Industry Fears Sen. Squash Of FCRA

By Steven Brostoff, Washington Editor

NU Online News Service, Sept. 12, 1:00 p.m., EDT,Washington?Although the House of Representatives approvedpermanent reauthorization of the Fair Credit Reporting Act by a392-30 vote, some in the financial services industry are expressingconcerns that the goal of a uniform national system may besidetracked in the Senate.

The concern relates to a privacy bill recently enacted inCalifornia that imposes more severe restrictions on informationsharing among affiliates than those in FCRA.

If FCRA is reauthorized as it currently exists, the Californiarestrictions, as well as any other state laws that vary from FCRA,would be preempted.

However, there are concerns that because of the parliamentaryrules in the Senate, it may be possible for the state's senators todelay consideration of FCRA reauthorization unless the newCalifornia law, S.B. 1, is granted an exemption.

Allen Caskie, chief counsel with the American Council of LifeInsurers, noted that since the life insurance industry is stateregulated, it is well aware of the problems that arise from a lackof uniformity. Many policymakers, he said, acknowledge that if theywere starting from scratch, they would never establishstate-by-state regulation.

However, Mr. Caskie said, because the system is already inplace, it is difficult to dismantle. That problem does not existright now with privacy, he said. The concerns over privacy arerelatively new and the country has the chance to develop a uniformsystem that works for everyone. But now, Mr. Caskie said,California is trying to go the other way.

FCRA addresses the issue of information sharing amongaffiliates. By contrast, the Gramm-Leach-Bliley Act addresses theissue of information sharing among non-affiliates.

Another major difference between FCRA and GLB is that FCRApreempts inconsistent state laws, while GLB allows states to enactprivacy laws that are more restrictive than those in GLB.

The California law would require insurance companies and otherfinancial institutions to allow customers to opt out of informationsharing among affiliates, a standard which is far more restrictivethan that in FCRA.

If FCRA is reauthorized as is, that provision in the Californialaw would be preempted.

But since the parliamentary rules in the Senate allow any onemember to slow down or even stop any legislation, the fear is thatone or both of California's senators, Dianne Feinstein and BarbaraBoxer, both Democrats, will delay FCRA reauthorization unless thenew California law is saved from preemption. Mr. Caskie said thatthe primary concern is that the resulting system would benon-uniform when consumers are much better served byuniformity.

FCRA is scheduled to expire at the end of this year. Financialservices groups say that unless FCRA is reauthorized with all itscurrent preemptions intact, it will be much more difficult toprovide credit to consumers.