Banker Dons a Black Hat

• Email
• Share
• Print

Hmm. Could there be a reason that bankers always played the bad guy in early American films? Judging from congressional testimony going on in the wake of recent identity thefts at ChoicePoint (NYSE: CPS), Reed Elsevier (NYSE: ENL), BJ's (NYSE: BJ), and Retail Ventures (NYSE: RVI), one suspects there is.

You'll notice that one prominent name got left off the list above -- the rogue of the hour, Bank of America (NYSE: BAC). There are two reasons for its absence. First, we're still not quite sure whether BoA was a victim of identity thieves or its own incompetence. To date, the bank is still saying it simply "lost" the backup tapes containing information on as many as 1.2 million customer accounts.

That, however, is not what earns BoA the "rogue" moniker. To earn that, the bank added insult to the injury of losing its customers' records. In written testimony to the congressional committee investigating the security of customer data, BoA argued that the law should not require companies to inform their customers of security breaches that put their data at risk. Rather, BoA suggested that it should be left to the companies to decide whether informing customers of a breach is "appropriate." BoA's reasoning is that if it is required to repeatedly inform its customers of numerous breaches of its security, a "boy who cried wolf" syndrome may set in. Customers, numbed by numerous false alarms, might ignore the warning when it really counts.

Thank goodness that was not the only point of view expressed to Congress. Two of the recent victims of ID theft, ChoicePoint and Reed Elsevier's LexisNexis subsidiary, testified in favor of regulations requiring notification in case of security breaches. ChoicePoint's position was the most aggressive, calling for notification in case of "any unauthorized access" of an individual's data. LexisNexis fell just short of that standard, saying disclosure should be required in cases of "substantial risk of harm to consumers." Both positions appear to be an improvement over BoA's "just trust us" policy.

For more on this story, read why legislation is almost certainly on its way in "No rest for the Wicked."

Fool contributor Rich Smith owns no shares in any company mentioned in this article.