(Hey, Bill: this shd increase Ur Honor Board list by 50-fold!!) THE OCEANSIDE NORTH COUNTY TIMES; SUNDAY, MARCH 21, 1999 [CALIFORNIA]
"Banks reveal personal records for welfare project"
STEVE PEREZ STAFF WRITER
In a move that has amazed some privacy experts, more than
100 financial institutions throughout the state have turned over
detailed information about customers' account records to the
Franchise Tax Board. The reporting is required as part of
federal welfare reform aimed at tracking down deadbeat parents.
Though institutions such as banks have the option of performing
the search themselves, at least one local banker said he turned
over all customers' records because of legal concerns.
Representatives for two of the larger banks in the state, Wells
Fargo & Bank of America, were unable to say how they complied.
The reporting requirements are so new, spokeswomen contacted
were unaware of them and asked for more time to research the
issue. Other banks have expressed distaste for the new task.
The data-match program came with the passage of federal welfare
reform in 1996, said Jim Shepherd, a state Franchise Tax Board
spokesman. The landmark law included reporting requirements
covering all financial institutions, from banks and credit unions,
to companies that hold safe-deposit accounts and money market
accounts, he said.
Under the law, enforced this year in California for the first time,
financial professionals had to snoop through their list of customers
for deadbeat parents or turn computer information over to the state
and let it do the search. Shepherd said the state has strict security
controls regarding the data and penalties for unauthorized access.
The computer records obtained are either returned to the institutions
or erased, he said.
Still, Dale Kelly Bankhead, a spokeswoman for the San Diego
chapter of the American Civil Liberties Union, remains worried
about the potential for abuse. "It's just another step down the
road to a Big Brother society," Bankhead said. "Pretty soon
the government's going to have a dossier on each one of us
in a computer someplace."
Evan Hendricks, editor of the Privacy Times newsletter in
Washington, D.C., said he was amazed so many institutions
elected to send customer information to the state. "It's bad policy
to leave this option to the banks in the first place," Hendricks said.
"Some of these people clearly have never been suspected of
being a deadbeat, and it sounds to me like there was no notice
or consent from the banks before they sent the information off.
Once customers find out a list of their accounts have been
turned over to a state agency, I just have to believe that's going
to produce quite an outcry."
California residents are being frisked electronically thanks to
enabling state legislation passed in 1997. The measure, writ-
ten by Assemblyman Antonio R. Villaraigosa, D-Los Angeles,
now the speaker, ordered the state tax board to oversee the
program. The board reported that as of March 17,
256 institutions doing business in the state had complied with
the so-called Financial Institution Data Match.
Of that group, the board said, slightly more than half, 130,
elected to send to the state computer files containing exten-
sive account information about all their customers. The board
said an additional 126 opted to perform their own search
against a computer list of people who owe child support and
report potential cases back to the state. And 500 institutions
have applied for temporary waivers from the program.The state
allows limited time waivers for such reasons as dealing with
the computer problem caused by arrival of the year 2000.
Shepherd declined to release the names of the institutions, the
methods they used to comply or which ones requested waivers,
saying he had to research the legality of divulging that information.
But state tax officials expect all the financial institutions to comply
one way or another by the end of the year. He insisted that
the personal financial information is safe and won't be used
for any other purpose than collecting delinquent child support.
"I think we're as concerned and sensitive to that (privacy) issue
as any outside person looking in at it," said Shepherd.
Privacy advocates react
That tax authorities even possess people's bank records now
startles some privacy experts. "This is really astounding," said
Hendricks. He predicted other agencies would try to get their
hands on such information for their own uses, saying that
expecting them not to was like "trying to roll a lamb chop past a
wolf."
"It's very scary," said the ACLU's Bankhead. Like many inter-
viewed for this story, Bankhead was unaware the requirement
was being enforced and that actual bank records were being
turned over until informed last week by the North County Times.
"As you know," Bankhead said, "financial information contains
a whole host of other personal information that, really, the
government has no business knowing about each of us.
Some bankers, sensitive to customer confidentiality issues, said
they were yet again being forced to assume the role of collections
agent without any compensation from the state.
Millions anticipated
State and local officials charged with collecting child support are
looking forward to a windfall. The state expects to recover up to
$6 million in child-support funds under the data-match program
and to save up to $1.6 rnillion in welfare costs during the first
full year of implementation. More than $8.7 billion in unpaid
child support is owed in California alone. "Our anticipation is
it's going to increase collections on those cases which have
been extremely difficult to collect in the past," said Lucia
Edmondson, spokeswoman for the child support unit in the San
Diego County district attorney's office.
Though several North County banks report they are already obeying
the law, the county isn't participating in this data-exchange program.
Edmondson said the county's child support unit has some "pro-
gramming issues" to work out. Despite the alarms sounded by
privacy rights advocates, a federal banking attorney called the
whole process a "non-event." "This is going to be happening
unless Congress changes its mind and rewrites the law," said
Gordon Glaza, regulatory counsel for the American Bankers
Association in Washington, D.C. "In theory, the records of someone
with no debt against them will not be retained. They'll swing right
through the account, and that's the last they hear of it."
Unhappy bankers
Representatives for larger banks, such as Wells Fargo and Bank
of America, said they were unable to tell the North County
Times how they were complying with the law on Friday. Spokes-
women for the banks said they had never heard of the datamatch
project. Those local banks that discussed the program were not
pleased with what they viewed as an added enforcement role.
Their comments about the issue were guarded.
"No one wants to come out and say they are for deadbeat parents,"
said Mark Christian, first vice president at Rancho Santa Fe
National Bank. "But there are broader implications here, and I
think it sort of sneaked up on everybody without much fanfare
after being buried in welfare reform."
A representative of Temecula Valley Bank, who said he turned
over all the requested information to the state, said he did so
reluctantly but feared legal liability if his bank happened to
miss a name. Don Pitcher, the bank's chief financial officer,
said the reporting program took him by surprise. These days,
he said, banks are already required to report all kinds of infor-
mation to authorities for various reasons. That includes infor-
mation about new hires, interest income and cash transactions
over $10,000.
The Franchise Tax Board's 31-page booklet detailing the plan
hit Pitcher's desk late last year. It gave his bank and other
financial institutions throughout the state until Feb. 28 to probe
customer records or let the state do the work. "We decided not
to do the match ourselves," Pitcher said. "We don't want the
liability if we miss a few." This month, Pitcher noted, a public
furor erupted in another context regarding the issue of govern-
ment access to banking records. The so-called "Know Your
Customer" rules were proposed by federal bank regulators to
combat money laundering and drug trafficking.
Consumers sent more than 70,000 comments, all negative, to
a federal site on the World Wide Web. The correspondents were
responding to proposals that among other things, required banks
to track customers' activities and establish a federal financial
database for use by police and the Internal Revenue Service.
One bank's experience
In the child-support program, Rancho Santa Fe National Bank
elected to do its own matching, though it's a more costly proce-
dure. The new federally mandated searches are more thorough
than earlier state orders involving collection of money from
deadbeats, bank officials said.
The data-match program requires institutions to run checks on
every account, even smaller ones like non-interest-bearing
checking accounts and tiny savings accounts that generate
less than $10 in annual interest.
Chistian said Rancho Santa Fe National Bank uses a
banking software program created by a company in Lincoln,
Neb. That company offers two new software modules that help
bank computers generate the required data. The one allowing
the bank to perform its own check against the state's list of
deadbeats cost $8,000, twice as much as the one that would
create the data allowing the state to do the work. "It's easier
to make a dump of the whole database and send it off," Christian
said. "But once that data is gone out of your control, the bank
can no longer account for what is happening. I'm not comfortable
losing that accountability to my customer." He advised cus-
tomers concerned about the issue to press their own institu-
tions for answers and switch to other companies if they don't
like what they hear.
Rod Jones, chief executive officer of North County Bank, said
it was interesting so many institutions elected to turn over all
their account records to the state. North County Bank elected
to perform its own search, Jones said, but it wasn't something
he enjoyed. "I disagree with most of the laws that require us
to enforce these kinds of things," he said. "There are money-
laundering laws, and now this. Banks frequently are called
upon to do things I think are costly and I don't think neces-
sarily these are roles that banks should be playing, but we
don't have much choice."
AT A GLANCE
Here is a brief look at the program to collect money from
ccounts of so-called deadbeat parents in California.
• Name: Financial Institution Data Match
• What It Is: The systematic government scanning of per-
sonal financial accounts under a program mandated by
the federal government's welfare reform of 1996. The
goal is to increase childsupport collections.
• What It means: Starting Feb. 28, 1999, and every 3 months
after, everyone with an account in any financial institution
in the state was to be checked against computer records
of so-called "deadbeat" parents. The state's tax collector,
the Franchise Tax Board, is responsible for managing the
program.
• Accounts searched: According to federal law, accounts
at banks,
savings and loans,
credit unlons,
Insurance companies
and money-market mutual fund.
Safety deposits are also included.
• Compilance: (1) The "all accounts" method, in which
institutions submit computer files containing ALL open
accounts each quarter to the state, which then searches
the records. (2) The "matched accounts method," in which
institutions check their accounts against a com-puterized
list generated by the Franchise Tax Board each quarter & report
back.
• How it's working: Of 256 institutions reporting statewide,
130 used the "all accounts" method, sending to the state,
account information that ranges from the customers' names,
types of accounts, Social Security numbers, addresses,
balance details and dates of birth. The remaining 126 financial
institutions use the "matched accounts method," which requires
them to send to the state any records of matches to the
delinquent-parent information received from the state.
• If there's a match: The Franchise Tax Board sends a written
"order to withhold" to the financial institution, which notifies
the customer of the order and gives the customer 10 business
days to pay the debt, voluntarily. If the customer doesn't pay
in full, or make payment arrangements with the Franchise Tax
Board within that time, the institution is required to send the
funds directly to the state. The first orders are scheduled to
be dispatched in April.
*********
No, my ex-won't be up there...our youngest is now 23 going on 40(grin)
Will someone forward your Honor Board to the California Franchise Tax Board for cross compliance check? T'would be an interesting use of
publically posted information....hmmmm
O/49r |
