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

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.