Suit Accuses U.S. Bancorp of Peddling Data

U.S. Bancorp violated federal and state consumer protection laws by providing customers’ financial information to a telemarketing firm, the Minnesota attorney general’s office alleges in a lawsuit.

The suit, filed by Minnesota Atty. Gen. Mike Hatch, alleges that U.S. Bank, the country’s 13th-largest bank and a unit of Minneapolis-based U.S. Bancorp, sold information on more than 900,000 bank and credit card customers to a telemarketing company for $4 million plus commissions. The telemarketing firm, MemberWorks Inc., is not named in the lawsuit.

“When a bank hands out this information to the highest bidder, it has to answer to its customers,” Hatch said in a statement. The suit seeks a jury trial and demands that the bank pay civil penalties to consumers.

In addition to having California credit card customers, U.S. Bancorp has branches in Northern California, and recently agreed to buy Newport-Beach based Western Bancorp, owner of Santa Monica Bank and Southern California Bank.

Hatch spokeswoman Jennifer Freeman said that 600,000 U.S. Bank depositors and 330,000 credit card account holders nationwide were affected by the bank’s sale of the information.

U.S. Bancorp denied that it violated customer privacy rights or Minnesota consumer protection laws. “These allegations are false,” said U.S. Bancorp spokesman Donn Waage. “Our direct-marketing program is very carefully managed. Our partners at no time have access to customer accounts.”

The case could have repercussions for other banks and other states, Hatch said.

Federal agencies are reviewing such telemarketing sales practices, Comptroller John Hawke Jr. said earlier this week. “Judging from the calls we receive from state attorney general offices around the country, the scope of the concern may be widespread,” Hawke said.

Also, Congress is debating how to improve consumers’ financial privacy as part of the bank modernization bill. The Senate Banking Committee held the first of what is expected to be several hearings on the matter.

“The question here is not whether we should do anything. It’s what we should do,” Sen. Paul S. Sarbanes (D-Md.) said.

House Commerce Committee member Edward J. Markey (D-Mass.) is insisting on a tougher privacy policy to prevent banks from sharing consumers’ private information against their will. While he supports financial modernization generally, he said, “I don’t want a bill if that’s the price we have to pay to enter the cyberworld of the 21st century.”

Some lawyers say that current state laws might be stronger than federal statutes in protecting consumer privacy. Other states could join Minnesota with lawsuits in the U.S. Bancorp case, because it involves customers in 18 states, Hatch said.

The suit accuses U.S. Bank of violating the federal Fair Credit Reporting Act and engaging in consumer fraud and deceptive advertising by providing MemberWorks with customers’ Social Security numbers, account balances, names, addresses, checking and credit card numbers, average account balances, finance charges and credit limits, Hatch’s statement said.

It also accuses U.S. Bank of violating federal law by allowing MemberWorks to automatically withdraw payments from a customer’s checking account without prior written authorization.

Hatch said his investigators found cases in which U.S. Bank customers were charged for travel and other services even though they claimed they never talked to a MemberWorks representative. MemberWorks used the lists of bank customers to sell them memberships in a health program that provided discounts on dental care and other medical services.

Hatch also alleges that U.S. Bank approved telemarketing scripts containing deceptive information. If a customer asked whether U.S. Bank provided credit card or checking account numbers to MemberWorks, the script instructed the telemarketer to say, “No, I personally do not have your account number.”

The bank disputed these charges, saying that no unauthorized charges were made to customer accounts. When customers agree to purchase a product, their approval is voice-recorded with their permission, the bank said in a statement.

Spokesman Waage added that about 70,000 U.S. Bank customers bought dental care, travel packages and other consumer products through companies such as Hilton Hotels, Barnes & Noble, and Kiplinger’s Personal Finance. “We are proud of these affiliations,” he said.

MemberWorks takes “all precautions to ensure that all of our sales practices meet the highest standards in the industry,” said Wayne Gattinella, MemberWorks’ senior vice president for consumer affairs. All MemberWorks programs come with a 30-day free trial membership and consumers can cancel and receive refunds, he said.

U.S. Bancorp has $76 billion in assets and about 1,000 branches in the Midwest and West. The company is a product of the 1997 merger of First Bank System and U.S. Bancorp of Oregon.

U.S. Bancorp shares fell 63 cents to close at $31.75 Wednesday on the New York Stock Exchange.

* DATA FOR SALE: Major banks in California say they sell customer data to third parties. C7