Reform Law's Privacy Provisions Fail to Appease European Union

By Fickenscher, Lisa | American Banker, November 16, 1999 | Go to article overview

Reform Law's Privacy Provisions Fail to Appease European Union


Fickenscher, Lisa, American Banker


The privacy provisions in the financial reform law that President Clinton signed into law last week do not go far enough to satisfy the European Union.

The law did not help the cause of reconciling regulatory discrepancies -- the subject of tough negotiations for more than a year between European and American officials -- that could prevent U.S. banks, credit card companies, and others from marketing internationally using data-base techniques that have proved successful at home.

"We will have difficulty agreeing that (the U.S. financial modernization law) is adequate," said Gerard de Graaf, first secretary for trade matters in the Washington delegation of the European Commission. He did not specify the perceived weaknesses but said his side intends to "analyze the law carefully."

European and U.S. officials who spoke at a conference last week sponsored by the newsletter Privacy & American Business agreed that the privacy negotiations are at a pivotal stage and could conclude within six weeks.

At issue is a European Union privacy directive that took effect in October 1998. It stipulates that companies may not transfer data on European citizens into countries -- including the United States -- that are not deemed to have adequate consumer privacy laws.

Because of the gap in privacy protection philosophies -- U.S. laws are regarded as far more lenient and pro-business -- negotiations led on the American side by Ambassador David Aaron have focused on a "safe harbor" agreement that would let U.S. companies transfer data from Europe without violating the EU directive.

The financial reform law is only the latest stumbling block, according to participants in last week's privacy conference outside Washington.

Consumer advocates and some members of Congress share the European perspective on the privacy provisions. Among the most contentious provisions are those that allow companies to share consumer information with their affiliates and let consumers voluntarily "opt out" of marketing campaigns.

Privacy advocates say the onus should not be on consumers to disqualify themselves from marketing campaigns, but rather on the marketers to seek permission first.

Mr. de Graaf's counterpart in the United States, Barbara Wellbery, counselor to the undersecretary of the U.S. Department of Commerce, said that in the best case, the Europeans would declare the Gramm-Leach-Bliley Act and the Fair Credit Report Act adequate.

The Commerce Department maintains that if companies covered by those laws are in compliance, then "they don't have to be concerned about safe harbor language. They are already doing what they should be doing," said Robert Belair, a partner in the Washington law firm Mullenholz, Brimsek & Belair and editor of Privacy & American Business.

Mr. de Graaf said that the chief negotiators, Mr. Aaron and John F. Mogg, European Commission director general, had two "productive meetings" two weeks ago and that they would like to finish their work by mid-December.

"I thought I would be giving a post-mortem on these discussions," said Mr. de Graaf, who described the negotiations as "disappointingly slow. We have reached a stage where we can either agree to agree, or agree that reaching an agreement will be difficult."

One promising result of the discussions, Mr. …

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