As lawmakers prepared to debate landmark legislation overhauling the nation's financial system, House leaders agreed last night on language that would permit banks and other financial institutions to freely share names, account balances and other information with affiliated businesses.

It followed weeks of intense skirmishing over the role that privacy concerns should play in legislation that would dramatically expand the ability of banks, securities firms and insurance companies to merge with one another -- and to share customer transaction records and other sensitive information. Lawmakers and medical groups around the nation are also concerned about how the legislation would affect the use of medical records by financial services firms.

The fight, set to go to the floor of the House today, underscores how quickly privacy has leapt from fringe debates into the mainstream of discussions about the direction of the nation's vast financial services industry. A year ago, privacy was barely addressed when lawmakers debated similar legislation.

The bill would revamp the Balkanized financial services system established during the Depression, a system that now mandates the separation of commercial banks, securities firms and insurance companies.

Perhaps the only thing that legislators, advocates and others agree on is that the debate over financial services is just a precursor of things to come on Capitol Hill, as Congress wrestles with medical privacy, electronic commerce and other related matters in coming months and years.

"Privacy issues -- because of electronic commerce, because of the vastness of electronic information -- are going to be central to public policy debates from now on," said John Byrne, senior counsel for the American Bankers Association.

"There's this vague unease and annoyance and anger, and a readiness to embrace this as an issue," said Kathleen Collins, a banking privacy specialist with the law firm Morgan, Lewis & Bockius.

Yesterday's developments followed a surprising, bipartisan vote earlier this month by the Commerce Committee that endorsed a plan to give individuals authority to prevent banks and other financial institutions from sharing personal information with affiliates or outside companies.

Since then, financial-services lobbyists have staged a focused campaign to persuade Democrats and Republicans with industry ties to do a turnabout and limit what consumers would be allowed to do. They warned such curbs would hinder the ability to offer consumers new services and products.

The Clinton administration has not taken a position on the legislation's privacy language but officials say it has not gone far enough in terms of consumer rights to notification and choice.

There is strong bipartisan support for a new and more efficient regime that would free financial firms to provide "one-stop shopping," giving consumers a single convenient and presumably less expensive place to bank, invest and buy insurance. Combining these companies under one roof would ease the way for them to use computers, networks and huge reservoirs of financial and insurance information to track and profile customer activity, generally for marketing purposes but also to detect fraud.

The House Rules Committee, which sets parameters for debate on House legislation, last night dropped the Commerce Committee provision when it melded competing bills that emerged from the Commerce and Banking Committees. The committee did decide that lawmakers could debate an amendment that would give consumers only the ability to limit the sharing of financial information to outside, unaffiliated companies for marketing. That provision also would require companies for the first time to create and distribute privacy policies. Democrats withdrew their sponsorship of the privacy amendment and vowed to vote against Republican procedural proposals today, however, because of an unrelated dispute over language dealing with redlining.

The legislation going to the floor will also ban a practice known as "pretext calling" in which information brokers and private investigators use deception and trickery to obtain financial information. In an exception sponsored by Rep. Ed Royce (R-Calif.), however, the practice would be allowed when private investigators have a judge's approval and are working on a case involving court-ordered child support.

Robert Douglas, a private investigator who has spoken before Congress about the practice and is skeptical about the exception, said that "what it's really about is getting one loophole they will expand over time."

Dan Zielinski, spokesman for the American Insurance Association, said privacy advocates overstate the impact of the proposed legislation. He said the industry's approach is not anti-consumer and will not intrude on customer privacy. In fact, he said, it will add conveniences and services.

He said customers who worry about privacy will be able to shop around and find an institution that offers the sorts of protections that suit them best.

But consumer advocates say many customers have no idea how widely their information is distributed. In Minnesota, for example, U.S. Bancorp just settled a lawsuit with the state attorney general, who alleged that the bank had released financial records to a telemarketing firm for more than $4 million. The bank will now let customers "opt out" of much information-sharing.

David Butler, spokesman for Consumers Union in the District, said he believes congressional leaders are ignoring the wishes of constituents in order to please large campaign contributors in the industry.

"People deserve to be able to decide whether their personal information is shared or sold," said Butler, noting that national surveys routinely show people want more control over financial and other records.

The provisions concerning medical records have also stirred controversy. Under the bill, health insurers would be allowed to share health records for insurance underwriting without individuals' consent, according to a letter signed by Rep. Gary A. Condit (D-Calif.), Rep. Henry A. Waxman (D-Calif.) and others. The law also would allow banks, law enforcement agencies and others to gain access to medical records, the letter said. And once those records are released, there are no restrictions on redisclosure.

"The bill gives insurance companies a virtual blank check to disclose patients' medical files," Waxman said.