The House Banking Committee approved legislation Wednesday that would make it a federal crime to trick a bank into divulging private customer information.
The legislation is aimed at stopping so-called "information brokers" from lying about their identity on the phone or using other fraudulent methods to obtain customer data for resale. Those who unsuccessfully attempt such fraud or request the stolen information would be punished too.
The House bill "is a response to the serious threat to consumer financial privacy from a rapidly expanding industry," committee Chairman Jim Leach said before the vote.
"This bill is pro-consumer and pro-privacy and walks a careful line between the desire of customers for ready access to information about their accounts and the need to protect that information."
In an Aug. 4 letter to Rep. Leach, Senate Banking Committee Chairman Alfonse M. D'Amato pledged to push similar legislation when the Senate reconvenes in September.
Financial institutions would not be subject to any penalties or lawsuits under the bill. Individual data thieves would be subject to maximum fines of $250,000 and five years in jail; corporate violators could be slapped with up to $500,000 in penalties.
Efforts to broaden the scope of the bill failed.
Under pressure from Rep. Leach, Rep. John J. LaFalce withdrew an amendment that would have let victims sue their bank if the institution cooperated with information thieves. The New York Democrat's proposal also would have required federal regulators to issue privacy protection regulations and enacted into law privacy guidelines adopted voluntarily by the industry.
"The legislation is unlikely to curb the worst abuses of information brokers unless we impose a modest level of privacy requirements on financial institutions themselves," said Rep. LaFalce, who also introduced the plan as a separate bill Tuesday.
A proposal by Rep. Maurice D. Hinchey, R-N.Y., to prevent banks from disclosing private information unless customers grant prior written consent was defeated in a 23-to-7 vote.
Industry representatives supported the bill and defeat of amendments that would have cracked down on banks and credit card issuers.
"We are the victims in the same vein that the customer is," said John J. Byrne, senior counsel for the American Bankers Association. "There are enough business and legal incentives for banks to protect data and consumer privacy."
