As lawmakers prepare to delve into privacy issues again this year, banking lawyer L. Richard Fischer is urging them to recast the debate.
He says the stakes are high, because the Fair Credit Reporting Act's preemption authority hangs in the balance. But it is hard to tell whether Congress will buy the argument that he and other industry officials are making.
The preemption provisions of the act - which dictates how financial institutions, credit bureaus, and consumers use credit reports - are scheduled to lapse at yearend. Executives, lawmakers, and regulators are debating renewal of the provisions, and a host of consumer-privacy issues - from data sharing to identity theft to telemarketing - have been lumped into the same agenda.
Mr. Fischer, a partner in the Washington office of Morrison & Foerster, says these additional issues are loosely associated with credit-reporting issues and could derail the renewal effort. To get as much accomplished as possible in this session of Congress, he wants to clear up the privacy morass and attack each issue separately - and leave the most divisive ones for another day.
"It's quite clear that all the privacy elements are interrelated in people's minds, and I don't think they are interrelated in fact," he said. "The key is to try to avoid grand solutions. Some of the proposals that I've heard about would make Rube Goldberg blush because they are so complex."
The problem is that Mr. Fischer's simple solution - which includes postponing until next year the fight over whether customers should have to "opt in" or "opt out" - also means opening up the Gramm-Leach-Bliley Act.
"If the issue here is affiliate sharing by financial institutions … deal with it in the context of the Gramm-Leach-Bliley Act, and not the FCRA context," he said. "I don't see anybody that's got a road map to solving all of the GLBA issues - the broader privacy issues - in this session of Congress."
Not so with the Fair Credit act, Mr. Fischer said. Support for most of the law's provisions has been coalescing over the past six months and should only grow stronger now that Federal Reserve Board Chairman Alan Greenspan is on board.
The act spells out ground rules and uniform standards for information in credit reports, how banks use them, and how the information is shared among affiliates. It also requires that institutions tell potential borrowers when it denies an application because of information in the report, and that credit bureaus make reports available to consumers and look into consumers' claims of errors in their reports.
The credit system built around the act "has had a dramatic impact on consumers, households, and for access to credit across the country at reasonable rates," Mr. Greenspan said Wednesday before the House Financial Services Committee.
"People are starting to recognize on both sides of the aisle that this uniform set of rules, at least with respect to the quality of information in data files, is essential to our economy," Mr. Fischer said.
Congress could simply extend the preemption provision by one year on sharing of information between affiliates.
"The friction is all in one area, and that's affiliate sharing," Mr. Fischer said. "Any suggestion that we ought to let the whole ship go down because we don't like some of the cargo on it doesn't make much sense to me."
This is not the first time Mr. Fischer, who has written a book about financial-privacy laws and edits the Privacy and Information Law Report, has debated the sunset provision. He argued against it when Congress passed the 1996 Fair Credit act amendments, though he recognized it as "the compromise on top of all the other compromises that finally got that legislation done" after a six-year debate.
Mr. Fischer said identity theft is probably the chief issue to be addressed and that it was pointless to address it in the context of the Fair Credit act.
"They may be first or second cousins, but that's all they are, so let's not confuse the debate," he said.
Industry and consumer interests are aligned on identity theft, he said, since industry typically bears the financial losses, while consumers suffer emotional harm as well as lost time in repairing their credit. That should make it easier for legislators, regulators, the administration, and the industry to agree on an approach.
Mr. Fischer predicted that telemarketing rules - which have run into a jurisdictional mess between the Federal Communications Commission, the Federal Trade Commission, and 25 states with telemarketing statutes - will be solved this year as well. The House and Senate adopted legislation last week that gave the FTC $16 million to establish a national do-not-call list, and authorized it to charge maintenance fees to users. The Direct Marketing Association has filed a lawsuit challenging the plan on constitutional and statutory grounds.
The FTC will move to the bargaining table because the administration wants a deal, Mr. Fischer, and litigation is not a long-term answer for the telemarketing industry, Mr. Fischer said.
"They are going to want certainty at some point in the course of this year, and then they can get back to business rather than litigation."
Mr. Fischer said that, since the FCC has broader authority, it will write a comprehensive rule and the FTC will maintain the registry. States will not be allowed to keep a separate set of rules, but state attorneys general will be plenty busy enforcing the federal statute.
"Nobody's going to get everything they want, but there needs to be a federal resolution rather than having 21 resolutions," he said.
Certainly, Mr. Fischer's solution does not resolve everything, and leaves a debate on the Gramm-Leach-Bliley Act looming. But that is inevitable, he said; in the meantime the industry can get some of the legislation it needs.
"It's only when you try to put [the privacy issues] all together that it gets difficult," he said. "Once you pull the pieces apart, it's easier to get at them."
