WASHINGTON - Financial services firms are confident they can defeat President Clinton's tough new privacy legislation but are increasingly concerned that the issue will impede other bills backed by the industry.

For example, legislation letting banks pay interest on business checking accounts is being stalled on the Senate floor by Sen. Richard H. Bryan, D-Nev., who wants to tack on a privacy-related amendment.

The White House bill is "dead on arrival," said American Bankers Association chief lobbyist Edward L. Yingling. "The danger, long-run, to the industry is not so much a frontal assault but privacy amendments tacked on to other issues we care about."

"We share that concern," said Marc Lackritz, president of the Securities Industry Association. "There are some very vigorous privacy zealots who I'm sure will introduce fairly radical and dramatic privacy legislation at every opportunity."

(Bankruptcy reform and the digital signatures bill are considered safe from tinkering because they are so far along in the legislative process.)

The Clinton administration is expected to unveil its bill this week, but the President gave a preview Sunday in a commencement address at Eastern Michigan University. He asked Congress to take a step beyond the Gramm-Leach-Bliley Act and require financial firms to give customers a chance to block data sharing with affiliated companies. The financial reform law he signed last November requires only that companies let customers "opt out" of data sharing with third parties.

President Clinton also advocated a tougher law for medical information and detailed spending data. A financial company would have to get a customer's advance permission to share such data in any way.

And finally, the President said consumers must be given a chance to correct mistakes in the data a financial company compiles.

"Your information doesn't belong to just anyone; every consumer and every family deserves choices about how their personal information is shared," the President said.

New rules implementing Gramm-Leach-Bliley's privacy protections are due next week from federal regulators. They are expected to take effect in November, with the first round of annual disclosures explaining company privacy policies out in December.

"The notion of proposing more legislation when the ink isn't even dry on this law and the rules haven't even been written is absurd," Mr. Lackritz said. "It's unnecessary. It's premature."

Joe Belew, president of the Consumer Bankers Association, agreed. "There is a real serious sentiment that we ought to let things shake out from round one," he said.

Steve Bartlett, president of the Financial Services Roundtable, was outraged by the President's speech. "This is the worst kind of political grandstanding," he said. "We need deliberations, not demagoguery.

"To call for some new scheme at this point, when the current law hasn't even been implemented - well, it's election-year grandstanding."

Mr. Bartlett, who represents banks, brokers, and insurers, said the White House plan would actually hurt consumers. "What consumers are seeking in financial services are better products, lower prices, maximum convenience," he said. "The Presidents' proposal would deny all three."

On one topic there was agreement: Medical information should not be shared with anyone without the customer's permission.

Mr. Yingling said he expects the banking industry to voluntarily agree by the end of May to keep medical data private. "We're working on a plan to say medical information just won't be shared - period," he said. "We can just take that issue off the table."

Mr. Bartlett agreed, but said privacy advocates are unfairly attacking financial companies on the issue. "Medical privacy should be protected. That has never been issue," he said. "Yet we keep getting hammered as if there is a problem there to solve."

Industry leaders are focused on the final rules due out next week. They said the annual disclosures required by Gramm-Leach-Bliley will be complicated.

"The disclosure may be incomprehensible to the average person," Mr. Yingling said. "It'll be lengthy, classic Washington gobbledygook."

While the industry expects this year to be devoted to implementing the new rules, legislation is likely to resurface next year. "I do think privacy has legs. I do think it will come back next year," said Kenneth A. Guenther, a 20-year veteran of legislative battles as executive vice president of the Independent Community Bankers of America.

An administration official speaking on background to reporters reminded them that Congress went much further on privacy last year than expected. "The momentum on this topic is only going in one direction," the official said.

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