CONFERENCE REPORT ON S. 900, GRAMM-LEACH-BLILEY ACT -- (Extensions of Remarks - November 08, 1999)

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SPEECH OF HON. FORTNEY PETE STARK

OF CALIFORNIA IN THE HOUSE OF REPRESENTATIVES Thursday, November 4, 1999

Mr. STARK. Madam Speaker, the glaring absence of any financial privacy provisions for affiliated entities in the financial modernization bill before us today is a sorry mistake. It is wrong and inappropriate for Congress to, on the one hand, enact legislation that explicitly allows mergers between banks, insurers and securities firms--but which on the other hand denies consumers any say in how their personal financial information can be used and disclosed.

I thought we learned this lesson 21 years ago, when Congress enacted the Right to Financial Privacy Act. That 1978 law, which I authored, put in place standards governing access and sharing of financial information for federal agencies. It stemmed from a Supreme Court decision that ruled the fourth amendment does not apply to banking records. As a former California banker, I had been a party in that 1974 suit, California Bankers Association v. Schultz.

And here we are today, throwing open the door for financial institutions to create huge new holding companies--without giving consumers any ability to say how their sensitive personal financial information can be shared. In effect, we are creating a financial privacy vacuum.

This runs counter to what we are trying to achieve in the area of medical confidentiality, where we are aiming to put the strongest possible safeguards in place at the Federal level, while preserving what is best about State privacy laws. In the next week or so, HHS will issue proposed regulations for medical privacy, which on balance are expected to be strong. If we can give consumers rights over their medical data, why can't we also give them a measure of control over how their financial data is used, marketed, and sold?

Defenders of the conference agreement say that the bill limits sharing of personal financial data with non-affiliated, third-party entities. Nonsense. All that companies that don't formally affiliate have to do to escape the bill's consumers opt-out provision is enter into a joint agreement. Then, presto, they are free to manipulate personal financial data in any way they like.

Nobody likes getting annoying calls from pesky telemarketers at dinnertime. Well, once this bill passes, the telemarketing business will go through the roof. Mergers between banks, securities firms and insurers will produce data amalgamation like we've never seen before. Before long, your health insurer will be able to get information on how money you make and what investment strategies you favor--making underwriting that much easier. Your bank will be able to easily look up how many checks you've written to your psychiatrist--and use that information to help decide whether you're an acceptable loan risk.