Senate May Take New Tack on Tech Issues

Fate of opt-in effort in doubt; stronger support for banking privacy possible

WASHINGTON -- Republican control of both houses of Congress, and the leadership changes it will bring about, could deter efforts to bring opt-in privacy protections to online commerce. However, Capitol Hill's approach to other privacy issues may not change.

The bid to allow the sharing of personal information only if consumers actively agree to it, known as opt-in, has been strongly opposed by the technology industry but championed by Sen. Ernest "Fritz" Hollings (D-S.C.), the current chairman of the Senate commerce committee. That has the technology industry welcoming the return of Sen. John McCain (R-Ariz.) as chairman of the key committee.

"McCain is certainly more tech-industry-sensitive then Hollings," said John Palafoutas, vice president of the AEA, an electronics trade group in Washington. But Hollings "is still a force to be contended with, and for anything to happen in that committee, Sen. McCain is going to need Hollings' cooperation," Palafoutas said.

The differences between McCain and Hollings on privacy are clear; McCain has previously backed the more passive opt-out approach to privacy legislation.

Smoother Transition

While the Senate commerce committee will likely shift in its approach, the same can't be said for the Senate banking committee, which is expected to take up renewal of the state preemption provisions of the privacy protections in the Fair Credit Reporting Act (FCRA).

The FCRA allows sharing of certain kinds of data among business affiliates; states are prohibited from setting their own data-sharing rules. The provision, which expires at the end of next year, has the potential to become the leading financial privacy issue of 2003.

In this case, a change in leadership may not make a difference. Sen. Paul Sarbanes (D-Md.), the chairman of the banking committee, may be replaced by Sen. Richard Shelby (R-Ala.), also a strong advocate of privacy protections.

"Shelby is one of the most ardent pro-privacy senators of either party," said Evan Hendricks, editor and publisher of "Privacy Times." "Privacy is in much better shape [in the banking committee] than anywhere else."

But the Senate commerce committee has been the key committee for technology legislation. It was there that Hollings began his effort to force technology suppliers to build mechanisms into their products to stop piracy.

That measure has already faced problems. "If it wasn't already going nowhere, I think with the Republican control of the Senate, it would be [more likely to go nowhere]," said Rhett Dawson, president of the Information Technology Industry Council in Washington.

The Republicans "are even less enthusiastic about having Congress get in the middle of technology choices" than the Democrats, said Dawson.

IT industry officials, however, said no bills will get passed without Democratic support, particularly because of the Senate's 60-vote rule.

Ari Schwartz, associate director of the Washington-based Center for Democracy and Technology, said McCain worked to get bipartisan privacy legislation adopted, and he believes that debate will resume. "A significant number of members . . . are for stronger privacy rules," he said.

Technology associations and business trade groups have supported opt-out laws because consumers often don't take advantage of them . For example, the 1999 Gramm-Leach-Bliley financial modernization act includes a number of opt-out privacy protections.

Gramm-Leach-Bliley gives customers the right to stop financial services firms from selling or sharing their personal data with third parties. All that customers have to do is opt out. But critics charge that the privacy notices are full of legal jargon and fine print and are difficult to understand. Less than 5% of customers opt out of data sharing.

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Republican Rule

These Senate leadership changes could affect privacy legislation:

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Commerce committee chairman Sen. Ernest “Fritz” Hollings (D-S.C.) favors the opt-in approach to sharing consumers’ personal information with third parties. Sen. John McCain (R-Ariz.), the returning chairman, prefers opt-out.

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With Sen. Phil Gramm (R-Texas) retiring, the path is clear for the banking committee’s two most ardent privacy advocates to make changes. Sen. Richard Shelby (R-Ala.), who may become the next chairman, wants strong privacy protections, as does Sen. Paul Sarbanes (D-Md.), the current chairman.

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Copyright © 2002 IDG Communications, Inc.

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