The House Commerce Committee, in a surprise move, endorsed legislation yesterday that would give consumers new authority to stop banks, securities firms and other financial institutions from sharing their information with affiliates or other companies.
The panel approved the privacy amendment shortly before passing a bill to overhaul the nation's financial services industry, making it easier for banks, securities firms and insurance companies to merge with one another and use customer information to market new services and products.
Industry officials have fought hard against restricting their use of customer information, saying it it would undermine the purpose of the long-sought bill. But after hours of debate, and a series of thwarted amendments, the committee approved a provision that would give consumers the right to prevent financial institutions from sharing or selling their names, addresses, account balances and transaction history.
Consumer advocates were gleeful, describing the voice vote as a historic step in legitimizing privacy as a public policy issue.
"This is a major victory for privacy. Now we have established in principle that all consumers should have a right to say no," said Rep. Edward J. Markey (D-Mass.), who pressed throughout the day to give consumers more control over their personal information. "This is further than anything like this has gotten before."
But industry officials were glum. For days, as it became clear that privacy had become a central issue, they had threatened to walk away from the deal if they lost control over customer information. After the committee vote, they pledged to fight against the amendment in the coming months, saying it would limit their ability to cross-market new financial products to customers. The legislation must pass through the full House, then be reconciled with a Senate version and finally pass muster with President Clinton before it can become law.
"It's troubling. Some of the `opt-out' stuff could be very troubling for our firms," said James Spellman, spokesman for the Securities Industry Association, who said the "tide has turned" against industry during the day. "It has put some gray clouds up there. Do I think it's sufficient to tank the bill? It's too early yet to say."
In addition to giving consumers the right to say no, the legislation now includes requirements that financial institutions create and disclose privacy policies. It also gives the Federal Trade Commission authority to enforce those policies.
David Butler, spokesman for Consumers Union, said he and other activists were disappointed the committee had stopped shy of requiring companies to get permission to share information with unaffiliated companies.
"But this is a major step forward for the protection of consumers' privacy," said Butler, who predicted an ongoing struggle over the issue until it reaches the House floor. Butler said consumer groups intend to press Congress to require companies to get permission before they use customer information in some ways.
Dan Zielinski of the American Insurance Association said industry groups intend to push back to preserve the benefits of the legislation. "Much of the industry is very upset," he said. "It is a provision that . . . will need to be remedied."