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North Dakota Privacy Battle and it's Repercussions
From: North Dakota Rep Jim Kasper
Date: August 13, 2002
Re: Council of State Governments news article

Who owns our citizens' personal and confidential financial information, the people or the financial institutions? That question was resoundingly answered in North Dakota on June 11, 2002, when 73% of the people voted to repeal a bill (SB 2191) passed during our 2001 Legislative session that had seriously eroded the privacy protections in previous North Dakota law. Here is the rest of the story.

The debate and battle over how confidential financial information will be handled and treated continues between U.S. Congress, state legislatures, consumer groups, and the citizens of our nation. The Gramm Leach Bliley Act (GLB), passed by the Congress in 1999, in my opinion, is one of the worst laws ever enacted by the United States Congress. GLB has eliminated the barriers between common ownership of banks, insurance companies, and securities firms, and allows these financial services companies to own each other and to market all financial products, like a one stop shopping WalMart. It has resulted in the elimination of competition and will result in the elimination of hundreds of thousands of small businesses across the United States. Ultimately, we will see the concentration of power and control of the financial services industries in the hands of a small number of mega-banks and financial conglomerates. I don't believe this result is in the best interest of our states and our nation.

In order to capture and increase market share, the mega-banks must have the free flowing of people's financial information. GLB allows this to easily occur through its privacy provisions, known as opt-out. This privacy "charade" works like this. When each of us receives the "Privacy Policy Notice" from our financial institutions, and we do not respond to the notice instructing the financial institution "not to sell or share" our private information, we have just given them our consent to share or sell our personal financial information.

GLB allows the states to enact more protective privacy laws by state Legislative action, commonly referred to as opt-in. Under opt-in, a financial institution is prohibited from selling or sharing its customer's confidential financial information without the customers consenting, in advance, in writing. In other words, by doing nothing, the customer has total protection of his or her private information. North Dakota was way ahead of our time in the area of privacy. The 1985 North Dakota Legislature enacted a strict law on privacy. It prohibited financial institutions from sharing or selling private information with any affiliates or non-affiliates. In 1997, the North Dakota Bankers Association succeeded in amending North Dakota law to allow for the sharing of customers financial information with their affiliated companies. At that time, it was a "quiet" piece of legislation and received no opposition. They should have stopped there, but they didn't.

In our 2001 Legislative session, the banks introduced Senate Bill 2191. This bill replaced current North Dakota privacy law with the GLB standard of privacy. In other words, it took away the citizen's strict protective privacy law and replaced it with the "no protective", opt-out privacy provisions of GLB. When I became aware of the provisions of SB 2191, I began to try to kill the bill. The bill had sailed through the Senate on a 49-0 vote, with no opposition. It was assigned to the House Industry, Business and Labor Committee, of which I am a member. The battle began in late February 2001 and continued for over a month. Three fellow members of our House IBL Committee, Reps. George Keiser, Dan Ruby and Doug Lemieux joined me. The banks had three to four fulltime lobbyists at the capital almost daily, as well as a number of lobbyists representing the credit unions. They also brought into Bismarck local bankers and credit union officers to lobby their Representatives to support SB 2191. Their arguments ranged from "loss of jobs" and "negative economic development for North Dakota", to "don't make North Dakota an island" and "we need to pass SB 2191 to comply with Federal law".

We argued that each person's confidential financial information is a constitutionally protected property right, just like our homes, our farms and our automobiles and no institution should have the right to share or sell anyone's private financial information without prior consent, just like no one has the right to take our automobile and sell it. Unfortunately, the vast majority of our colleagues in the House (77-20 final vote) saw it differently. The bill was signed into law by the governor with an emergency clause and became North Dakota law on July 1, 2001, the same day that the privacy provisions of GLB became effective nationwide.

Happily, this is not the end of the story. A small group of private citizens, called Protect Our Privacy, organized almost immediately and in 6 weeks obtained over 17,000 signatures to refer SB 2191. In a state of only 650,000 people, that's a whole lot of signatures to gather. We just had the referral vote on SB 2191 here in North Dakota on June 11, 2002. Despite being outspent by almost 8 to 1 by the big banks, the people of North Dakota overwhelmingly voted to throw out SB 2191. We have now gone back to our prior, very protective privacy law we had in effect since 1985.

I believe that North Dakota's citizens are no different than any other state's citizens. All of the nationwide polls show that between 85 percent and 90 percent of the people in the United States want their private information to remain private. California is now very close to passing SB 773, sponsored by Sen. Jackie Speier, which will be opt-in regarding the treatment of financial information. If the California Assembly fails to approve her bill (it has already passed the Senate) a committee to initiate a very strong privacy law in California, led by Chris Larsen, the President and CEO of E-Loan.com, is ready to go. Mr. Larsen is serious enough on this matter to have donated $1 million dollars of personal funds, to assure the initiated measure will gather the 700,000 plus signatures needed, to get it on the California ballot. As I write this article, the final result in the California legislature is not known, but Sen. Speier remains optimistic her bill will pass the state Assembly and be signed by Gov. Gray Davis.

The privacy battle is not going to go away. As our constituents become better informed on how GLB has opened up their private financial information to unlimited use by financial institutions, I believe they will demand that state Legislatures implement strict privacy laws, to protect their personal information. Many North Dakota Legislators who originally voted for SB 2191 have since changed their position, as the truth on privacy has come out. I encourage all Legislators, regardless of party affiliation and ideology, to seriously consider where you want to be on this matter. Privacy is not a partisan issue. It is a Constitutional issue. Be prepared, because you may be asked to decide the fate of your state's citizen's confidential and personal financial information.

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