Statement of 
                        Julie L. Williams
                Acting Comptroller of the Currency
                           before the 
           Committee on Banking and Financial Services
                  U.S. House of Representatives

                          July 28, 1998


     Mr. Chairman, Ranking Member LaFalce and members of the
Committee, I welcome this opportunity to appear before you today
to testify on issues relating to the proper handling and
safeguarding of customer financial information and the protection
of consumer privacy.  The OCC applauds your leadership in
addressing growing concerns about how customer information is
used -- and sometimes misused -- in the financial marketplace. 

     These concerns have been heightened by recent changes in the
financial services industry, particularly the twin trends of
mergers and advances in technology.  As banks merge or combine
with other financial firms, the amount and types of information
they have available has grown significantly.  And, companies now
can gather, analyze, and disseminate this customer data more
efficiently and use it to target customers with products and
services tailored to meet customers' needs and preferences.  This
information can result in increased business opportunities for
industry and improved products and services for consumers.

     But surveys reveal a growing uneasiness on the part of consumers
about what becomes of their personal information once it passes into
the hands of the companies receiving it. With whom is that information
shared and for what purpose?  What safeguards do businesses have in
place to prevent unauthorized individuals from obtaining personal
information and using it improperly?  Too often, consumers cannot
satisfactorily answer these questions on the basis of the information
available to them.  What they do know, based on what they read and hear
in the media, is that more and more well-meaning Americans each year fall
victim to information fraud
and identity theft, causing hardship and inconvenience.

     Mr. Chairman, the convergence of the two great trends of financial
services consolidation and the information revolution confronts us with
new challenges that need to be addressed on several fronts.  Meeting the
public's legitimate demands for convenience, safety, and privacy in
their financial dealings requires a constructive, concerted response
from Congress, the regulatory agencies, and the financial services
industry itself.  Fortunately, action is going forward on all
three fronts.


     With respect to the OCC's activities, shortly after becoming
Acting Comptroller, I convened a Privacy Working Group, which has
already begun to look into three areas: the security of bank
customer information; the adequacy of disclosure of their privacy
policies; and bank implementation of the information-sharing
provisions of the Fair Credit Reporting Act.  Our activities in
connection with these issues are described in detail in my
written statement; however, this morning I will focus on the
first issue area.

     As you have recognized, Mr. Chairman, customer information
security today poses a particular, new concern.  Bank personnel
are sometimes persuaded by unscrupulous and persistent third
parties posing as customers to divulge confidential account
information over the phone.  This information is then either
"brokered" to legal users or to others who use the information to
set up fraudulent checking or credit card accounts. 

     Most banks have procedures in place that attempt to strike a
balance that preserves the integrity of customer data without
unduly inconveniencing legitimate customers.  In the course of
our supervisory activities, the OCC examines national banks to
test security procedures for information systems.  But the
problem we see today is different from what many bank information
security systems are designed to address: the goal of
unscrupulous information brokers is not to steal the money in the
customer's account nor to corrupt a bank's information system,
but rather to steal information about the customer's account for
use by others. 

      Recently, we have been working with the other banking
agencies, and the FBI, IRS, Secret Service, and FTC to develop
guidance for the financial services industry that specifically
addresses this problem of information-brokering using "pretext
phone calling."   

     But our efforts to tackle this problem have been hampered by
the fact that, at present, there is no federal law that directly
prohibits the procurement of customer account information from
financial institutions under false pretenses. 

      That, Mr. Chairman, is why we strongly support the
Financial Information Privacy Act of 1998.   We welcome the
opportunity to work with the Committee on this initiative, which
will benefit consumers and promises to be of great assistance to
regulators and financial institutions in their efforts to
safeguard confidential customer information.

     There are other areas that may warrant attention in the
future. For example, at present, there is no requirement that
companies adopt privacy policies or disclose to consumers what
those policies might happen to be. Instead, we are -- for now --
looking to various industries to adopt meaningful self-regulatory
policies -- policies that respond to consumers' privacy concerns,
provide adequate disclosure about privacy policies, accord
consumers meaningful control over the use of the information they
furnish, include reasonable steps to protect the security and
integrity of that information, and offer some compliance
assurance mechanism.  

     Although we have seen some promising developments in the
banking industry in this area, time will tell whether industry
efforts prove effective.  If not, new steps will be needed.




     Mr. Chairman, we commend you, Mr. LaFalce and the other
members of the Committee for recognizing how important the issue
of consumer privacy is to the evolution of the financial services
industry in the next century.  We look forward to working with
the Committee to address this challenge. 
     Thank you.