|Front Page |More News |Special Reports |Industry Guide |Small Business |B2B
|I-Marketing |Opinion |Cartoon |CRM |Stock Index |Cybercrime
Critics Question New Internet Privacy Law

Send this Article
Print this Article
Related Stories
By Jay Lyman
Part of the NewsFactor Network
July 3, 2001

The Financial Services Modernization Act, which took effect on July 1st, requires many companies to notify consumers of their information collecting and sharing practices.

Although providers of online financial services and others are taking steps to comply with new privacy laws, confusion over the Gramm-Leach-Bliley Act extends to companies affected by the legislation and to the government agencies enforcing it.

Meanwhile, privacy advocates say the law, also known as the Financial Services Modernization Act of 1999, is actually a threat to privacy because companies will now be more likely than ever to share information about consumers.

"The law is very weak," said Chris Hoofnagle, legislative counsel at the Electronic Privacy Information Center (EPIC). "It's not a privacy law. It's mainly a bank-insurance-brokerage house consolidation package."

Broad Law

The Act, which took effect on July 1st, allows mergers between banks, insurers and brokerages, but also requires a wide range of companies to notify consumers of their information collecting and sharing practices, according to U.S. Bureau of Consumer Protection attorney Loretta Garrison.

"Because the law is fairly broad in the financial activities it covers, there are a lot of companies that don't realize they're a financial institution or financial services provider under this law," Garrison told NewsFactor Network.

"We've been inundated by a wide variety of businesses trying to find out what they need to do."

Garrison said lending, exchanging, trusting, investing for others, safeguarding, insuring and providing financial investment or economic advising services are all referred to as financial activities under the law.

A Federal Trade Commission (FTC) official told NewsFactor that the law also requires enforcement by as many as seven different federal agencies as well as every state attorney general, because state-regulated insurance companies are also covered.

Privacy Pop-Ups

Response to the law has varied among large Internet providers of financial information, though nearly all have taken some steps to comply.

Companies such as Yahoo! and AOL Time Warner recently notified online financial services customers of their privacy policies with pop-up ads, which automatically display information on the screens of Web site visitors. Microsoft's MSN MoneyCentral updated its existing privacy policy to comply.

In addition to e-mail and other electronic notices, consumers can expect to receive an average of 15 postal mail notices from insurers, brokerages and other companies, according to EPIC's Hoofnagle.

Meant For Mergers

While legal experts urged all financial services companies to comply with the act to be safe, Hoofnagle told NewsFactor he expects few companies will be prosecuted.

"I think it's unlikely to see enforcement except where there are clear violations of the act," he told NewsFactor.

Hoofnagle said the law protects information only from third-party, non-affiliated sources -- allowing banks, brokerages and insurers to share consumer information if they are affiliated.

"They don't need to go outside to non-affiliated sources," Hoofnagle said. "It's difficult to find a third party, given the conglomerates of today. This provides no protection for sharing within the corporate family or corporate umbrella."

Garrison agreed that the basic law of the Financial Services Modernization Act of 1999 was to allow banks and brokerages to merge, but said that "whenever there is disclosure outside the exceptions, such as a third-party marketer, that company needs to provide an opt-out notice."

See Related Stories
The Boss Is Watching: Workplace Monitoring on the Rise
Study: Interactive TV Could Be 'Spy in Your Home'
'E' Stands for Exposure
Web Group 'Symbolizes' Online Privacy
Does Anyone Read Online Privacy Policies?

Talkback: Click here to add your comment about this story...

Sponsored Links
FREE: Registration for Leading CRM Solutions Event, Click Here.
Need the right tools for your e-business? Click here.
Get your message to over 75,000 e-biz & tech pros - click here.


July 17, 2001

DOW 10539.87 +67.75
NAS 2037.50 +8.38
S&P 1205.44 +2.99
Study: Online B2B Efforts Growing Slowly but Steadily
Full Story

The Domain Name Rush is On - But Where's the Gold?
On NewsFactor

U.S. Clears Homestore.com in Antitrust Inquiry
Full Story

The Day the World's Best Dot-Com Died
On CRMDaily

Bellwethers To Shed Little Light on Tech Rebound
On NewsFactor

Privacy Glitches: Is Anyone Safe Online?
Full Story

Autobytel Q2 Loss Worse Than Expected
Full Story

U.S. Files Charges on Internet Stock Scheme
Full Story

Hacker Group: Software Will Make Censors 'Powerless'
On NewsFactor

Group Charges Search Engine Results Deceptive
On NewsFactor

Product Review:
X10 Wireless Camera System
On Wireless NewsFactor

Study: More Americans Spending Time Online
On NewsFactor

Travelocity Brings Home Marketing Deals With British Airways, Lufthansa
Full Story

States' E-Procurement Goals May Be Unrealistic - Study
On CRMDaily

Play It Again: Web Radio Looks for Comeback
On NewsFactor

NetByTel, SpeechWorks Talk Up Retail Customers
On CRMDaily

Sharing Microsoft's .NET Vision - With Linux
On NewsFactor

Remedy Tests CRM's Wireless Waters
On CRMDaily

E-Learning and Knowledge Management at the Crossroads
On osOpinion

Tech Cartoon
Just for Fun

Tuesday's Cybercrime Report
Full Story

Tuesday's Time Capsule:
One Year Ago: Amazon Rides High as It Turns Five
Full Story

USA Networks Buys Control of Expedia From Microsoft
Full Story

Royal Ahold Wants 100 Percent of Peapod
Full Story

Report: Word-of-Mouth Key to Customer Acquisition
On CRMDaily

UK Travel Site Acquires Food Delivery Company
Full Story

It Only Looks Official: Fake FBI E-Mail Latest Online Scam
On NewsFactor

See more news

Get news by e-mail

Visit open forums

E-Commerce Times
Front Page | News | Opinion | Special Reports | Letters to the Editor | Small Business Advisor
Industry Guide | Open Forums | Linux News | Editorial Corrections | Search |
Link to Us | Become an Affiliate | Site Info
Other NewsFactor Network Sites
NewsFactor Portal | E-Commerce Times | TechNewsWorld | Linux Insider | Wireless NewsFactor
osOpinion | allEC | CRM Daily

FreeNewsFeed | Free Newsletters

Business Development | How To Contact Us | About NewsFactor Network
How To Advertise | Article Reprint Information

© 1998-2001 Triad Commerce Group, LLC. All rights reserved. See Terms of Use and Privacy notice.