Israel's Banking Regulator Proposes Shifting Customers to Digital Mail Without Consent

Israel's banking regulator, part of the Bank of Israel, has proposed a significant shift in how banks communicate with customers, allowing them to automatically move clients to digital-only notifications without explicit consent. Under the proposed draft, banks could send important alerts, such as credit limit cancellations, account restrictions, mortgage rate changes, or legal actions, via their apps, online portals, or SMS messages. Customers who wish to continue receiving physical mail would need to actively request it, reversing the current default where banks send mail unless a customer opts for digital. This change in default settings is seen as powerful, as most individuals do not alter them. The Bank of Israel itself noted in the draft that even regular digital users often continue receiving mail simply because they never opted out. The proposal is expected to disproportionately affect vulnerable populations, including the elderly, new immigrants, and those who primarily use their phones for calls or rarely check their message centers within banking apps. For these individuals, physical mail serves as their sole notification method, and missing a letter could lead to irreversible problems.

This proposed change starkly contrasts with a 2020 decision where the Ministry of Justice, in conjunction with the Bank of Israel, ruled that credit card companies could not unilaterally switch customers to digital statements without their explicit consent, even with prior notification and an option to revert. The 2020 ruling allowed exceptions only under strict conditions, such as a customer's prior explicit agreement and consistent engagement with digital communications. The new draft is broader, covering all bank notifications and not requiring notification before the switch occurs. It also appears to disregard previous Knesset committee conclusions from January, which recommended against moving customers to digital mail without explicit consent and maintaining printed mail as the default. Despite a letter from Committee Chairman MK David Biton to the Governor of the Bank of Israel in July stating that the Bank of Israel would not proceed without committee consensus, the draft was published shortly after recent elections, before new Knesset committees were formed and without apparent consensus.

While the draft includes some protections, such as exempting customers aged 70 and above and those who haven't used digital platforms in the past year, critics point out loopholes. Age is checked only at the time of transition, and a single login to a digital platform within a year suffices to be considered a digital user. Furthermore, the increased reliance on digital messages, including potential links, raises concerns about distinguishing legitimate bank communications from phishing attempts, a risk not explicitly addressed by prohibiting links in notifications. Other countries, like the US and Canada, require explicit customer consent for digital delivery of legally mandated documents, and the EU mandates a lengthy notification period and a free paper option for investment services. Legal experts propose that if the shift proceeds, it should include a mandatory two-month advance notice via mail, a clear opt-out mechanism, stricter age-related provisions, and the prohibition of links in notifications to mitigate fraud risks.