January 14, 2009
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News: Mind Your Behavior; CC is Watching.
There's a saying: "Just because you're paranoid, it doesn't mean ‘they're not watching you". We don't normally apply that to the credit card industry but, perhaps we should. Most of don't spend all of our time wondering how our credit card lender ‘lucky-guessed' that we were buying hair plugs. Maybe a wife would be curious as to why the family's monthly credit card statements are always trying to sell her on lingerie auctions, though.
Referred to by the credit card industry as ‘MCC' (merchant category code) designations, lenders do track these four-digit numbers that denote purchases from different types of businesses as to what merchandise or service each merchant sells or provides. For one thing, this is how a credit lender determines how to assess rewards points for their promotional programs. They can't name the specific product or service that is purchased because they only receive from the merchant where the purchase took place, the merchant's name, city and state, and the purchase amount. The merchant will also provide a reference number for the credit card transaction. They can tell you the type of business, such as ‘pawnshops', ‘ massage parlors', ‘escort' or ‘dating services'.
Is this illegal or new? Certainly not. It is practically as old as credit cards, themselves. As far as the law goes, federal financial privacy laws do regulate the sharing of personal and payment information outside of their internal networks. The law also requires that banks and lending institutions distribute copies of their privacy policies to card holders annually. Everything they can do externally is written there in the fine print. As to what they do with it internally, that information is not released to the public. The law does not normally govern this. There are some exceptions to this, however. Cases like fraud investigation and government-controlled purchases are some of the exceptions.