Marketing Miasma and the Gramm-Leach-Bliley Act

In a June 1999 House Committee markup session of the bill that passed as the GLBA, financial service industry lobbyists expected Democrats to raise privacy issues, but thought that Republicans would successfully oppose adding privacy provisions to the bill. An earlier attempt by Democratic Representative Ed Markey of Massachusetts in May had failed on a 19 to 8 vote.[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][1]

But things changed between the May and June events. Right before the June markup, Minnesota Attorney General Mike Hatch sued U.S. Bancorp for selling customer records to a telemarketer. This suit eventually opened a window on to ugly direct marketing being conducted by banks, where the institution would sell customer information to third party telemarketers and receive some percentage of revenue. These and other practices encouraged banks to ignore fraudulent sales, because they made money from both the sale and the fees associated with reversing transactions.[2]

In the June markup session, Markey again introduced his privacy amendment, but this time he found support from Republicans. Representative Paul Gillmor of Ohio introduced his own privacy amendment, commenting that advances of technology and information gathering “carry with them unprecedented new threats to personal privacy.”[3]

Others shared personal stories of perceived privacy invasion, including Representative Barton of Texas, who recently received a Victoria’s Secret catalog at his Washington, DC home. He had complained that his credit union must have sold his new address to Victoria’s Secret. Barton feared that his spouse would see the catalog and conclude that he had impure thoughts while away from his home district. Barton believed that he should be able to stop financial institutions from selling personal information to third parties, and supported the Markey Amendment.[4]

The financial services lobbyists were distraught—one was anonymously quoted as being in “shell shock.” After passage of the Amendment, banking industry representatives threatened to oppose GLBA, but they were careful to not mention their opposition was based on privacy. Instead, they said the bill had “problems” and “negative changes.”[5]

Ultimately, GLBA passed with privacy provisions intact.

[1] Dean Anason, In Focus: All of A Sudden, Customer Privacy Is Reform Bill Thorn, American Banker, Jun. 14, 1999.

[2] Jessica Silver-Greenberg, Banks Seen as Aid in Fraud Against Older Consumers, New York Times, Jun. 10, 2013; Charles Duhigg, Bilking the Elderly, With a Corporate Assist, New York Times, May 20, 2007.

[3] Dawn Kopecki, U.S. Financial Industries Face Privacy Regs in Bank Bill, Dow Jones News Service, Jun. 11, 1999.

[4] Financial institutions regularly “furnish” data, including contact information, to consumer reporting agencies. That is probably what happened to Barton–his Washington address was likely furnished by his credit union to the CRA, which then sold the address as a “credit header.” Recall from the FCRA section above that until the effective date of the GLBA, CRAs freely sold such headers for marketing purposes.

[5] Dean Anason, In Focus: All of A Sudden, Customer Privacy Is Reform Bill Thorn, American Banker, Jun. 14, 1999.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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