Legislators, Bankers Spar on Internet Privacy Law
Anason, Dean, American Banker
Banking officials clashed with government representatives Thursday over the need for financial privacy laws in cyberspace.
Maintaining a united front at a House Banking subcommittee hearing, bank lobbyists set forth eight privacy principles adopted last week by four national banking trade groups.
The guidelines-which include giving customers the option to prevent disclosures of personal information and limiting corporate employees' access to such data-were Exhibit A in the case that banks can responsibly police themselves.
"Few consumers would patronize a bank that failed to provide an adequate level of privacy," said Marcia Z. Sullivan, government relations director for the Consumer Bankers Association, which has consistently advocated a code of conduct. "It is really easy for a dissatisfied customer to find another bank."
But even before hearing the industry testimony, Rep. Bruce F. Vento said he was skeptical that consumers would be protected without government intervention.
"We have not achieved a critical mass where the profits from greater consumer privacy protections reward and outweigh the losses from the company not being able to use the information," the Minnesota Democrat said.
He called for Congress and regulators to set "benchmarks" for privacy protection, clarifying the meaning of consumer consent and defining how information can be shared with affiliates and outsiders. Such standards, he said, would inspire public confidence and allow electronic commerce to flourish.
The industry's attempt to preempt congressional action with a self-regulatory code ran into two obstacles: a federal consumer advocate's call for legislation and a privacy scholar's critical evaluation of current banking practices.
Leslie L. Byrne, director of the U.S. Office of Consumer Affairs and a former Virginia congresswoman, said new laws are necessary to provide "legislative standardization" of industry and government privacy principles and to guarantee their implementation.
Alan F. Westin, a Columbia University professor and publisher of Privacy and American Business, said that of 50 bank Internet services studied by the Center for Social and Legal Research, which he heads, 39 collected personal and financially sensitive information from consumers but none disclosed their information practices. …