Three weeks ago, Rep. Edward J. Markey's demands for strict privacy limits in the financial reform bill seemed to be coming from left field.

Yet a series of events last week and the veteran lawmaker's rhetorical battering convinced the House Commerce Committee to adopt a financial reform bill with stringent consumer privacy protections.

That prompted groups representing banking, insurance, and securities firms to threaten vigorous opposition in bluntly worded statements.

"The bill has problems with it that would force most, if not all, of our companies to oppose the bill," said Brian C. Conklin, acting president of the Financial Services Council.

Limits on powers for bank operating subsidiaries and insurance and securities activities compounded banking industry opposition.

"Unless these negative changes are revised, (the) American Bankers Association will oppose the bill on the House floor," chief lobbyist Edward L. Yingling said. The privacy provisions alone, he added, "clearly could kill the bill."

House leaders had sought a final vote on the floor by July 4, but the privacy fight could prompt a delay. "This may slow down the bill going to the floor until the dust settles," said Bert Ely, an industry consultant based in Alexandria, Va.

Near the end of the committee's deliberations Thursday, Rep. Markey, D- Mass., successfully offered an amendment that would require financial institutions to give their customers the right to "opt out" of having their information shared with affiliates or third parties such as telemarketers.

The measure went further than the plan backed by the committee's Republican leaders, which would have limited consumers to blocking information shared with third parties.

Rep. Markey's triumph surprised many because he lost 19 to 8 on a similar amendment in a subcommittee vote in late May. But on the eve of the full committee vote, the Minnesota attorney general sued U.S. Bancorp for allegedly selling confidential customer data to a telemarketer. The banking company has denied the charges.

The lawsuit followed the comptroller of the currency's reprimand of the industry's "seamy" information-sharing practices in a speech last Monday. ABA senior counsel John J. Byrne said the Markey amendment, if retained, would force banks to develop expensive new computer systems and could interfere with loan sales and outsourcing agreements typically used by small banks.

Also under the bill's privacy provisions, financial institutions would have to establish policies on the use of customer data and notify consumers of them. Insurance companies could not share medical information without customer permission. Customers would have the right to correct data shared with affiliates or third parties.

The Federal Trade Commission would punish violators of the privacy measures, but consumers would not be given the right to file lawsuits.

The committee defeated on a 24-to-10 vote a separate proposal by Rep. Markey that would have required customer permission, or an "opt in," before information could be shared with third parties.

The bill's next stop is the House Rules Committee, which must reconcile the differing versions passed by the Commerce and Banking Committees.

Steve Bartlett, president of the Financial Services Roundtable, said that financial companies will urge Rules to set the privacy debate aside for separate, more deliberate consideration.

The industries had originally said they would accept only mandatory privacy policies and disclosure, but that is "not politically realistic," said Leigh Ann Pusey, senior vice president of federal affairs for the American Insurance Association.

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