Update: DMers Cheer Privacy Rules as Clinton Signs Bill
Clinton called for stricter privacy provisions to be imposed as he signed the bill, saying he did "not believe that the privacy protections go far enough."
The long-awaited law allows banks, insurance companies and securities brokers to enter into each other's businesses and permits the sharing of customer information among financial institutions under the same corporate umbrella. It also sets out the parameters under which banks, insurance companies and other financial institutions can use and share information they have about their customers.
"We're very pleased that this new bill provides a nice balance between consumer privacy and common-sense business practices," said Wayne Gattinella, president of Memberworks North America, Stamford, CT, which markets a variety of products to bank customer lists. Gattinella noted, however, that he expected politicians to "continue to use privacy to advance their own agendas."
Although the law prevents banks from providing account information to companies like Memberworks for marketing purposes, the banks can analyze their own customers' purchasing histories, develop lists based on that information and send the list of names and phone numbers to Memberworks. Then Memberworks can send the list of the customers who agree to purchase products - generally membership club enrollments that offer discounts on certain products and services - back to the banks, which can then either bill the customers themselves or attach the account information for Memberworks to complete the billing process.
"That's the way we've been doing it for the past several months anyway," Gattinella said, adding that "virtually all" of the banks Memberworks does business with already comply with the new law.
John R. Camillo, senior vice president and general counsel at JCPenney Direct Marketing Services, Dallas, said the new law helps marketers by making the privacy provisions more clear.
"Overall, I think the effects of the bill will be positive for companies like JCPenney because it will help clarify the circumstances under which nonpublic personal information can be shared," he said.
JCPenney, which offers insurance and other products to bank customers and JCPenney credit card customers through statement inserts and telemarketing, will continue to be able to receive information about customers' purchasing histories under the new law because it also is a financial institution. It cannot share that information with third-party marketers that are not financial institutions such as telemarketers, however.
Although the law calls for the Treasury Department to study banks' protections of consumer privacy, Clinton took an extra step in calling for the Treasury Department to work with the National Economic Council and the Office of Management and Budget to develop new legislation to introduce to Congress next year.
Meanwhile, Reps. Edward J. Markey, D-MA, and Joe Barton, R-TX, introduced H.R. 3321, the "Consumer's Right to Financial Privacy Act," seeking to change the financial reform bill to mandate an opt-in scenario in which consumers would have to give their permission before their information could be shared. It also has other provisions to strengthen the privacy protections for consumers. Identical legislation was introduced in the Senate by Sens. Richard Shelby, R-AL, and Richard Bryan, D-NV, in the form of S.1903.