The Impact of Opt-in Privacy Rules on Retail Credit Markets: A Case Study of MBNA

42 Pages Posted: 27 Sep 2006  

Michael Staten

Georgetown University - Credit Research Center

Fred H. Cate

Indiaan University Maurer School of Law; Indiana University

Abstract

U.S. privacy laws are increasingly moving from a presumption that consumers must object to ("opt out" of) uses of personal data they wish to prohibit to a requirement that they must explicitly consent ("opt in") to uses they wish to permit. Despite the growing reliance on opt-in rules, there has been little empirical research on their costs. This Article examines the impact of opt-in on MBNA Corporation, a diversified, multinational financial institution. The authors demonstrate that opt-in would raise account acquisition costs and lower profits, reduce the supply of credit and raise credit card prices, generate more offers to uninterested or unqualified consumers, raise the number of missed opportunities of qualified consumers, and impair efforts to prevent fraud. These costs would be incurred despite the fact that as of the end of 2000, only about two percent of MBNA's customers had taken advantage of existing voluntary opportunities to opt out of receiving MBNA's direct mail marketing offers. If Congress were to adopt opt-in laws applicable to financial information, the impact across the economy on consumers and businesses would be significant.

Keywords: data protection, privacy, credit, Gramm-Leach-Bliley

Suggested Citation

Staten, Michael and Cate, Fred H., The Impact of Opt-in Privacy Rules on Retail Credit Markets: A Case Study of MBNA. Duke Law Journal, Vol. 52, p. 745, 2003. Available at SSRN: https://ssrn.com/abstract=932958

Michael Staten

Georgetown University - Credit Research Center ( email )

3420 Prospect Street, NW - Suite 300
Washington, DC 20057
United States

Fred H. Cate (Contact Author)

Indiaan University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States
(812) 855-1161 (Phone)

Indiana University ( email )

107 S Indiana Ave
100 South Woodlawn
Bloomington, IN 47405
United States
8128551161 (Phone)

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