President Clinton called for new federal legislation to increase the privacy protections of individual financial records Friday when he signed the Financial Services Modernization Act into law.
The act allows banks, insurance companies and securities firms to merge and to offer competing products and services to consumers; gives consumers the opportunity to opt-out from having personal financial information shared with third parties, affiliated and unaffiliated companies, in addition to direct marketers; and permits states to adopt more restrictive privacy legislation.
“I do not believe that the privacy protections go far enough,” the President said as he directed the National Economic Council (NEC) and the Office of Management and Budget (OMB) to join the Treasury Department in reviewing the “privacy practices in the financial industry” and developing “a legislative proposal which the Congress can consider next year.”
The President said he wants to “make sure every family has meaningful choices about how their personal information is shared within corporate conglomerates.”
In a move seen to head off more restrictive state privacy rules, American Bankers Association president Hjalma Johnson challenged banks to develop individual privacy policies and make them publicly available by April 10, at least six months before they would be required to do so under the Financial Services Modernization Act.
As he called on the nation’s banking industry to “make consumer privacy” its top priority, Johnson announced the creation of a special ABA task force on privacy. Charles R. Nesson, a privacy expert and director of Harvard Law School’s Berkman Center for Internet and Society, will be its chief advisor.
The Direct Marketing Association “can live with the legislation and promote the whole concept of its opt-out provisions,” according to Richard A. Barton, its senior vice president, Congressional matters.
But the DMA will be closely monitoring legislative attempts in the states to adopt more restrictive financial privacy laws that could have an adverse effect on direct marketers, according to Pat Faley, vice president Consumer Affairs. The DMA “will work with the ABA, when it’s appropriate” to head-off tougher state financial privacy laws, she said.
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