Washington Outlook
Edited by Paula Dwyer
The Privacy Warrior Who Has Financial Services Running Scared
Most Washington lobbyists live by the axiom that it's easier to stop legislation than to pass it. That is especially true when it comes to privacy: Despite poll after poll showing that Americans want more control over their personal information, business has fended off a slew of bills that would impose strong safeguards. Now the tables are turning, and the financial-services biz finds itself in the uncomfortable position of lobbying for federal legislation to ward off tougher state laws.
Behind the turnabout is a battle of wills pitting Senate Banking Chairman Richard C. Shelby, an Alabama populist, against Wayne A. Abernathy, Assistant Treasury Secretary for financial institutions. Shelby, unlike many of his GOP peers, wants tougher privacy protections. Abernathy says new laws aren't needed. As an aide to former Senator and Banking Committee Chairman Phil Gramm, Abernathy helped negotiate the privacy sections of the 1999 law eliminating barriers between bank lending, insurance, and stock underwriting.
While that act lets customers stop financial firms from sharing personal data with outside companies, consumer groups complain that the law is weak. It doesn't prevent Citigroup, for example, from sharing customer credit-card balances with its 2,761 affiliated banks, brokers, and insurers. So consumer groups have turned to the states, some of which seem more willing to enact stiffer curbs. Already, five states have adopted rules that force financial institutions to seek customer consent -- "opt-in" in privacy parlance -- before sharing their data with outsiders. California, a major banking center, may be next.
Alarmed, financial institutions want a national privacy standard that will bar states from enacting rules tougher than Washington's. However, to get such a standard, financial institutions may have to agree to stricter privacy protections. Shelby has said that financial firms ought to obtain permission to share or sell customer data, but for now he isn't tipping his hand on what it will take to win him over. "In the absence of stronger standards at a federal level," he says, "I believe states should be able to adopt greater protections."
Shelby may have industry over a barrel. An obscure provision in the Fair Credit Reporting Act that prevents states from barring data-sharing within financial supermarkets expires at the end of 2003. The act lets banks, for example, reveal customer-account details to affiliated mortgage brokers. If the federal preemption expires, states could require banks to obtain prior consent before releasing such info.
Coalitions of creditors and retailers are warning lawmakers that a balkanized scheme of state rules would gum up the credit-reporting system and raise the cost of credit. Industry's other argument: Combating identity theft, which Abernathy says is a top priority, could be harder if, for example, a bank computer network in California couldn't instantly flag an unusual credit-card charge in Chicago because Illinois law barred data-sharing without customer consent. "You'd have different systems that crooks could exploit," says Edward L. Yingling of the American Bankers Assn.
Abernathy has suggested that keeping the states at bay would be easier if company privacy policies were more user-friendly. So financial outfits are revamping those impenetrable notices they send customers. The new versions, industry officials promise, will be in plain English and make it easier for customers to keep data private. "Opting out should be as easy as changing your billing address," says Abernathy. With Shelby running the Senate Banking Committee, that may be just the first step toward stronger protection for consumers.
By Amy Borrus
CAPITAL WRAPUP
Asbestos Plot Thickens
Just as a solution to the asbestos litigation morass seemed to be gaining steam in Congress, a key player has stepped on the brakes. Senate Judiciary Chairman Orrin Hatch (R-Utah) on Mar. 5 sent two groups supporting rival proposals back to the negotiating table. But the two sides have not even met, and lobbyists say hope for compromise is fading.
Until Hatch's surprise move, a plan to set medical standards for victims filing suit -- and give the sickest first crack at payouts -- had momentum, with the American Insurance Assn., the American Bar Assn., many companies, and even some trial lawyers on board. Now Hatch has given hope to labor unions and manufacturers such as General Electric (GE
) and General Motors (GM
), which would create a multibillion-dollar trust fund for asbestos claims and take the issue out of the courts.
What happened? Hatch, aides say, is showing his penchant for compromise and willingness to work across the aisle. After all, Vermont Senator Patrick Leahy, Judiciary's top Democrat, favors the trust fund approach. But some GOP aides wonder if something else is at play: a fight for Hatch's soul between two lobbyists. Hatch's former chief of staff, Kevin McGuiness, is lobbying for the Asbestos Study Group, which favors the trust fund approach. Onetime Judiciary Committee General Counsel Manus Cooney is pushing the medical criteria solution for the insurers' group. Combining both approaches may save Hatch from a tough decision but is unlikely to win broad Hill support, lobbyists fear.
By Lorraine Woellert
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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