WASHINGTON - Taking the offensive, a coalition of financial services trade groups on Thursday announced plans to fight tough privacy laws being considered in state legislatures.
Allen R. Caskie, executive director of the Financial Services Coordinating Council's Privacy Project, said one of the group's goals is to build an information clearing house. The council will sponsor nationwide studies and polls to illustrate the value of the free flow of consumers' financial information and will use the resulting data in educational materials, newspaper op-ed pieces, and advertisements, he said.
The council wants to persuade state lawmakers to hold off on legislation until the restrictions in the Gramm-Leach-Bliley Act have been fully implemented.
"We've just passed the most comprehensive privacy protections the financial services industry has ever seen. Let's let it work before we make any changes," said Floyd E. Stoner, deputy executive director for government relations at the American Bankers Association, which is a member of the council.
The group's ultimate aim is to avert "a patchwork of inconsistent or conflicting state laws that would [block] the efficiencies and synergies that Gramm-Leach-Bliley was intended to provide," Mr. Caskie said.
An amendment to the financial reform law by Sen. Paul Sarbanes, D-Md., allows states to trump the federal law by enacting tougher protections of consumers' financial information. According to Roberta Meyer of the American Council of Life Insurers, there are already 35 privacy bills pending in 22 states.
Many of the proposed laws would force businesses to receive consumer consent - known as an "opt-in" requirement - before their personal financial information could be sold or used for marketing purposes.
"The industry has not done a very good job of explaining the benefits of information flow," said Indiana University law professor Fred H. Cate, who presented a paper titled "Personal Information in Financial Services: The Value of a Balanced Flow."
For instance, he said, U.S. consumers have easier access to credit and lower interest rates than consumers in other countries because lenders and credit reporting agencies can exchange their financial information freely.
A state-by-state system of opt-in privacy requirements would drive up consumer costs, as lenders sought other, more expensive ways to verify borrowers' creditworthiness.
Mr. Cate is one of a slate of privacy experts that the council will be sending to meet with state legislators considering new privacy laws.
The council's members include the ABA, the American Council of Life Insurers, the American Insurance Association, the Investment Company Institute, and the Securities Industry Association.
- S.900 Gramm-Leach-Bliley Act (Source: THOMAS)
- HR.10 Gramm-Leach-Bliley Act (Source: THOMAS)
- Fred H. Cate web site at the Indiana University School of Law-Bloomington.
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