Coming soon to your local travel agency, mortgage company, tax preparation service and storefront
check-cashing outlet: federal rules to protect consumers' privacy.
Federal regulators are drafting the rules to spell out how
consumers' personal information will be protected as barriers
between financial businesses come down, because of landmark
legislation enacted in November. The law allows banks, investment
firms and insurance companies to get involved in each other's
But it's less widely known that the law's privacy provisions
reach beyond banks, Wall Street and insurance to a diverse panoply
of "money" businesses. They include consumer finance companies,
department stores that issue credit cards, money transmitters and
money-order businesses, debt collection agencies, credit bureaus
and telemarketing firms that sell financial products.
The definition of "financial activities" is being broadened as
traditional distinctions blur in the marketplace.
Importantly, consumers are getting a new right to stop the
financial businesses from sharing their personal data with a third
party, such as a telemarketer, with some exceptions.
That right, however, doesn't go as far as consumer groups and
privacy advocates had wanted. Financial companies with whom you do
business will be able to share or sell your data unless you
expressly ask them, in writing, not to do so. The onus is on
Financial and money businesses of all shapes and sizes will have
to disclose their privacy policies to customers at least once a
"Because the privacy provisions apply to a company doing a
financial business, regardless of whether the company is affiliated
with a bank, they will apply to a very broad group of companies and
industries," said Scott Alvarez, associate general counsel of the
That's because financial holding companies are allowed to engage
in a wide range of activities, with the new requirement that they
abide by the privacy rules. Consumers should get the same
protection whether a business is part of a holding company group or
stands alone, the government's reasoning goes, so all "money"
businesses should be subject to the privacy rules.
The idea is, for example, that if you do business with a mom and
pop travel agency, your personal data should be as well protected
as that of customers of American Express Co., which has a travel
business, banking operations and other financial divisions under
the same roof.
The Federal Reserve is among a group of agencies drafting
privacy rules for the industries and sectors they regulate, along
with the Securities and Exchange Commission, the Office of the
Comptroller of the Currency, the Office of Thrift Supervision and
others. The Federal Trade Commission is writing the rules for
insurance companies and agents and all other affected businesses
outside of banks and securities firms.
They're working under a tight deadline, aiming to put out
proposed rules for 30 days of public comment in early to
mid-February. Under the new law, final regulations must be in place
Officials of several business groups affected by the
new privacy rules, contacted by The Associated Press, declined to
comment on them because they haven't yet been proposed.
They included the American Society of Travel Agents; the
American Financial Services Association, whose members include
consumer finance companies, automobile financing divisions and
retail chains; and the Community Financial Services Association of
America, which represents check-cashing and short-term cash loan
Some officials of groups representing the banking, securities
and insurance industries, which closely followed Congress' lengthy
deliberations on the financial overhaul legislation, already have
discussed the new privacy rules with regulators.
Under the overhaul law, banks, brokerages and insurers that
affiliate are entitled to share customers' personal data with each
other - a provision that raised a storm of protest by consumer
groups and privacy advocates. It's a key reason the financial
companies wanted to be able to merge - to help them find potential
customers for new products.