Banks Given Privacy Rule Delay
Wednesday, May 10th 2000, 12:00 am
By: News On 6
WASHINGTON (AP) â€” Over the objections of lawmakers and consumer groups, federal regulators have given U.S. banks and other financial service companies a seven-month reprieve before they have to comply with new rules designed to protect consumers' personal data.
Consumer advocate and presidential candidate Ralph Nader, meanwhile, accused the Clinton administration Wednesday of engaging in ``press release politics'' by touting its support for consumer privacy protections after agreeing to weaker privacy restrictions in legislation last year.
``It is campaign fodder to paper over the administration's lack of courage to face up to the (financial industry) lobbyists last year,'' Nader, the Green Party candidate, said in a statement.
Federal Reserve officials suggested that companies can use strong privacy policies and speedy disclosure of them to customers as a marketing tool to lure consumers.
Banks and other financial companies ``are going to have to use a lot of common sense'' in following the new privacy rules, Oliver Ireland, the Fed's associate general counsel, said at an open meeting of the central bank's governors. ``It's very difficult to know exactly how it's going to play out in'' a financial company, he said.
If he were a banker or other financial executive, Ireland suggested, ``I'm selling confidence in my institution.'' If companies beat the new July 2001 federal deadlines for having to disclose their privacy policies to customers or have strong policies, they can use them as a marketing edge.
The governors â€” including Fed Chairman Alan Greenspan â€” voted at the meeting to adopt the new privacy rules with a seven-month delay for industry compliance; several other federal agenices held similar votes this week.
The new rules give consumers the right, by written request, to stop banks, securities firms and insurance companies from sharing their personal data with third parties, such as telemarketers. They also apply to a number of ``money'' businesses, including consumer finance companies, department stores that issue credit cards, money transmitters and money-order businesses, debt collection agencies and credit bureaus.
Under the rules, all financial companies will have to disclose their privacy policies to customers at least once a year.
The privacy rules were mandated by major legislation enacted last November that removed Depression-era barriers and allowed banks, investment firms and insurers to get into each other's businesses. Published in preliminary form several months ago, they brought a deluge of written comments from affected industries and companies, which said it would be difficult to comply by the November deadline for final rules.
Fed governor and vice chairman Roger Ferguson acknowledged that they were giving the financial companies seeking a delay ``the benefit of the doubt.''
Seven federal agencies, including the Fed, the Treasury Department, the Federal Trade Commission, the Federal Deposit Insurance Corp. and the Securities and Exchange Commission, now are putting the regulations in effect in November but making compliance with them voluntary until July 2001.
By Wednesday, an angry Rep. Edward Markey, D-Mass., who has been active in consumer privacy issues, had managed to gather signatures of 30 of his Democratic and Republican colleagues in Congress on a letter of protest to Greenspan and the other heads of the agencies.
At the same time, 15 consumer and privacy groups, including the Consumer Federation of America, Consumers Union, the American Civil Liberties Union, Junkbusters and the Privacy Rights Clearinghouse, also complained about the delay in a letter to the regulators.
On the Net: New privacy regulations on Federal Reserve Web site: http://www.federalreserve.gov/BoardDocs/press/boardacts/2000