(June 7) – “Three major financial-services trade groups are adopting guidelines to protect customer information, including a recommended ban on sharing medical records with affiliated or outside companies,” writes Michael Schroeder in today’s Wall Street Journal.
“The voluntary guidelines for the most part reinforce privacy rules written by federal regulators as part of last year’s financial-services overhaul legislation. The law, however, didn’t address medical-information sharing. The banking groups also are seeking to encourage financial institutions to better protect customers against criminal use of their information, or so-called identity theft.”
“Now that banks, insurers and securities firms are allowed to merge, the sharing of medical information has become an issue. For the most part, insurance companies, particularly health underwriters, collect medical data from policyholders. Privacy advocates want to make sure medical information can’t be used by an affiliated bank, for instance, to turn down a customer’s loan application.”
“The new federal regulations require banks to notify customers about their privacy policies and give them the option of preventing their personal information from being shared with outside firms. The rules are set to take effect in November.”
“The trade-group guidelines, on the other hand, are a form of self-regulation, which the banking industry endorses as an alternative to legislated privacy protections. The Clinton administration, with the support of consumer groups and a bipartisan group of lawmakers, is pushing legislation that would give customers increased rights to limit the sharing of information with affiliated firms, such as jointly owned banks, broker-dealers and insurers.”
“Donald Ogilvie, executive vice president of the American Bankers Association, said bankers don’t support the initiative in Congress. ‘Just let the law work for a little bit’ before new restrictions are considered, he said.”
“The guidelines were introduced by the ABA, the Financial Services Roundtable, which represents major financial conglomerates, and the Consumer Bankers Association, which represents thrift institutions.”
“Some bank groups, such as America’s Community Bankers and the Independent Community Bankers of America, complain that small banks weren’t part of the process and that the guidelines are written from the perspective of the large financial holding companies. Specifically, the guidelines emphasize the proper way to share information among affiliates. Most small banks aren’t part of financial holding companies and depend on marketing agreements with outside firms to offer added services.”
“These groups see the guidelines as grandstanding. Karen Thomas, director of regulatory affairs at the Independent Consumer Bankers, said the 10-point plan is ‘similar to industry guidelines adopted in 1997 and consistent with new legislative requirements, with the exception of the medical provision.’ Separately, House Banking Chairman Jim Leach introduced a bill that would require financial firms to get customer permission before sharing medical records.”