information privacy, North Dakota’s voters handily rejected a state law on June 11, 2002 that had allowed banks to sell customer information without written permission from the customers. It is reported that the June 11, 2002 voter initiative resulted in seventy-four percent voting to repeal the law, and twenty-six percent in favor.

The rejected law, which had gone into effect in North Dakota in July 2001, embraced a pro-bank "opt-out" approach. It required financial institutions to notify customers of their intention to sell their information, but allowed such sales unless the consumer affirmatively opted-out. Before that law, North Dakota required written opt-in by consumers. "The bankers are working on the assumption that their customers' information is theirs to do with as they please," said Charlene Nelson, a leader of the effort to repeal the current law. "This information belongs to us."

Banks often share the information to determine the credit risk of a given customer, said Jerry Cerasale, Senior Vice President of Government Affairs at the Direct Marketing Association. "It's unfortunate because banks and credit card companies in North Dakota won't be able to share information with each other and that might increase the prices and interest rates on loans," he said. "Of course we’ll live with it." Because the measure was a ballot initiative and not a bill in the legislature, the DMA did not lobby in the state about it, nor did it try to influence voters, Cerasale said. "We didn't launch any public relations campaign," he said.

Why This Matters: The North Dakota vote is alarming. It illustrates the likely result when questions are put before voters that belong before legislators who can consider all the ramifications of their actions. Imagine if receiving junk mail or watching commercials on television were put to a vote by consumers. It remains to be seen whether this isolated vote in North Dakota will influence the 2003 Congressional reauthorization for the federal Fair Credit Reporting Act (FCRA), which allows financial services organization to share customer data with third party marketers.

This article originally appeared in ADLAW By Request, a publication of Hall Dickler Kent Goldstein & Wood LLP.