Congress has been slow to enact airtight protections for individuals’ privacy. When there is trade off between the demands of corporations versus citizens’ right to privacy, our national legislators almost always come down on the side of financial institutions and their affiliates. Congress putted around the edges of the privacy issues when it passed the Financial Modernization Act in 1999. But, the privacy provisions have done little to halt the wholesale access to financial records and other personal data of consumers.
A shocking report just released by the Federal Trade Commission (FTC) should disabuse everyone-and hopefully Capitol Hill-of the notion that the right to privacy is some nice esoteric concern with little real economic impact.
The FTC found that 3.3 million U. S. consumers had been victimized last year in identity thefts made possible by the easy access to personal information. The thefts were used to open fraudulent bank, credit card or utility accounts and to commit other crimes.
The cost: $3.8 billion to consumers on top of losses of more than $32.9 billion to businesses, many of them small merchants.
In addition to these “identity thefts,” the FTC found that 6.6 million became victims of a closely related crime, “account thefts” which involved the use of stolen ATM cards, or financial records to steal from a victim’s existing accounts.
These “account thefts” created $14 billion in business losses plus $1.l billion in losses to consumers. The “account thefts” are outstripping the “identity thefts.” FTC found a 71 percent increase in this type of theft lastyear.
In most cases, the thefts were used in purchases by the thieves. But, about 15 percent of the thefts were used in other schemes including the utilization of stolen information to obtain government records. FTC cited cases where the thieves used the identifying information when stopped by law enforcement officers or caught in the commission of a crime.
Privacy is now before the Congress again. This time in the form legislation to extend the override of state laws which in any way control how credit information is gathered, disseminated and used by credit reporting agencies which maintain an estimated 600 million files on American consumers-a gold mine of data for the credit industry and a dangerous minefield for citizens wanting to protect their privacy. The preemption expires at the end of the year unless Congress acts.
The preemption of state laws involving the Fair Credit Reporting Act (FCRA) has passed the House of representatives. It is now under consideration in the Senate Banking Committee. The financial industry had appeared likely to get what it wanted from the Senate without broader issues of privacy becoming a front burner item.
In the interim, California, led by a spunky privacy rights advocate, State Senator Jackie Speier, has succeeded in passing a stronger state privacy law which allows consumers to block sharing of their information with affiliates. That’s changed the equation. Now the Privacy proponents want the California law to become a national standard and they are pushing the issue with the Senate Committee.
Complicating the issue is the fact that financial institutions in California agreed to the Speier bill this summer to head off stronger privacy provisions which were about to go on the California referendum ballot. That has made it tougher for financial lobbyists in the Senate and has givenconsumer organizations at the national level new leverage to bring privacy-not just extension of FCRA-to the forefront. They want the affiliate sharing provisions in the FCRA bill brought up to California standards California’s two Senators-Diane Feinstein and Barbara Boxer-have written the Committee urging that the FCRA provisions be comparable to the tighter standards of the California law. Without that assurance, Feinstein and Boxer are expected to oppose the FCRA preemption extension.
Both Senate Banking Chairman Richard Shelby and the Committee’s ranking Democrat have long been advocates of greater financial privacy. Will Shelby and Sarbanes support the California initiative and put it the FCRA legislation? The financial industry has spent a ton of advertising and campaign on extending the Fair Credit Reporting Act. The stakes are large.
As the FTC report on identity and account theft highlights, lax laws on privacy costs consumers and businessmen– small and large–billions of dollars. :Looking the other way on privacy is not cost-free. Write your U. S. Senators and tell them to support the California privacy provisions as part of the FCRA legislation.
FOR MORE INFORMATION:
Privacy Rights Clearinghouse http://www.privacyrights.org
U. S. Pirg www.pirg.org/orgconsumer/credit/index.htm