WASHINGTON-As fast as concerns over financial privacy protections have been gaining attention and momentum in Congress, they have become a focus of the business community as well. On May 18 the Congressional Privacy Caucus conducted its second briefing, geared specifically at Internet privacy and heard testimony from industry representatives. As firms that engage in business over the Internet, including credit union-related Web sites that are or aim to be portals- which seek to do transactions with CU members- have to concern themselves with the coming legislative showdown over privacy, so too are credit unions, CU trades and CUSOs in the mix. And all are wondering if the legislation introduced recently by Rep. John LaFalce (CU Times, May 17) spearheaded by an initiative of President Clinton and the U.S. Treasury Department has any hope of consideration in this session of Congress or will resurface in the next session. Banking Committee Chairman Phil Gramm (R-Texas) has called the delay in implementing the privacy provisions in Gramm-Leach-Bliley, even while new proposals are vetted, "nothing but politics. These proposals are not a serious effort at making banking law"said Gramm. A new trade association was formed to represent an alternative point of view before congress, even as consumer advocates claim to represent the public interest. Called the National Business Coalition on E-Commerce and Privacy, it is comprised of nationally recognized companies and associations from diverse economic sectors, including manufacturing, retail, financial services, and media (see box for list of members) . Member companies claim a vested interest in protecting consumer privacy and espouse a commitment to ensure that their business practices incorporate the rights and interests of their customers, shareholders and employees. Member companies actively use technology, the Internet and electronic transactions to supplement traditional business practices to achieve efficiencies, lower costs, and provide improved products and services, said John Schall, executive director of the group. Electronic commerce and technology are today's most powerful influences on a strong U.S. economy and global competitiveness, the trade asserts, but in order to to make full use of that opportunity for business and consumers alike, the group will work for a fuller understanding of the effects of any further privacy restricted information flow. The Coalition believes that public policy should: *Protect the legitimate interests of consumers in preserving existing legal protections while allowing the development of new electronic market channels; * Achieve a reasonable and practical balance between consumer rights to the privacy and security of their data and transactions and the legitimate interests of businesses in using information to improve the quality, efficiency and cost-effectiveness of products and services; *Maximize the ability of businesses and consumers to operate across state and national boundaries by minimizing barriers to cross-border transactions and information flow; and * Promote national and global networks that are seamless through consistent and predictable regulatory environments and technology-neutral standards. These principles were adopted in late February , said Schall. Schall said that he had attended the first briefing held by the Caucus (in March) and thought it offered a fairly one-sided view. "At least there's a lot of stuff on the industry side that's not getting any attention. Many of these privacy proposals haven't been thought-through to their practical considerations," he said. Ultimately, said Schall, the Caucus needs to hear a "more real conversation with technical people so they may understand how these transactions are handled." One measure of those considerations was made public by Thomas M. Boyd, attorney for Alston & Bird, Washington, D.C. Boyd represents the Coalition and recently authored an opinion piece in the American Banker (May 19) that was critical of the administration's privacy proposals (and LaFalce's legislation). The consumer's "opt-out" permission before nonpublic personal information could be shared with affiliated financial institutions was criticized because it would "preempt the flexibility contained in GLB," wrote Boyd. It is that flexibility, referred to as a "sham" by Caucus member Senator Richard Shelby (R-Ala.) and other privacy advocates in Congress, that the new legislation was meant specifically to address: closing the affiliate loophole. Boyd maintains, moreover, that requiring a consumer's permission (opt-in) before disclosing "identifiable health information" to a financial institution before they decide to offer a product or service may interfere with accepted risk management practices. It is just that scenario that Shelby, LaFalce, Rep. Ed Markey (D-Mass) and others in congress want to avoid: that a bank (or credit union) might deny a consumer loan or mortgage based on negative information provided by an insurance affiliate (say, a diagnosis of cancer, or some other extensive or expensive treatment profile). Boyd also objects to the legislation because it would provide for legal action (civil suits) for failure to comply with the law's policies and practices, calling it "litigation nirvana." Shelby (and the mostly Democrat congressional support for increased privacy protections) is firm in that medical information, individual spending habits and behavioral profiling should only be amassed upon a consumer's consent. The financial sector opposes that provision because they say it interferes with target marketing of new products and services. Shelby (and others) have been criticized because they accepted campaign contributions from the financial sector and then voted against GLB (he was the sole senator to vote "No."), but he maintains that consumers are plain in the directive for Congress to provide more privacy protections. Shelby believes that these protections can be instituted without destroying the gains made by financial modernization. The Caucus' briefing on Internet Privacy heard from experts in the Internet economy, including Josh Isay, Director of Public Policy, DoubleClick, Inc.; Tod Cohen, Washington Counsel & Director of Governmental Affairs, eBay Inc.; Jonathon Zuck, President of the Association for Competitive Technologies and Richard Smith, Veteran Software Programmer & Co-founder of Phar Lap Software Inc. "I have not yet taken a policy position on Internet privacy," Shelby stated, adding that hearing the business-related side of the story will help lawmakers understand how to better craft legislation. -
caburger@cutimes.com
