Live from Government Affairs: DMers Warned of FCRA Train Wreck
Financial service marketers have high hopes that a key measure of the Fair Credit Reporting Act—preemption of state laws—will be reauthorized this fall. But they are worried that they may have to pay too high a price.
“The tiger is the Richard Shelby-Paul Sarbanes committee,” said Steve Bartlett, CEO of the Financial Services Roundtable, a lobbying group with a membership comprised of 100 top financial services firms.
According to Barlett, the banking committee headed by Shelby is now discussing added restrictions on the Gramm-Leach-Bliley Financial Modernization Act (GLB). These could include an opt-in for thirty party marketing, and an opt-out for affiliate marketing, he said during a session at the Direct Marketing Association’s Government Affairs conference in Washington, DC.
Despite that, Bartlett and his groups would like to tie GLB along with the FCRA and Identity Theft in an omnibus bill. The perfect bill would alter GLB so that marketers could send shorter privacy notices, and allow to opt out. It would also make identity theft a federal crime.
Why tie GLB to FCRA?
Because GLB is a “mirror image of the FCRA problem,” Bartlett said. “It creates restrictions on the sharing of information on customers.”
He added that GLB does not preempt state law, and that any state can impose tougher regulations.
Bartlett reported that there is “little or no opposition to the concept of reauthorizing FCRA in Congress.” But he added that legislators are “afraid of the politics of privacy,” and that they are misinterpreting the public’s mood on the issue.
Bartlett, a former member of Congress, predicted there will be a “train wreck,” if the FCRA is not renewed.
For one thing, states will be able to set their own credit reporting standards after Dec. 31. Bartlett predicted that California will do that shortly after Jan. 1.
“California (legislators) can screw it up badly if they choose, and even if they try to do it well,” he said.
But cities and counties would also be able to set their own standards, which could lead to chaos, and to the offering of credit block by block, Bartlett continued.
The bottom line is that “creditors would have to pay more for what they don’t know,” he added.
Bartlett cited a report by the Perryman Group, predicting an annual $89.6 billion drop in gross domestic product if preemption is allowed to expire.
The report also estimates that consumers will pay more than $20 billion in incremental interest and $19 billion in added costs for insurance, catalog and e-commerce and other purchases. New residential construction will be reduced by roughly $3.4 billion per year.
Economic losses will fall heavily on low-income minority group members, particularly those in the inner city, it continues.
These results would be compounded over time. The report states that “programs such as the proposed opt-in restrictions in California destroy the economics of the entire mechanism to make information available, even if they do so only in a few areas.”
Scott Hildebrand, vice president of direct marketing for Capital One, commented during an earlier session that the DMA and its members should move to the forefront of the fight because they have good economic arguments. He cited data showing that financial marketers mail 6 billion pieces a year.
Jerry Cerasale, vice president for government affairs at the DMA, answered that the DMA supports FCRA renewal and is working with other groups to achieve that. He added that given the size of the financial services industry, “We are not the dog on this—more the tail.”
