As Congress moves to tear down Depression-era barriers between banks, brokers, and insurers in the name of enhanced competition, consumer groups are asking what the expected dramatic changes will mean for the pocketbook - and privacy - of the average American.
Sweeping bipartisan legislation to bring about the biggest overhaul of financial-industry laws since the 1930s is expected to win final passage in Congress as early as this week. President Clinton and many Democrats support the bill.
The bill would allow, for the first time, the formation of large financial conglomerates that could offer everything from loans and credit cards to investment opportunities and life insurance under one corporate roof.
As a result, American consumers could enjoy one-stop shopping in what would be, in effect, financial superstores that would more efficiently market and manage a vast range of goods and services.
Yet these megafinancial firms would also have the potential to amass unprecedented quantities of personal data on individuals - everything from detailed profiles of spending patterns to health information. Such data could be "mined" in ways that would profit the firm but not necessarily the consumer - for example to deny services to those deemed to risky, or to aggressively market products to those deemed able or willing to buy.
Indeed, the shift may exacerbate already growing concerns among Americans over the privacy of their financial and medical records. Nearly 30 percent of the public considers "loss of personal privacy" one of the most pressing problems for the coming century - more serious than terrorism, overpopulation, or world war - according to a Wall Street Journal poll in September.
Partially in response to such concern, the Clinton administration is expected to unveil soon new federal rules to protect the privacy of medical records - one of the prime areas of potential privacy abuses that critics say is not adequately addressed in the financial-overhaul bill.
In the debate over the historic bill, which was two decades in the making, powerful groups of industry and consumer advocates have staked out opposite sides on the bottom-line issue: whether it will protect consumer rights, or subordinate them to corporate interests.
"Consumers will be in the driver's seat," says Catherine Pulley, a spokeswoman for the American Bankers Association, which has pushed for the bill alongside groups representing the insurance and securities industry.
Firms have a powerful incentive to serve their customer's best interests, including respecting their privacy, argue industry groups and GOP leaders who fought hard for the legislation.
"Every customer can opt out by changing to another bank if they don't like how they are treated," says Sen. Phil Gramm (R) of Texas, chairman of the Senate Banking Committee and a key player in negotiations over the bill.
But consumer advocates and civil-liberties groups, together with a minority of Republican and Democratic lawmakers, take the opposite view, contending that financial industries will exploit every bit of information they can to promote their own profits.
"The bank gets your information and you have no say, no control," says Frank Torres, legislative counsel of the Consumers Union in Washington.
The bill "significantly increases the ability of financial institutions to abuse and harm consumers," agrees Sen. Richard Shelby (R) of Alabama.
Under the bill, the Financial Services Modernization Act, decades-old Glass-Steagall restrictions on banks affiliated with securities firms would be removed. In addition, the act would permit new "financial holding companies" to engage in the banking, insurance, and securities business.
Both new and existing financial companies would be free to share customer data with their affiliates. However, they would have to give customers the right to opt out of information-sharing with unaffiliated third parties, with one large exception. Banks that have joint-marketing agreements with other financial institutions would not have to give customers the right to opt out.
The bill would also require financial firms to develop clear, written privacy policies and disclose them "conspicuously" to all customers.
Supporters of the bill contend that such new provisions mark a major step forward for protecting privacy, while not blocking the digital-age information-sharing vital to customer convenience.
Help or hindrance?
Customers would benefit, for example, by being able to check all accounts simultaneously, on single statements or by dialing 800 numbers, says Dan Zielinski, spokesman for the American Insurance Association here. Firms, meanwhile, could use customer data to better tailor products.
The possibility of widespread privacy violations is "absurd," says Mr. Zielinski. Indeed, a firm's ability to protect privacy is likely to become an increasingly valuable asset, he says.
Critics say the bill promotes a trend whereby consumers lack control over what personal information is collected, who it is shared with, and how it is used.
"A person's checkbook and credit-card records are a virtual diary of their life. It shows when they traveled by airplane, where they eat meals out, what organization they pay membership dues to.... It's private," says Gregory Nojeim, legislative counsel at the American Civil Liberties Union.
(c) Copyright 1999. The Christian Science Publishing Society