State preemption provisions for the Fair Credit Reporting Act are set to expire in January 2004. If allowed to lapse, state and local politicians could potentially set up tens of thousands of different regulations governing the collection and dissemination of consumer credit information.

The expiration of the provisions sets the stage for a lengthy, explosive debate over the protection of consumer financial information.

In an attempt to alert the direct marketing industry to what it deems would be the harmful consequences of such a lapse, the Direct Marketing Association Thursday released a briefing on the issue. Meanwhile, Sen. Richard Shelby (R-AL), the new head of the Senate Banking Committee, has said that state laws should preempt federal laws if they provide stronger privacy protections.

The DMA said that a lapse opens the door for more than 30,000 jurisdictions to regulate credit information, a move that could limit consumers’ ability to receive low-cost credit and other offers, causing remote and retail sales to decline and costs to escalate, among other potential problems.

Under the current preemption provisions, states are prohibited from making certain types of privacy rules more restrictive than those outlined in the FCRA. The FCRA governs how the three major credit bureaus collect and share consumer data.

“Every facet of the direct and interactive marketing industry will be harmed in the FCRA is not allowed to remain whole and universally applicable,” said DMA president H. Robert Wientzen in a statement. “Protection of our single, nationwide system of collection and dissemination of credit information is key to the way consumers and merchants do business with each other every day. Without it, what would we do, go back to getting letters of reference every time consumers move to a new town or state?”

Shelby, who takes a tough stance on protecting consumer privacy, said in a speech Thursday to the Consumer Federation of America Conference that Congress “must” act to reauthorize the FCRA’s preemption provision. He expected the debate to be controversial.

“I believe that it is fair to anticipate that this law’s reauthorization will likely elevate the debate over financial privacy beyond the terms of the law itself,” he said.

Shelby believes that, “Individuals must benefit from the strongest privacy protections available,” said Andrea Andrews, a spokesperson for the Senator. “Therefore, federal privacy protections must not preempt state laws or other regulations that provide stronger privacy protections.”

Shelby, as the new head of the committee, gained more power to push through his views on privacy. He said he believes that individuals should have greater control and choice in how their financial information is shared and sold. “It seems to me that where the very foundation of financial institutions relationships are based on trust–privacy is good for business,” he said. He reiterated that the consumer privacy protections in Gramm Leach Bliley were insufficient. GLB works in concert with the FCRA to establish the rules by which financial services companies can share consumer data with affiliates and non-affiliates. The DMA’s briefing can be viewed online at http://www.the-dma.org/cgi/disppressrelease?article=379.

State preemption provisions for the Fair Credit Reporting Act are set to expire in January 2004. If allowed to lapse, state and local politicians could potentially set up tens of thousands of different regulations governing the collection and dissemination of consumer credit information.

The expiration of the provisions sets the stage for a lengthy, explosive debate over the protection of consumer financial information.

In an attempt to alert the direct marketing industry to what it deems would be the harmful consequences of such a lapse, the Direct Marketing Association Thursday released a briefing on the issue. Meanwhile, Sen. Richard Shelby (R-AL), the new head of the Senate Banking Committee, has said that state laws should preempt federal laws if they provide stronger privacy protections.

The DMA said that a lapse opens the door for more than 30,000 jurisdictions to regulate credit information, a move that could limit consumers’ ability to receive low-cost credit and other offers, causing remote and retail sales to decline and costs to escalate, among other potential problems.

Under the current preemption provisions, states are prohibited from making certain types of privacy rules more restrictive than those outlined in the FCRA. The FCRA governs how the three major credit bureaus collect and share consumer data.

“Every facet of the direct and interactive marketing industry will be harmed in the FCRA is not allowed to remain whole and universally applicable,” said DMA president H. Robert Wientzen in a statement. “Protection of our single, nationwide system of collection and dissemination of credit information is key to the way consumers and merchants do business with each other every day. Without it, what would we do, go back to getting letters of reference every time consumers move to a new town or state?”

Shelby, who takes a tough stance on protecting consumer privacy, said in a speech Thursday to the Consumer Federation of America Conference that Congress “must” act to reauthorize the FCRA’s preemption provision. He expected the debate to be controversial.

“I believe that it is fair to anticipate that this law’s reauthorization will likely elevate the debate over financial privacy beyond the terms of the law itself,” he said.

Shelby believes that, “Individuals must benefit from the strongest privacy protections available,” said Andrea Andrews, a spokesperson for the Senator. “Therefore, federal privacy protections must not preempt state laws or other regulations that provide stronger privacy protections.”

Shelby, as the new head of the committee, gained more power to push through his views on privacy. He said he believes that individuals should have greater control and choice in how their financial information is shared and sold.

“It seems to me that where the very foundation of financial institutions relationships are based on trust–privacy is good for business,” he said.

He reiterated that the consumer privacy protections in Gramm Leach Bliley were insufficient. GLB works in concert with the FCRA to establish the rules by which financial services companies can share consumer data with affiliates and non-affiliates.

The DMA’s briefing can be viewed online at http://www.the-dma.org/cgi/disppressrelease?article=379