THE WHITE HOUSE
Office of the Press Secretary (Ypsilanti, Michigan) ________________________________________________________________________ For Immediate Release April 30, 2000
PRESS BACKGROUND BRIEFING BY SENIOR ADMINISTRATION OFFICIALS ON FINANCIAL PRIVACY Aboard Air Force One En route Ypsilanti, Michigan
11:55 A.M. EDT
SENIOR ADMINISTRATION OFFICIAL: Hi. Let me just briefly set this up. The President, in his remarks today, is going to talk about how we're entering the Information Age and, yet, even today, we need to establish rules of the road that will protect American core values in this era, just as we did in the Industrial Era before it.
And so he will give illustrations of a couple of different core values, and he'll really challenge the young people that this is their responsibility to find ways to protect those values.
The central issue that he'll talk about, and where I think we're making some news today, is on the area of financial privacy. Last year, the President signed the Financial Modernization Act, the Gramm-Leach-Bliley Act in November. And that bill contains some important financial privacy protections, really, for the first time.
But the President made clear as he signed that bill that he thought those provisions did not go far enough, and directed the Treasury Department, NEC and OMB to develop a plan to protect more comprehensively Americans financial privacy.
This bill that he is announcing today and which he will send to Congress next week -- the Treasury Secretary will transmit -- is a fulfillment of his commitment to go further to help protect American consumers financial privacy. The central concept he embodies is that Americans should have the ability to control how their information is used by the firms that provide them financial services. And, depending upon how sensitive the information is, greater protections and more control is appropriate. And that's the central theme that will run throughout all of the proposals that we'll talk about.
The only other general point I'd make before I turn it over to my colleague is that public interest in this issue continues to grow, the momentum on this issue grows. Last year, when we considered financial modernization legislation we announced our proposal in May, and the President had a proposal last year that this goes further than. No one thought that there would be -- and many members of Congress said there would be no legislation on the subject last year. And, yet, only six months later, Congress adopted a good first step in the process.
So we would say to those who are skeptical about legislation that the momentum on this topic is only going in one direction. And the President today is going to challenge the Congress to do what we think most Americans want them to do.
SENIOR ADMINISTRATION OFFICIAL: As my colleague said, the President is committed to what I think all Americans want, is an ability to choose how their information is used in the financial world.
Many things have changed. I was just going to say three things have changed. Technology has changed, as we know, but also there is consolidation that banks, securities firms, insurance firms can come together now in one conglomerate. And the third thing that has changed is we are less are a cash society and more electronic payment, electronic transaction.
The five areas I was going to mention that's in this legislation that's going to be transmitted this week is, one, that consumers could choose, or opt out of information being used and shared within a conglomerate before it's used for marketing and other purposes.
What that would mean is people could get a form once a year and be able to look at it and say if they don't want the information to be shared, they could check a box and send it back in. If they don't fill it out and they don't send it in, the information can be shared.
But recognizing that there is some information that's so sensitive, especially sensitive, the President has set a higher standard -- what is called opt-in -- that somebody has to say, yes, you can share it for two areas of especially sensitive information. That's for medical information and that's for a sort of detailed, comprehensive set of your personal spending habits.
In terms of medical information, I think the best example is if a bank wants to make a mortgage loan or an auto loan and think about lending you money, can they go to their insurance affiliate and find out how your health is? Well, the President believes the answer to that should be no, unless the consumer affirmatively says, no, you can go look at my health information at the insurance affiliate -- that we should not be as Americans worried about if our mortgage or auto loan is going to be using information from the insurance affiliate.
Secondly, if you use a checking account or a credit card account or a debit card, the payments that are made, the payments that are made for all of us, as Americans, should be processed and should be done, but that we should have an opportunity not to have a whole list of our personal spending habits shared. That they could not call up a "John Doe" set of personal spending habits and see every payment I've made.
In essence, who we are as individuals determined by where we spend our money, how we spend our money, how we earn our money and get that whole portrait of us as individuals. Again, we could say, yes, that can be shared. Again, the opportunities to mark it would be there. If there was a complete list of all those who travel to Europe, it would be all right to put me on a list of all those who travel to Europe; but not to say, give me everything on "John Doe."
Q So that's an opt-in on the complete detail list, but an opt-out on, like, if they want to know everybody who buys cat food or something?
SENIOR ADMINISTRATION OFFICIAL: That's right. That's right. So that what we're looking at is how do consumers benefit, and recognizing there is some benefit to maybe having a complete list of people who travel frequently to Europe -- that's an opt-out, a lower threshold.
But in terms of saying everything about you or I as an individual, tell me all the spending that we've done, that's facilitated by a payment system, by a check or credit chard -- that's an opt-in. And this is meant to be around those payment systems, specifically. And, again, the medical is the opt-in.
Q On the payment issue, will they be able to use that information to develop sort of generalized profiles of people and their spending habits? In other words, a lot do that now, where they don't necessarily release every single payment, but they might mark it, well, this person generally likes to buy this brand or these types of things with their credit cards. Would they be able to still use the data, or would it just be completely off limits?
SENIOR ADMINISTRATION OFFICIAL: Curt, if you enjoy a particular product -- tennis -- they might be able to say, give me everyone that likes tennis, and Curt might appear on that and they could give a general, broad mailing on tennis. But they couldn't, without an affirmative "yes" or opt-in, say, give me everything you've got on Curt.
A private investigator, in essence, couldn't call up a bank and say, give me everything you've got on Kirk, unless you affirmatively say that that --
SENIOR ADMINISTRATION OFFICIAL: Let me clarify. Covered in the opt-out is not only the, give me everything you got, the 9,000 payments he made; you couldn't say, tell me about Curt's spending habits. And they could not say, Curt loves tennis, traveled to Europe, cigars, et cetera. They could say, tell me the people who like cigars, and give them a list of the cigars.
The notion is sort of it revolves around you, it's individualized to you, that gets to the higher opt-in.
Q The issue, whatever they might want to find out about, they could find people who might be interested in those things, but they couldn't just say, like you said, go to you and, give me everything that's on this person?
SENIOR ADMINISTRATION OFFICIAL: Again, we're looking at, and the President is very focused on the consumer and how the consumer can benefit -- recognizing that there are various benefits of this Information Age. Marketing is one of those benefits, to have broad, generalized marketing. One could still opt-out if one wishes not to have those benefits.
But in terms of the overall sense of who you are as an individual, where you spend your money, individualized in a query way, like a private investigator might say, give me everything on Curt -- that that would be an opt-in.
Q -- more mundane example. Like supermarket chains often use these shopping club cards, where you scan the card and you get various coupons. And one of the reasons they do that is so they can electronically monitor all the things that you purchase on a regular basis at your local supermarket.
From that, larger corporations find out, oh, you're buying size one baby diapers -- all right, let's start sending you some coupons on Infamil or something like that. I mean, there's a very strong integration between what supermarket chains monitor of your shopping habits, and transferring that on to larger corporations that sell products that they stock.
How does that fit or not fit in this whole scenario?
SENIOR ADMINISTRATION OFFICIAL: This fits around financial privacy. And this initiative recognizes that there is a certain sensitivity to our financial records, as there are to medical and children on line that the President has spoken to.
And so this is really talking about the payment function. And your example of a shopping card, where somebody says, I want to be a member -- in essence, they have become a member and they've made a decision to be part of the many of those benefits that come with that membership.
But when we think about promoting the economy, one of the things that the President thinks about is promoting the confidence in the payment system and bringing all Americans into the banking system. And that that payment system -- just the checking, credit card, debit card function is what this refers to.
Q Will people be penalized for opting-out or not opting-in? If they apply for a bank loan, for example, and they say they don't want the banks insurance affiliate to give them the medical records. Can the bank then deny the loan on that basis?
SENIOR ADMINISTRATION OFFICIAL: Well, the legislative language would actually require that they would have to ask all applicants for the same information, regardless of whether there is an affiliated insurance company. So --
SENIOR ADMINISTRATION OFFICIAL: Regarding medical information.
SENIOR ADMINISTRATION OFFICIAL: Regarding medical, to your question. If the bank truly asked everybody for this information -- not just those that happen to have an insurance company -- that would be an additional threshold. So there are very few products today that they do that. But if that were the case, and it was really important to that product.
Q So this is kind of protecting from the bank taking advantage of its insurance affiliate in cases where it otherwise wouldn't have that access?
Q The reasons that they moved toward these conglomerations is to synthesize this information flow and give them a better sense of risk in the marketplace, is it not?
SENIOR ADMINISTRATION OFFICIAL: There are many benefits that this administration saw, the industry saw in financial modernization. That the marketplace should best dictate how industry is organized -- consumers dictate how industry is organized. And those many benefits we believe will be very much still seen -- marketing and cross-marketing was one of those potential benefits, that's still very much that consumers will get that. But at the same time, that we all recognize -- and as the President will lay out in his speech later today -- that we have to adjust our rules for this new age, to protect the zone of privacy and give consumers choice; that there may be some consumers who will say, no, I want a zone of privacy that I might not wish to share.
Now, on the other hand, there are many, many parts of this legislation that will allow processing to go on; that your checks could be processed; that they could check for risk and fraud and work with law enforcement agencies -- even in a complex world of finance; securitize the financings; that we'll have to have the protections in the legislation that would still go forward.
SENIOR ADMINISTRATION OFFICIAL: Just two clarifications, also. We would argue that the benefits of affiliation and the protecting consumers privacy are entirely consistent objectives. And, in fact, if you don't protect consumers privacy, consumers will not fundamentally have confidence in these large institutions and the benefits to our system won't materialize.
And in order to demonstrate that, there are -- actually, we proposed two new exceptions that would expressly allow, would clarify that it is allowed for institutions to provide, for example, customer service centers that have information about multiple products, or send you single, aggregated account statements of all your different product lines.
The test was always, is there a consumer benefit and is there a consumer harm. Those sorts of things which the banks argue is why they need to do this are clearly consumer benefits and we see no adverse implication, as long as it's not re-used for other purposes.
SENIOR ADMINISTRATION OFFICIAL: At the risk that we're about to land, why don't we see how many more questions.
Q I just wondered if you could cite some examples of risks involved in not putting these projections in place. What have you seen that sort of spurred this?
SENIOR ADMINISTRATION OFFICIAL: Well, I was going to say this. I think that this is a quickly evolving landscape. And if one looks at the various benefits that come from the consolidation from the technology that you're referring to, they're very real. But there are many who would wish to mine data and look at a consumer and see what more they can get.
There are various circumstances last year -- and one was a case up in Minnesota that the State Attorney General brought, there were cases out in California about various financial institutions that sold data, specific account number data -- that when brought into the public light many people are very concerned about.
And I think that's what the President is trying to address, is to instill that confidence, give choice and build the base for the whole economy to continue to grow.
END 12:08 P.M. EDT