The Gramm-Leach-Bliley Act is not working to protect consumers from the misuse of their financial information, says Mike Hatch, the attorney general of Minnesota.
“The act has confused consumers, provided a green light to the unauthorized sharing of personal financial data as part of misleading telemarketing campaigns and is riddled with loopholes that exempt many business practices from any control,” Hatch said during a Senate Banking Committee hearing on privacy last week.
But John Dugan, an attorney representing the Washington-based Financial Services Coordinating Council disagreed, arguing that GLB strikes the right balance between protecting the privacy interests of consumers and preserving the clear consumer benefits from the free flow of information in the economy.
Members of FSCC include the American Council of Life Insurers, the American Insurance Association, the Securities Industry Association and the American Bankers Association, all of Washington.
In his testimony, Hatch said GLB, which allows consumers to opt out of certain types of information sharing by financial institutions, is ineffective in protecting privacy.
Consumers, he said, face the burden of looking for privacy notices, reading and understanding them, and then taking affirmative action to halt the sharing of their personal information with third parties that are not affiliated with their financial institutions.
“This system is contrary to how consumers act in the marketplace and what consumers expect from government efforts to remedy the imbalance of power in the marketplace,” Hatch said.
Indeed, he said, even the most educated and persistent consumer would have a hard time deciphering statements in the opt-out notices sent to them by their financial institutions.
“The ineffectiveness of the notice and opt-out procedure has been thoroughly documented,” Hatch said.
He noted that states have tried to enact protections that go beyond those of GLB, but these efforts have been strongly opposed by the financial services industry.