Leahy, LaFalce to introduce President's privacy package; trades set to oppose it

WASHINGTON-Saying, "we are what we buy" and our buying habits should be no one's business but our own- and that medical treatment histories should not be shared between the insurance and banking affiliates of newly created financial conglomerates- President Clinton announced on April 30 he would soon send stricter privacy legislation to Congress. The administration's and Treasury's proposed package has found willing members of Congress to introduce it-Senator Patrick Leahy (D-Ver.) and Rep. John LaFalce (D-N.Y.)- but it has already garnered an avalanche of criticism. In a twist of Mark Twain's witticism about the weather, "Everyone complains about privacy, but no one does anything about it," proponents of both sides of the issue can only agree that it merits concern and that people are certainly talking about it. Two camps have formed on either side of the argument: the bank, insurance, securities and credit union trade groups oppose additional protections, claiming that provisions of the Gramm-Leach-Bliley Act (GLBA) are sufficient, are still to take effect and are costly, while consumer advocates like the U.S. Public Interest Research Group, the Consumer Federation of America, Consumers Union and others say the time is now to close loopholes within GLBA and add deeper protections to medical histories and buying habit databases. The sound and fury over privacy comes as the NCUA board will vote (at press time) on the rules implementing GLBA on May 8, becoming the first financial regulator to do so. NCUA Board Member Yolanda Wheat told Credit Union Times that "the right side of this issue is to be on the side of the consumer. I think credit unions should be in the forefront by telling members, `Look, we value your privacy and we won't do anything with this information unless you say we can. Of course, there has to be a balance of the costs involved, but speaking for a moment as a consumer and a CU member myself, I would personally be willing to accept the small charge you may have to pass along in order to protect my records. I think, if given that choice, knowing how intrusive and massive an invasion other industries will be undertaking, that members may look upon credit unions as bastions of trust. Telling members the facts and giving them a choice can only elevate credit unions in the eyes of consumers." Dennis Dollar offered a concern for the third party marketing efforts of credit unions. "Yes, there's a growing concern about privacy and financial and medical records, and a particular worry about the Internet. Members want privacy, but they also want to know if they are eligible to get discounted auto insurance rates. A lot of CUs, especially smaller ones, must work with third-party vendors to market those and other products. As long as we don't throw the baby out with the bath water, I'm for protecting privacy. If we as regulators do not meet this challenge, I'm sure Congress will revisit the issue." Both Leahy and LaFalce have championed several other consumer-related legislative packages, specifically, LaFalce's efforts to curb payday lending and predatory mortgage lending, (CU Times, March 15, April 12) and Leahy's repeated attempts to protect medical records (CU Times, March 3, 1999). Both members of Congress witnessed the privacy battleground that surrounded passage of the financial modernization bill. LaFalce maintained then that the manner in which financial institutions handled privacy issues would take on increasing importance as consumers became aware of the impact of consolidation in the industry, and sources say he privately thought the law did not go far enough. Recently, he affirmed that belief. "We worked closely with the President to enact a terrific financial privacy bill, certainly the best that could be enacted at that time. It was not intended to be the ultimate solution on financial privacy, but a first step" said LaFalce on May 1. President Clinton outlined his proposal during a commencement address at Eastern Michigan University in Ypsilanti, Michigan. He stated that "In this Information Age, we can't let new opportunities erode old fundamental rights. We can't let breakthroughs in technology break down walls of privacy. Our response to this challenge will affect the lives of every single member of this graduating class and the lives of your children." Some of the privacy issues presented by information technology are "so sensitive they must have the protection of law," said Clinton. The challenge to financial privacy coming from the Information Revolution merits new protections, he said. "We are moving from cash to electronic transactions. A bank is no longer just a bank, it's often linked with an insurance firm, a broker, a travel agency. All this helps to give us added convenience, lower prices and more choices," he said. But it also mandates a new definition of what is private and what is not private." The proposal will include a two-tiered level of information sharing, so that the benefits of speedy check, credit and debit card processing as well as beneficial cross-marketing will continue, while offering consumers a choice to "opt-in: or give permission to share more tenderly-held information, such as their medical histories and their complete buying habits. (At press time, the package was not yet available for analysis.) "The life insurance company could share information about your medical history with the bank without giving you any choice in the matter. The bank could share information from your student loans and your credit cards with its telemarketer, or its broker, again, without giving you any choice. I believe that is wrong," Clinton told students to roaring applause. CUNA termed the proposal's timing as "awkward" stating that it's too soon after new rule implementation to offer changes. Bank lobbyists said the idea would be "dead on arrival" on the Hill. But LaFalce promised to do all he could to get a vote this year, and if not, next year. "While business may have reservations about this legislation, they should realize that they oppose greater privacy protections at their own peril." -caburger@cutimes.com