Many of the nation’s largest banking and insurance firms supported the passage this month of the Gramm-Leach-Bliley Act, but at least one banking trade group was opposed to the consumer privacy provisions in the legislation, which essentially allows banks, insurance companies and securities firms to merge and share information about their customers freely.
The Independent Community Bankers of America, Washington, favored the banking legislation but said the privacy provisions unfairly discriminated against smaller banks.
“In total, we supported the legislation, but we had to hold our nose on some of the provisions, and privacy was one of them,” said Kenneth Guenther, executive vice president at the ICBA. “The legislation gives the largest financial institutions a total free pass in terms of transferring information to their affiliates, while we are going to be facing more regulations on our third-party transactions.”
He said the full scope of the burden on small banks will not be known until the final legislation is drafted, but, at a minimum, community banks will now have to provide opportunities for customers to opt out of having their information shared with all third parties for marketing purposes. At the larger, conglomerate banks, all customer information can be shared freely among different divisions without giving customers an opportunity to opt out.
“The big banks were the sinners on the privacy front, and, ironically, it ends up that their burden is far less significant than that of the community banks,” Guenther said.
