Customer privacy rights would be weakened, not bolstered, by the House's financial modernization bill, a consumer advocate said Thursday.
Though the House bill would enable banks, insurers, and securities firms to affiliate for the first time since the Depression, it would not let customers prevent the companies from sharing sensitive data, said Mary Griffin, insurance counsel at Consumers Union.
What consumers deserve, she told reporters, is an across-the-board right to prevent banks from sharing their information with affiliates or third parties.
Instead, she said, the House bill would only let customers opt-out of information sharing with third parties, and only if the data were to be used for marketing purposes. The Senate version would not even do that.
"(Congress) can't hide behind these minimalist approaches," Ms. Griffin said.
Consumers Union is urging President Clinton to press for stronger protections when House and Senate conferees meet to iron out differences between their bills.
"Our (privacy) laws have not caught up to the changes in the marketplace that make information sharing possible and profitable," the group said Thursday in a letter to President Clinton. "We therefore seek your help in crafting meaningful ... protections."
More is at stake for consumers than just reducing their junk mail, Ms. Griffin said. For instance, she said, information sharing can expose consumers to unfair sales practices.
The "most glaring" example, she said, involved Bank of America's predecessor, NationsBank, which gave its securities affiliate a list of mostly elderly bank customers whose certificates of deposit were due to expire. The affiliate then sold risky bond funds to some of those customers, allegedly suggesting that the uninsured funds were in fact insured, Ms. Griffin said.
The bank settled with the government for $7 million. But if customers had been allowed to opt-out of information sharing, they might never have been deceived, she said.
