Beware the Privacy Police

by John J. Byrne, Esq.

I thought that for my first "official" column, it would make sense to warn you about the real possibility of wrong-headed and overly burdensome mandates from Washington. [What do you mean, what else is new?]

The heightened media awareness over the issue of privacy presents bankers with a challenge that we can readily meet. If we want electronic commerce to succeed, we need to attend to consumer fears, both real and imagined.

Financial Privacy-The Issues
Public opinion polls tell us that consumers are concerned about their privacy on the Internet. The Clinton Administration has outlined their position on electronic commerce by calling for the private sector (and not the government) to lead.

Congress has introduced close to 100 bills on privacy and the Federal Trade Commission (FTC) has just released a survey on posted website privacy policies.

And recent news stories have covered the practice of some asset search firms that gain personal financial information about accountholders through deception.

The banking industry is united in one position--we protect information better than any other industry and that no new laws are necessary. We must aggressively make that case or we'll face problems.

FTC Results
In their survey on online privacy the Commission found that only 16% of "financial services" disclosed their information practices on their websites. While I could point out that the surveyed entities included investment newsletters and many non-banks, instead I would argue that we should focus on how to improve our standing with policy leaders.

BA members can access privacy policies on the ABA website (aba.com) for banks to use as they move toward posting their own policies. The ABA is also releasing a "white paper" that describes the scope of current laws and regulations that cover financial institution privacy. Industry groups are also meeting with government leaders to educate them about how banks do protect privacy. It is critical that your bank develop privacy policies today and disclose those practices to consumers.

On the congressional front, House Banking Committee Chairman Jim Leach (R-IA) is planning late summer hearings on consumer privacy. This will be an opportunity for reasoned debate on the scope of the privacy issue. Chairman Leach is very concerned about the misuse of financial data and is rightly looking for answers. We need to assist the committee in their efforts to understand all aspects of the privacy issue, including the need for information access by banks for fraud deterrence. The more progress we make, the less opportunity there will be for bad laws.

Creating a Federal Crime of Identity Theft
There are two legislative initiatives on privacy worth supporting.

One of the best approaches to the issue of further protecting consumer privacy is to address the growing threat of identity theft. A current General Accounting Office report on Identity Fraud found that losses from identity theft reached $745 million in fiscal year 1997. GAO also concluded that there was evidence suggesting that the Internet can be used for crimes relating to identity fraud. To respond to this potential, there are two bills that will create a federal crime of identity theft. Senator Jon Kyl (R-AZ), has introduced S. 512 and Rep. Rosa DeLauro (D-CT) has H.R. 3551 that will give the U.S. Secret Service the tools to prosecute identity theft. ABA has sent letters of support to both members. We urge the BANKERS' HOTLINE readers to also get involved with this initiative. I believe that these are pro-privacy bills that will help both banks and consumers.

For more information on these and other bank security topics, please feel free to contact me at jbyrne@aba.com.

John is the Senior Federal Legislative Counsel for the American Bankers Association

Copyright © 1998 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 8, No. 7, 7/98