The banking industry on Monday took a compromise proposal on privacy to Capitol Hill that would let financial companies share information freely among affiliates but permit customers to block data transfers to third parties.

Under the plan, banks, insurance companies, and securities firms would have to create privacy policies and conspicuously disclose them to consumers. Customers would have an opportunity to stop information sharing with telemarketers or other third parties.

However, the plan would eliminate a key measure in the financial reform bill adopted by the House Commerce Committee on June 10 that would let customers block most information sharing among units of the same parent company.

As the full House nears a vote on reform, top banking executives and others are forming a common front against proposed privacy protections that they consider overly burdensome. They have vowed to oppose the legislation unless the measures are watered down along the lines of the industry compromise.

"The industry is going to completely turn on the bill if it bans affiliate information sharing," said Joe Belew, president of the Consumer Bankers Association.

"That is the unified position of the financial services (industries)" said Steve Bartlett, president of the Financial Services Roundtable. "We can protect consumers and still let the financial services industry offer a full range of consumer choice."

Also under the compromise, medical information could not be disclosed to affiliates or outside companies without a customer's permission. And it would become a federal crime to trick, or attempt to trick, a bank into divulging confidential data.

The plan calls for creation of a commission to study broader privacy issues before lawmakers act on them.

Mr. Bartlett, Mr. Belew, and lobbyists from large banking companies such as Citigroup Inc. and Chase Manhattan Corp. presented the compromise to staff members of the House Banking, Commerce, and Rules committees.

Speaker J. Dennis Hastert wants the full House to vote on the reform legislation next week, but the leaders of the Banking and Commerce committee must first reconcile their vastly different privacy provisions.

Congressional sources said they are still studying the industry's proposal.

"There are lots of proposals being discussed, but nothing is final," a House Banking spokesman said. "We are trying to find the middle ground, but we are not there."

But Edward L. Yingling, chief lobbyist for the American Bankers Association, said House leaders are looking for a solution that mirrors the industry plan. Consumers could prevent their bank from disclosing information to third parties but a bank could freely share that data with its affiliates.

Bankers, he said, could accept such a deal to get broader financial reform-but grudgingly.

"It's possible we could live with a compromise, depending on the language," Mr. Yingling said. "Our basic argument still is this should go in a separate bill" because the issues are too complex and require more study.

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