Live From Toronto: Mixed Reviews on Bank Reform Bill
DM lobbyists are happy with the banking industry overhaul agreed to on Friday by Congress and the White House. The bill, which overturns Depression-era laws, would allow banks, insurance companies and securities firms to enter each other’s businesses.
But the privacy measures included in the bill have already drawn fire from consumer advocates and small bankers.
Essentially, the bill provides for “notice and opt-out for transfer of data to third parties,” said Jerry Cerasale, senior vice president for government affairs with the Direct Marketing Association. “That’s straight [from the] DMA guidelines.”
The industry did lose on one provision: Banks will be prohibited from distributing account numbers to third parties. “We wanted to allow that to facilitate direct marketing,” Cerasale said. However, the DMA was unclear at press time on whether outside marketers could match encrypted numbers with banks.
Despite these measures, privacy advocates fear the creation of vast data pools about the borrowing and insurance habits of consumers. Consumers Union complained that consumers will not be able to prevent firms from sharing personal information with affiliates, according to Reuters.
The bill exempts data flows to credit reporting agencies, according to Marty Abrams, vice president for information policy for Experian.
Some trade groups are also unhappy with the provisions. “Community banks, which are already most sensitive to their customers’ privacy, again are being asked to a carry a disproportionate regulatory burden,” said the Independent Community Bankers of America in a statement. “These burdens are not imposed on information sharing among affiliates of the new financial conglomerates.”
The bill has also drawn its share of praise. Cerasale called it “a significant marketing opportunity for banks,” and said that it should lead to a DM increase.
For the first time, banks will be allowed to pursue securities underwriting and enter other areas through operating subsidiaries.
Hjalma Johnson, president of the American Bankers Association, noted in a statement that “…banks and other financial institutions have been forced to operate under the legal equivalent of the rotary phone.”
The bill, which has not yet been signed by negotiators, awaits a final vote by the House and Senate and a signature by President Clinton.
