Privacy Rules: A Success?

Washington

One legacy of the Gramm-Leach-Bliley Act is its privacy provisions, which financial services industry lawyers and lobbyists laud for providing firm and level guidelines for safeguarding the financial information of customers.

The law has resulted in financial services providers developing “a detailed inventory of current practices and centralized control over those practices,” said Oliver Ireland, a partner at Morrison & Foerster in Washington and a former top staff official at the Federal Reserve Board.

“Today, what you see, largely as a result of GLB,” Mr. Ireland said, “is that every covered financial institution has a publicly available privacy policy.”

Equally important, Mr. Ireland noted, because of the law and rules in place to monitor compliance, everyone knows “that the institution has analyzed those policies so that they know their practices are consistent with that policy and that they have a system of controls in place to ensure that they are adhering to that policy.” He also said it helps cut down on potential litigation.

Andy Barbour, vice president of government affairs for the Financial Services Roundtablewhich represents companies in all financial service sectors and played a role in drafting the original GLB and the subsequent Fair & Accurate Credit Transactions Act of 2003called the impact of the privacy provisions “positive.”

“We believe that anything that helps build trust between a consumer and a financial institution is a good thing,” said Mr. Barbour. “Our companies take very seriously their responsibility to safeguard their customers sensitive financial information.”

While supportive of the privacy provisions in GLB, Mr. Barbour did caution that the notice provisions remain a problemone he said regulators and Congress should address promptly. Specifically, he said, they are too cumbersome, too legalistic and not user-friendly.

“An important thing to remember is the way the regulators require us to structure the notices,” he noted. “This is an issue that the regulatory community should continue to examine. We think the privacy notices should be simplified and should be made uniform so that our customers can more easily understand their rights and execute their choices.”

He added that “simplifying them and making them uniform is something the regulators and Congress can do right now to benefit consumers.”

“The law is a success,” according to Mr. Ireland, who noted that regulators examine institutions regularly and carefully to ensure compliance. “That doesnt mean it has solved all problems related to the privacy of consumer information, but it did fundamentally change the landscape as to how financial services institutions look at and treat consumer information.”

Reproduced from National Underwriter Edition, March 10, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Privacy Rules: A Success?

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