The impact of opt-in privacy rules on retail credit markets

A case study of MBNA

Michael E Staten, Fred H. Cate

Research output: Contribution to journalArticle

16 Citations (Scopus)

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 for 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.

Original languageEnglish (US)
Pages (from-to)745-786
Number of pages42
JournalDuke Law Journal
Volume52
Issue number4
StatePublished - Feb 2003
Externally publishedYes

Fingerprint

credit market
privacy
credit
costs
privacy law
personal data
fraud
empirical research
corporation
profit
marketing
customer
supply
economy
Law

ASJC Scopus subject areas

  • Law

Cite this

The impact of opt-in privacy rules on retail credit markets : A case study of MBNA. / Staten, Michael E; Cate, Fred H.

In: Duke Law Journal, Vol. 52, No. 4, 02.2003, p. 745-786.

Research output: Contribution to journalArticle

@article{8db3a868f62043fb9f5e22322e4964f4,
title = "The impact of opt-in privacy rules on retail credit markets: A case study of MBNA",
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 for 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.",
author = "Staten, {Michael E} and Cate, {Fred H.}",
year = "2003",
month = "2",
language = "English (US)",
volume = "52",
pages = "745--786",
journal = "Duke Law Journal",
issn = "0012-7086",
publisher = "Duke University School of Law",
number = "4",

}

TY - JOUR

T1 - The impact of opt-in privacy rules on retail credit markets

T2 - A case study of MBNA

AU - Staten, Michael E

AU - Cate, Fred H.

PY - 2003/2

Y1 - 2003/2

N2 - 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 for 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.

AB - 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 for 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.

UR - http://www.scopus.com/inward/record.url?scp=0042158163&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0042158163&partnerID=8YFLogxK

M3 - Article

VL - 52

SP - 745

EP - 786

JO - Duke Law Journal

JF - Duke Law Journal

SN - 0012-7086

IS - 4

ER -