Update: Privacy Advocates Seek Stronger Protections in Finance BillA diverse group of public advocates and two members of Congress this week called for stronger privacy provisions to be placed in the Financial Modernization Act, the sweeping banking reform bill that is being reconciled in a joint House-Senate committee.
House and Senate leaders this week released a draft of the legislation that retains most of the privacy provisions introduced by the House in H.R. 10 earlier this year.
"The bill before the conference committee does not protect consumers, but significantly increases the ability of financial institutions to abuse and harm consumers," said Sen. Richard Shelby, R-AL, in a press conference the day after the draft of the bill was made public.
Joining Shelby at the press conference were Rep. Edward Markey, D-MA, and representatives from several other groups, including Ralph Nader of Public Citizen, Phyllis Schlafly of Eagle Forum and Nadine Strossen, president of the American Civil Liberties Union.
The coalition called for the adoption of a "consumers right to privacy amendment," which would change the bill from its proposed opt-out stance on the sharing of customer information with third parties to an opt-in structure, in which customers would have to give permission for information about them to be shared with third parties. The group also wants banks to disclose how they will use the personal information they collect and wants customers to have access to that information to ensure that it's accurate.
Much of the concern of the groups centered around the sharing of medical information between banks and insurance companies, but the legislative leaders removed provisions related to medical privacy from the bill for possible consideration as a separate amendment.
Banking-industry advocates, who support the legislation in its current form, have said they would not support legislation that requires consumers to give their permission for their information to be shared with third parties. Banks use that data to market additional products and services to their customers, often through third parties.
The Conference Committee was scheduled to begin considering amendment proposals last wek, with plans to bring the legislation -- which would allow banks, brokerages and insurance companies to enter each others' businesses -- before the full House and Senate by Oct. 20. President Clinton has threatened to veto the bill, but the committee's leaders indicated that they would seek to make the necessary changes to garner presidential approval.
Concerning the legislation in its current form, Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association, said the draft appeared to address the DMA's concern that the bill's privacy provisions discriminated against telemarketers as opposed to other direct marketers, but it did not address the association's concern about the sharing of encrypted account numbers.
The current form of the legislation, which represents a compromise of S. 900 and H.R. 10, places restrictions on banks' sharing of customer account numbers with third parties. The DMA maintains that such information can be used to verify customers' identities for the prevention of fraud if it is encrypted to prevent misuse.
"We are disappointed and will try and convince some people to try and allow that," said Cerasale.
Charlotte Birch, a spokeswoman for the American Bankers Association, Washington, DC, said the ABA was "pleased that the bill was moving toward the center," although she expressed concern that additional privacy provisions could be added in the form of amendments.
She noted that the newly drafted bill also relieved some of the privacy pressure on smaller, community banks by allowing them to share customer information with third parties that perform certain functions for the banks that larger banks often handle within their own operating subsidiaries or affiliates.