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Tuesday, October 26, 1999

Privacy issues may block services bill
Some worry about shared information
By Marcy Gordon
Associated Press

   WASHINGTON - The new financial "supermarkets" that could blossom under widely supported legislation to overhaul Depression-era banking laws would give consumers more choices and cheaper prices, proponents say.
   But critics warn that consumers' privacy would be violated as banks and newly affiliated brokerages and insurance companies share the data they've collected on their customers.
   They have offered chilling scenarios: People applying for loans from their banks and being denied because the loan officer found out from the affiliated insurance company that they have cancer or AIDS, for example.
   The dispute threatens to bog down the financial overhaul legislation at a time when it is given the best chance of adoption after 20 years of battling.
   "This is an extraordinarily pro-consumer bill," Rep. Jim Leach, R-Iowa, chairman of the House Banking Committee, said Monday. President Clinton said Friday it would bring "lower costs, more choices and better protections for consumers."
   But some key lawmakers say they will vote against the bill on grounds it would compromise privacy.
   And Senate officials, who spoke on condition of anonymity, said Sen. Richard Shelby, R-Ala., has served notice he will try to force changes in the privacy provisions and failing that, attempt to derail the measure. Under Senate rules, a single senator can hold up action for hours or days if he or she chooses.
   Shelby is a close conservative ally of Senate Banking Committee Chairman Phil Gramm, R-Texas, a key proponent of the bill. A spokeswoman for Shelby had no immediate comment on his plans for the bill.
   "I am for free markets. I am for competition," Shelby has said. But he said, "We keep uncovering instances where large, reputable (financial) institutions are indeed abusing customer information."
   A task force of state attorneys general has been investigating whether some of the nation's biggest banks violated federal law by providing their customers' personal data to telemarketers selling a range of products. The banks under scrutiny include Citibank, Bank One, Wells Fargo and U.S. Bancorp.
   The banks would not be allowed to provide customers' data to telemarketers under the new legislation, but would be able to share it with affiliated financial companies under the same corporate roof.
   U.S. Bancorp, based in Minneapolis, recently agreed in a settlement with Minnesota to curtail some of its business with telemarketing firms and to pay $3 million to the state and several charities. The bank neither admitted nor denied wrongdoing in agreeing to the settlement.
   Exchange of information
   Current law doesn't prohibit banks from selling customers' personal data but prohibits the sharing of information obtained from a third party, such as a credit bureau. Banks often provide the data to telemarketing firms and other companies in exchange for commissions on sales to consumers.
   At issue in the U.S. Bancorp case was the bank's alleged practice of sharing with telemarketers both bank customers' information and data from credit bureaus.
   Shelby has joined on the privacy issue with one of his ideological opposites, liberal Democratic Rep. Edward Markey of Massachusetts, who originally supported the financial overhaul legislation but now plans to vote against it.
   The criticism in Washington reflects widespread concern among Americans about privacy. Many consumers are alarmed at the prospect that data such as their Social Security numbers, birth dates, addresses, phone numbers, homeownership and credit status, checking and credit card account information and credit limits - as well as their hobbies, buying habits and health information - could be shared by companies.
   Consumer reaction
   Data sharing is a major reason why financial companies want to merge, as it opens numerous opportunities for the companies to market a range of products and services.
   In Los Angeles, Ulf Linberg, 50, had concerns Monday about such data-sharing among financial companies.
   "That would be terrible," he said. "There would be no privacy and the people in this country really cherish their right to privacy."
   Lee Bass, 52, said that although privacy is an issue for him, more importantly, he believes mergers among financial firms would limit consumers' options. "The more choices you have the better," Bass said. "If there's only one Sears, you have to shop at Sears."
   But Satoko Ueda, 25, said she thinks it would be beneficial if the companies were allowed to merge.
   "It will be more convenient," she said. "You don't have to call around, you will only have to make one call."
   Ueda said, however, that she would not want her bank knowing about her medical history.

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