Privacy Battle Looms in Congress

Theoretically, you already have that power.

But there's a catch. The current law requires financial institutions to ask your permission to specifically say if you do NOT approve of their sharing your financial data ("opt out"). If they don't hear from you, they can go ahead and pass around your financial history and status.

Not good enough, says Senate Banking Committee Chairman Richard Shelby, R-Ala. He wants to allow you to sign off on sharing your financial data, specifically saying you DO approve ("opt in"). If they don't hear from you, the banks would be forbidden to share your money and property status with the outside world.

This controversy goes to three issues:

In response to an inquiry from NewsMax.com, Sen. Shelby said that if financial institutions wanted to sell your financial information, "they should bear the burden of obtaining your consent."

The Fair Credit Reporting Act (FCRA), which prevents the states from prohibiting such data-sharing, expires at the end of 2003. Some states have indicated they're ready and willing to act if the law is not renewed.

Creditors and retailers are in an uproar over the prospect of turning the states loose to fashion their own rules. They argue that a crazy quilt of different rules from state to state could foul up the credit-reporting system and drive up the cost of credit, with the consumer paying the bill.

Furthermore, argues American Banking Association, if the computerized system in Illinois, for example, could not flag a suspicious credit charge in New York, crooks could get away with thievery.

"While I fully appreciate the arguments in favor of pre-emption" of the states' right to act on their own, Shelby told NewsMax, "I believe it matters very much how strong the federal standard is when we pre-empt states' rights to protect their citizens. In the absence of stronger standards at the federal level, I believe the states should be able to adopt greater protections for their citizens."

Translated, that means the powerful Alabama lawmaker is telling the industry to put up or shut up. Aa a result, according to BusinessWeek, the financial services business "finds itself in the uncomfortable position of lobbying for federal legislation to ward off tougher state laws."

Put another way, Sen. Shelby has the industry in a lose-lose situation: Either get behind tougher federal standards or prepare to live with greater privacy protections imposed by the states.

There s the old saying that "a bird in the hand is worth two in the bush." Privacy groups have long complained that the information that banks are required to send to consumers to allow them to "opt out" is often ineffective, in part because such notices are often confusing and the consumer just doesn't want to be bothered. The theory is that forcing the banks to beg the consumer to act affirmatively to allow an exchange of such information before the it could go forward would induce an amazingly sudden clarity. Bottom line: The consumer wins.

"We will be holding a series of hearings on FCRA and associated issues, including privacy issues, in the coming months," Chairman Shelby told NewsMax.

Those who value their privacy will want to pay attention.