Abstract

http://ssrn.com/abstract=347402
 
 

Citations (2)



 
 

Footnotes (206)



 


 



The Surprising Virtues of the New Financial Privacy Law


Peter Swire


Nancy J. and Lawrence P. Huang Professor of Law and Ethics, Scheller College of Business, Georgia Institute of Technology


Minnesota Law Review, Forthcoming

Abstract:     
The financial privacy law passed by Congress in 1999 has been the target of scathing criticism. Financial institutions have complained about the high costs of the billions of notices sent to consumers, apparently to widespread consumer indifference. On the other side, privacy advocates have condemned the law as woefully weak.

This article disagrees with the criticisms. Part I describes the main provisions of Title V of the Gramm-Leach-Bliley Act, showing a better match with basic privacy principles than many have realized. Part II explores the history of how GLB became law, placing the enactment into the context of a historic peak of privacy policy activity in the late 1990s. This history draws on my dual perspective, as an academic who has written extensively about financial and other privacy issues, and as the Clinton Administration's Chief Counselor for Privacy during the period.

Part III looks at the most hotly contested issue in the privacy debate, the rules for sharing personal information with affiliated entities and third parties. GLB establishes a basic rule that information can flow freely within a financial institution and to its affiliates. Customer choice - an opt out ability to prevent sharing - applies for transfers to non-affiliated companies. The article argues that an exception to that principle of customer choice, the "joint marketing exception" should be repealed. It then explores the knotty issue of how to handle data sharing in today's vast financial conglomerates, suggesting possible statutory modifications.

Part IV looks at the much-maligned notices that financial institutions have sent out in compliance with GLB. The critics have accurately complained about the legalistic and detailed language in the current notices. The critics have largely overlooked, however, important benefits from these notices. Publication of the notices and the new legal obligation to comply with them have forced financial institutions to engage in considerable self-scrutiny of their data handling practices. Many firms have hired a Chief Privacy Officer or made other institutional changes. The current notices, even in their imperfect form, have reduced the risk of egregious privacy practices. And improved notices, with a plain-language short form on top, would enhance accountability while also communicating far more clearly with ordinary customers.

In short, there are surprising merits of the GLB privacy provisions. Considerably more was accomplished in the Act than observers would have predicted in the spring of 1999 or than critics have recognized to date. Important flaws do exist, but specific and achievable changes in the statute and implementing regulation can go far toward reducing the magnitude of those flaws.

Number of Pages in PDF File: 60

Keywords: financial services, banking regulation, privacy, Gramm-Leach-Bliley, financial privacy

JEL Classification: D18, D72, D78, D82, K22, K23

Accepted Paper Series


Download This Paper

Date posted: January 6, 2003  

Suggested Citation

Swire, Peter, The Surprising Virtues of the New Financial Privacy Law. Minnesota Law Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=347402 or http://dx.doi.org/10.2139/ssrn.347402

Contact Information

Peter Swire (Contact Author)
Nancy J. and Lawrence P. Huang Professor of Law and Ethics, Scheller College of Business, Georgia Institute of Technology ( email )
225 North Ave
Atlanta, GA 30332
(404) 894-2000 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 1,925
Downloads: 229
Download Rank: 73,505
Citations:  2
Footnotes:  206

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.844 seconds