New rules on financial privacy spark furor

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Credit bureaus and direct marketers are hopping mad over the anticipated impact of new financial privacy legislation.

Marketers did not expect the Gramm-Leach-Bliley Act to have much effect on the way they do business. But as part of 159 pages of rules implementing the act, the Federal Trade Commission bans credit companies from selling name and address information from credit reports unless consumers have been given the chance to opt out. The ban becomes effective July 1, 2001.

While limited in scope, the so-called "header" information is widely used by marketers to verify information on prospective customers and to update lists. It is also used by consumer-oriented lookup services that provide information on credit reports.

Ron Plesser, an attorney who represents the 13 member companies that comprise the Individual Reference Services Group, said the association intends to sue the FTC over the rule. "It destroys the lookup industry in one stroke," he said.

The Direct Marketing Association also is upset by the rule and weighing a lawsuit, association Exec VP Jerry Cerasale said.

The sale of financial information from credit reports has been limited by law. But until now, such information as names, addresses and Social Security numbers have been considered non-financial information because they are readily available elsewhere and can be sold by credit bureaus.


"Suddenly a name and address is financial information," Mr. Cerasale said. The change "will have a great impact on the accuracy of mailing lists. It's going to hurt the size of mailing lists."

Credit bureau information is especially prized by marketers since it often represents the most up-to-date and accurate information on consumers available.

The FTC took the position that the new financial privacy law gave it no choice but to bar the sale of credit header information. A commission official said marketers can limit the impact of the law by making sure consumers have the option to opt out of the sale of such data when it is collected.

Direct marketers and the references services group, however, disputed the FTC's contention that it was forced to block the sale of header information. They insisted there was never any discussion of that possibility in drafts of the rules.

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