Financial Protection

We oppose a weak federal privacy bill because it would take away state consumer protections

We worked with the National Consumer Law Center to send a coalition letter (download here) to the House Financial Services Committee yesterday. NCLC, PIRG, the Consumer Federation of America and Consumer Action urged rejection of a draft Financial Data Privacy bill. Proponents say its goal is to modernize the privacy provisions of the 1999 Gramm-Leach-Bliley Act.

Actually, it would preempt, or override, all stronger state data breach notification and other state data privacy laws. Those laws include the landmark Illinois Biometric Information Privacy Act (BIPA). Both banks and non-bank financial institutions such as credit bureaus and debt collectors already take advantage of weak GLBA privacy requirements.

The draft bill was the subject of a subcommittee hearing yesterday. Renita Marcellin of the PIRG-backed Americans for Financial Reform was the consumer advocacy witness.

The Gramm-Leach-Bliley Act’s passage in 1999 was the result of years of relentless lobbying by Wall Street. It repealed portions of the 1933 Glass-Steagall Act that had walled off customer deposits in commercial banks from the reckless activities of investment banks. You may recall that those activities had triggered the Great Crash of 1929 and led to the Great Depression.

The 1999 bill allowed the creation of “one-stop financial supermarkets” combining insurance, banking, and investment sales all under one roof. The  act only included modest privacy protections due to a series of scandals at the time of its passage. Banks were sharing customer information with already-affiliated investment firms offering risky products.

Today, 30 years later, the remaining firewall separates banking from commerce. Massive BigTech firms want a bigger piece of the FDIC-insured financial marketplace. Stay tuned. We expect negotiations on the controversial proposal to continue.

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