Treasury Under Secretary Gary Gensler on Friday dismissed the financial services industry's argument that the White House should delay privacy legislation to give pending regulations time to work.
Instead he contended that the Clinton administration bill, introduced last week in Congress by Democratic allies, is needed immediately to toughen the consumer privacy protections in the Gramm-Leach-Bliley Act enacted last fall.
"There are clear gaps in the current law," Mr. Gensler said in an interview. "We know now the American people want to have a choice about sharing their information, particularly sensitive information" such as medical records and spending habits.
The Clinton administration tried to strike a balance between each individual's "zone of privacy" and legitimate interests of companies to target their marketing efforts, he said.
For instance, the bill would expand the exemptions in Gramm-Leach-Bliley. It would let financial institutions provide consolidated account statements without giving customers a chance to opt out, and permit operators at call centers to freely provide information from accounts at different affiliates or use that information for selling services.
Industry officials described these compromises as minimal, and insisted the federal government must agree to preempt state privacy laws.
"The industry isn't going to have this conversation until preemption is on the table," said Joe Belew, president of the Consumer Bankers Association.
Mr. Gensler said the industry would serve its self-interest by accepting tougher laws soon. "This is good for the financial institutions," he said, "because the core of their franchise is the trust customers have in them.He insisted the Financial Information Privacy Protection Act would not be an extra burden, but merely a layer of added protections on Gramm-Leach-Bliley.
Under the bill, financial institutions would be required to give customers a chance to block information sharing with affiliates and third parties. Gramm-Leach-Bliley requiresd firms to offer such an "opt out" before disclosing information to third parties but doesid not restrict data sharing among sister companies.
The White House bill would require customers to give their explicit permission, or to "opt in," before firms could share customer medical or detailed spending data.