Chained and Naked

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Loans are always a good way to expose your sensitive information to a host of strangers who are scrutinizing every aspect of your life. There are more likely than not more eyes than those of a pecuniary predator perusing the information you submit to your lender. Although borrowing money often feels like placing the burden of heavy chains around your neck, how much worse would it be to be naked under those chains?

I have recently read a Privacy Disclosure Policy used by many lenders, and typical of the industry in general, which inform their borrowers of what will happen to their personal information once it is gathered by the lender. It is very likely that if you apply for a loan, or if you have applied for a loan, the same or similar language is used to the same effect in your agreement. The document is enlightening as to how much freedom lenders have in disclosing private information to third parties.

What Information is Gathered and Shared

Don’t you love the Patriot Act? There is little secret that the Patriot Act has required businesses and individuals to disclose more information than ever before to the government for so-called law enforcement purposes. The information that is required under the Patriot Act is extensive, from all bank account activity to employment records and all credit activity. The list is longer but it is safe to say that it is very extensive. In order to comply with the Patriot Act, banks, lenders and a host of others must gather this information from the individuals with whom they transact.

Your Consent is Not Needed

The disclosure states “We are required to or we may provide information about you to third parties without your consent, as permitted by law…” As broad as this statement is, it is followed by a list stating only examples of entities who may receive the informatio

Although the list is limited to credit agencies and law enforcement, two types of entities that most borrowers would expect to have their information disclosed to, there is no actual limit to what entities may receive this information. What is permitted by law may limit to some degree what information may be shared without consent, but the protection of the law is unreliable since both president Bush and Obama have authorized the use of warrantless wiretapping.

How Third Parties Might Acquire The Information

The policy also states “From time to time, we enter into agreements with other companies to provide services to us or make products and services available to you. Under these agreements, the companies may receive information about you…” The breadth of this clause places essentially no limits on who may later enter into an agreement with the lender and obtain your information for almost any purpose.

The policy further reads, “…we may provide information about you to our service providers…” That which is disclosed to service providers is limited to “that which we deem appropriate” for them to carry out their functions. This essentially limits what they can disclose to what they want to disclose, but no more. Also, the definition of service provider seems to include everyone from the phone company to auditors and possibly even the janitor.

The lender may also “provide information about you to our service providers to help us perform marketing services.” Marketing services and others within the “corporate family of offices” may also receive “all of the categories of information we gather about you.”

Thus, any related company and, if the lender hires a marketing firm, the marketing firm may now have all of your sensitive information, with no assurances as to how the marketing firm may use the data. Coupled with the sweeping language of the rest of the “Privacy” policy, there are few limits to what can be done with your private information once you have given it over to your lender.

Opt-Out

Most people will have to borrow money at some point or another during their lives. There are a very select few who can pay cash for a house and not many more who can get a private loan from their rich uncle which are not subject to the disclosure requirements of other loans. If you do have to get a loan, look for an opt out clause.

Ask your lender where the clause is specifically and make sure that you are taking the proper steps to execute this part of the agreement. An opt out clause is only like putting a band-aid on a gaping wound, but it is better than nothing and will allow you to opt out of the sharing of as much information as possible to third-parties.

Conclusion

The best case scenario is that you will be bothered with a host of annoying, unsolicited marketing, even if you opt out. The worst case scenario is that your sensitive information will be compromised due to the prolific sharing that may occur after your lender has gathered your information.

The best thing for protecting your privacy is to avoid borrowing money. Easier said than done, I know. Because the majority of people will have to borrow at some point, the next best thing is to at least opt out of unnecessary disclosures. Whenever signing any borrowing agreement, you should seek competent representation to review your specific agreement. Look for similar language in any Privacy Policy related to your loan to try and become aware of the potential risks you face in borrowing.

If you want to create a complete strategy for protecting your privacy, get the book How to Vanish.

Disclaimer: This is not intended to be legal advice. Always seek the advice of competent legal counsel when reviewing or entering into any agreement or legal relationship.

Reprinted with permission from How to Vanish.

Bill Rounds, J.D. is a California attorney. He holds a degree in Accounting from the University of Utah and a law degree from California Western School of Law. He practices civil litigation, domestic and foreign business entity formation and transactions, criminal defense and privacy law. He is a strong advocate of personal and financial freedom and civil liberties.

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