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=09 =09 =09State Roundup: December 2, 1999 ? =09 =09 =09 =09 =09 =09 =09 =09 =09Thoroughly Modern Privacy Problems=20 ?????Even before the federal Financial Services Modernization Act was signe= d=20 into law, some state regulators could see signs of trouble. Unsure that the= =20 bill would provide adequate privacy protections for financial records, stat= es=20 began hashing out the issue, investigating consumer privacy and launching= =20 committees dedicated to exploring options. Those efforts have proven=20 fruitful. With privacy advocates lamenting the final results in S. 900, the= =20 pressure is seeping into the states to protect personal information. Howeve= r,=20 there are precious few that foreshadowed the federal government's game of= =20 catch to the states on the issue of privacy. Now, privacy advocates are=20 bombarding state capitals, urging them to take action that the federal=20 government didn't.=20 ?????What didn't happen at the federal level was an opt-in policy for shari= ng=20 of consumer information. The legislation, which provided a legal framework= =20 for financial services megamergers, permits banks to share their customers'= =20 information with other businesses, such as brokerages, insurance firms and= =20 telemarketers. To reveal customers' personally-identifiable information wit= h=20 outside partners, the financial institutions must provide consumers the=20 opportunity to "opt-out" of the sharing arrangement. This means that bank= =20 customers would need to notify a bank that they are against the disclosure = of=20 their personal information; if they don't alert the bank, their information= =20 would automatically be up for grabs. An amendment, introduced by Sen. Paul= =20 Sarbanes, D-MD, secures the right of states to pass stricter=20 information-sharing regulations. While privacy advocates are satiated by th= e=20 provision, they would have preferred language that required consumers to=20 opt-in to all information-sharing practices. Now, they hope to see that typ= e=20 of policy enacted in the states.=20 =09Building A Framework ?????There are a handful of states that already had begun work in the priva= cy=20 arena. One is Minnesota, which catapulted itself into the national privacy= =20 spotlight in June when Attorney General Mike Hatch launched an investigatio= n=20 and lawsuit against U.S. Bank for giving out personal financial information= =20 to a telemarketing company. The telemarketers, after calling customers and= =20 inquiring whether they wanted additional information about bank services,= =20 charged the customers for the services. Hatch alleged that the bank release= d=20 the information for $4 million plus commissions, some of which he said were= =20 gained by disclosing deceptive information. Under the settlement, the bank= =20 donated over $2 million to charities around the state and agreed to make=20 refunds to Minnesota customers who were victims of the scheme. It also=20 enacted an opt-out policy, among other penalties. Minnesota was one of the= =20 most outspoken opponents of the federal legislation, saying that it "was ev= en=20 weaker than the settlement we got," according to Hatch's press secretary,= =20 Leslie Sandburg.=20 ?????Consumers Union's David Butler called Minnesota "as proactive as any= =20 state at this point" for their prosecution of U.S. Bank, but added that "th= is=20 is still a relatively new debate at the state level."=20 ?????Some observers anticipate that with the passage of the federal "bank= =20 bill," states may become more alert to the issues at hand. "This will force= =20 states to look directly at the issue," said Brett Hester, the National=20 Governors' Association's economic development policy analyst. John Ryan, of= =20 the Conference of State Bank Supervisors, agreed. "It's a hot issue, an=20 easily political issue," he said. "You have elected officials who may want = to=20 make an issue out of this." Minnesota, taking advantage of the Sarbanes=20 amendment, will introduce legislation next session to the tune of protectin= g=20 consumer privacy.=20 ?????Also at the fore is Massachusetts' Lieutenant Gov. Jane Swift, R, and= =20 Gov. Paul Cellucci. In a recent speech, Swift railed against the federal=20 legislation, saying that both Congress and the administration missed out on= a=20 historic opportunity to ensure privacy protections. "Now that the federal= =20 government has determined that states should decide some privacy issues for= =20 their citizens," Swift said, "we in Massachusetts are pleased to be at the= =20 forefront of this crucial national debate." At the crux of the=20 administration's plan is the establishment of an opt-in system that require= s=20 businesses to seek consumers' consent before they sell or share information= .=20 "Governor Cellucci and I don=01,t think that this is too much to ask," she= =20 added.=20 ?????The legislation's initiative grew out of a quality-of-life commission= =20 established by the governor. The group determined that privacy was one of t= he=20 hottest issues, and from that grew the omnibus legislation that has been se= nt=20 to five different legislative hearings and two public hearings, explained= =20 John Ziemba, deputy general counsel and deputy director of the Office of=20 Consumer Affairs. Most committees are still looking at the legislation, and= =20 will wrap-up their investigations next year, as the Massachusetts legislatu= re=20 completes its two-year term.=20 ?????While Massachusetts remains one of the few states specifically targeti= ng=20 financial privacy, a host of others are joining the bandwagon in the hopes = of=20 ensuring consumer protection in other high-tech areas. New York Attorney=20 General Eliot Spitzer joined the group of state attorneys general upset wit= h=20 the weak protections in the federal bank bill, but it wasn't the first time= =20 he had entered the arena. He had ushered through a spam bill =01* allowing= =20 consumers the right to opt-out of receiving unsolicited, bulk e-mail =01* a= nd a=20 bill that would prohibit Web site owners from tracking consumer information= =20 unless users consented to the actions, said spokeswoman Christine Pritchard= .=20 Now the focus has turned to reforming the Fair Credit Reporting Act, which,= =20 among other things, would provide consumers the right to receive one free= =20 credit report each year to determine its accuracy. And Spitzer also has=20 promoted a bill on identity theft, declaring that if a consumer's identity= =20 has been stolen to obtain anything of value, the customer, and not just the= =20 credit card company, is deemed a victim and can seek reimbursement.=20 =09Honing In On The Hot Topics ?????Identity theft, perhaps because of the personal stories that result fr= om=20 it, is one of the hotter privacy issues in the states, and Arizona is worki= ng=20 on a law making it a crime to steal a personal password. Rep. Jeff=20 Hatch-Miller, R, who chairs the state's Internet study commission, said tha= t=20 legislators are just beginning to understand the new level of concern being= =20 raised by citizens with respect to their right to privacy. The group has=20 established a subcommittee looking into additional privacy legislation that= =20 may be needed with the understanding that the rules must seek a balance=20 between protecting consumers and businesses alike.=20 ?????"Arizona is a fairly conservative state," Hatch-Miller said. "We're=20 friendly to business here. To the extent possible, I think we'll promote=20 private solutions, as we do prefer them to government solutions."=20 ?????Hatch-Miller added that one of the newest areas of concern is=20 information from customer convenience cards, such as those given out by=20 grocery stores to determine sale prices, being sold to outside marketers.= =20 California already has seen legislation introduced that would bar the sale = of=20 that information, and its legislature's Joint Task Force on Personal=20 Information and Privacy continues to look at that, as well as all issues=20 surrounding privacy. Sen. Jackie Speier, D-San Francisco/San Mateo, is=20 expected to soon drop a bill complementing the Financial Services=20 Modernization Act that would prohibit the sharing of personal information= =20 among affiliate companies in different sectors. Although because of the=20 strong banking lobby and the political difficulties surrounding the issue,= =20 staffers say they still don't know what form the bill will take.=20 ?????That seems to be a familiar refrain in such discussions, as many elect= ed=20 officials grapple with the growing number of privacy concerns that=20 technological advances have ushered in. Many legislators looking to the=20 federal government for guidance on the matter have been thrown an unexpecte= d=20 duty with the results in the financial services act, but observers say they= =20 will take the ball and run with it. "I think what will happen is you'll see= =20 legislation in areas where there may be problems," predicted Neal Osten,=20 director of the commerce and communications committee for the National=20 Conference of State Legislatures. =01*by Stephanie Lash
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