"If you shop using PayPal, the payments company is about to start sharing your personal data. Very personal, like your pants size.
Beginning Nov. 27, it will start compiling its trove of customer purchase data to offer to retailers so they can target their advertising. A recent privacy update reads: "Personal information we disclose includes, for example, products, preferences, sizes, and styles we think you'll like."
Financial firms collect extensive amounts of customer data -- everything from the size of your paycheck to the size of your bar tab. About 25% of large banks said they share at least some of that data with nonaffiliated third parties for marketing purposes, according to a 2020 Government Accountability Office report. Privacy disclosures show JPMorgan Chase, Citigroup and Bank of America do it, while American Express and Wells Fargo don't.
The practice is more common among financial-technology firms like PayPal and "buy now, pay later" installment-loan companies like Affirm, said Daniel Garcia-Diaz, managing director of the GAO's financial markets and community investment team.
These companies tend to have in-depth data on your transactions and shopping habits. Banks typically don't, though they can piece together your financial life across products like credit cards, checking accounts and mortgages. America's federal law allows all of them to share vast amounts of customer data with outside parties for marketing, as long as they disclose the practice and give customers the ability to opt out.
Though consumers often say they'd like to opt out, it is often not as easy as clicking an app setting. Opt-out rates were generally less than 7%, according to the GAO report.
PayPal's new policy disclosed more detail than what is required by law, data privacy lawyers say. The company, which had some 391 million active consumer accounts last year, says the practice is widespread across the consumer-finance industry.
"We want to be the most rewarding and safest way to shop and pay," Amy Bonitatibus, PayPal's chief communications officer, said. "We're committed to being transparent in how we share insights that allow PayPal and its merchant partners to personalize shopping experiences for customers."
She said customers who share data will get perks like personalized cashback offers.
Some financial companies share other kinds of data, like how much money is in your bank account. Citigroup says in its U.S. consumer privacy disclosure that over the past year it has shared or sold various types of personal information, including assets in accounts, transaction history, demographic data, geolocation data, and professional and educational information to third-party advertisers.
The bank declined to comment.
Consumers are used to being tracked in many ways online, but tend to have a higher expectation of privacy when it comes to financial institutions, says Chi Chi Wu, senior attorney at the National Consumer Law Center.
"Nobody wants to find out their bank account information is being shared without their express permission," she said. Personal financial data like transaction patterns or checking account statements can be more revealing than what people share publicly online, and highly valuable to advertisers. They can show details such as income levels and sources of earnings. They can also show how people spend on, say, child care or political donations.
How data is shared with third parties is typically disclosed in the lengthy terms-of-service agreements and privacy policies.
Disclosure requirements were set 25 years ago, and most financial companies use boilerplate language to satisfy legal requirements without adding details about how data is collected and shared, says Paul Schwartz, co-director of the Center for Law & Technology at the University of California, Berkeley, School of Law.
Combing through privacy policies to figure out how to opt out for each company can also be a hassle, since different firms have different policies.
Bank of America and Chase allow customers to opt out online. Discover and Capital One ask for a phone call.
The best way to give consumers more control over their data would be to switch the opt-out system to an opt-in one, which would require congressional action, Schwartz says.
The Consumer Financial Protection Bureau last week rolled out a new open-banking rule that allows third parties, like budgeting tools or mortgage companies, to access your banking information with user permission. Under the new rule, companies are restricted from using this data for purposes outside the service you authorize, like selling it to advertisers.
However, this new rule only applies to data that you proactively agree to share. It doesn't cover the information that banks or financial firms collect and choose to share on their own.
Since financial institutions can share customer data under federal law, the consumer watchdog can only enforce stronger privacy protections indirectly, said Edward Janger, a professor at Brooklyn Law School.
"IKEA's privacy policy gives you more protection than most banks," he said." [1]
1. PayPal to Share Personal Data, Even Your Pants Size --- Payments company is joining other finance firms in the vast market for customer data. Moise, Imani. Wall Street Journal, Eastern edition; New York, N.Y.. 29 Oct 2024: A.9.
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