- The Washington Times - Wednesday, June 7, 2000

Three financial trade groups yesterday adopted voluntary privacy guidelines designed to protect consumers from unlimited sharing of their personal information.

The guidelines anticipate privacy provisions in the financial-modernization bill passed by Congress in November rules that will not take effect until July 2001.

The American Bankers Association, which spearheaded the revision process, Consumer Bankers Association and Financial Services Roundtable released a set of guidelines that were similar to the privacy rules in the Gramm-Leach-Bliley Act.

The District of Columbia-based groups' guidelines are an update of privacy standards drawn up in 1997. The ABA developed the new set, which was endorsed by the other groups.

One provision that goes beyond the federal regulations is the resolution to not share medical information between financial affiliates, such as insurance companies and banks. That measure came up during congressional debate, but failed. Rep. Jim Leach, Iowa Republican and head of the House banking committee, proposed similar legislation again yesterday.

Under the ABA guidelines, financial companies may share nonmedical information within their "family of companies," or affiliates, but not with outside parties unless customers allow them to do so.

Representatives from the groups hammered home the notion of trust during a press conference, touting the effort's motto: "A tradition of trust."

"Financial services is more and more a relationship business," said Joe Belew, using another industry buzzword. He is the president of the Consumer Bankers Association, which represents retail banks.

In the competitive banking marketplace, bankers feel that trust is a key element to retaining customers.

The groups highlighted the problem of identity theft, which the ABA estimates affects 300,000 to 500,000 Americans per year. Federal law holds consumers liable only for the first $50, so dollar losses from stolen credit-card numbers, for example, remain low.

The associations plan to target theft with consumer-education campaigns and technological safeguards. Though the problem is not new, the Internet has made identity theft easier for criminals, the groups said.

Two other banking trade groups were conspicuously absent from the press conference, and spokespersons said their interests were not reflected in the guidelines.

"Our sense is that they're more written from the perspective of a large conglomerate than a small bank," said Karen Thomas, director of regulatory affairs for the Independent Community Bankers of America, which represents 5,500 community institutions.

Ms. Thomas said small banks often partner with third-party financial companies such as insurance firms because they don't have the resources to sell insurance in-house or buy insurance companies.

The "family of companies" language included in the ABA's guidelines excludes community bank interests, she said.

Robert Schmermund, director of communications for America's Community Bankers, a 1,300-member group, agreed.

"It was an exclusive process, not an inclusive one," he said.

But Ms. Thomas and Mr. Schmermund said their groups generally supported the spirit of the ABA's guidelines, as well as the federal rules. They and the other bank trade groups are encouraging members to implement the regulations well in advance of the deadline.

Some consumer advocates, however, remain unsatisfied with the financial-services industry's efforts.

"We've seen these before, this is really nothing new," said Travis Plunkett, legislative director for the Consumer Federation of America.

Mr. Plunkett said banks should not differentiate among personal medical and financial information everything should be off-limits unless consumers allow it to be shared.

"This is sort of a PR gesture to respond to increasing public pressure," he said.

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