We write to you regarding your hearing on “Revamping and Revitalizing Banking in the 21st Century,” and in particular regarding the Financial Data Privacy Bill proposed by Chairman McHenry. EPIC appreciates your attention to the need for improved privacy protections in the financial services sector.
EPIC is a public interest research center in Washington, D.C., established in 1994 to secure the fundamental right to privacy in the digital age for all people through advocacy, research, and litigation. EPIC is a leading advocate for consumer privacy, including in the financial sector, and has appeared before this Committee on several occasions.
The Bill’s Focus on “Notice and Choice” is Outdated
Notice and choice simply does not work. We have all received these notices in the mail – a pamphlet from our bank or credit card company explaining all the ways they disclose our data to other entities. Under GLBA, the notice must give consumers the option of opting-out of a limited amount of data sharing. But in reality, very few consumers read these notices or exercise their opt-out option. Even though the Financial Data Privacy bill provides a new deletion right for consumers, this 1) still puts the burden on consumers to protect their privacy; and 2) is not a meaningful right as so few consumers will be aware it exists. The Financial Data Privacy bill assumes that consumers have the time, knowledge, and know-how to read company legalese and exercise their rights. This framework simply hasn’t worked.
Rather than move past this outdated notice-and-choice system, the Financial Data Privacy bill simply adds another layer of notice – notice must now be given at the point of collection rather than just at the point of disclosure. This is out of step with the progress made by the House Energy & Commerce Committee last Congress on the American Data Privacy and Protection Act (“ADPPA”). Sponsored by Democratic and Republican leaders on the Committee, ADPPA takes the burden of protecting privacy off the consumer and instead imposes a data minimization standard that requires businesses to limit the collection, use, and retention of personal information to what is reasonably necessary to provide the product or service the consumer has requested. Chairwoman McMorris Rogers has indicated that ADPPA continues to be a priority for the Energy & Commerce Committee this session. This is the standard that the Committee on Financial Services should be imposing on entities subject to the GLBA.
The Committee on Financial Services simply should not advance a bill in 2023 that uses a notice-and choice-regime, particularly when paired with a preemption provision that prevents states from enacting stronger protections. The standard has changed. The Committee should not advance legislation that purports to be a privacy bill unless it includes a data minimization standard similar to what is set forth in the bipartisan American Data Privacy and Protection Act.
Data Aggregators Should Not be Added to GLBA Without Stronger Privacy Protections
The Financial Data Privacy bill would add “data aggregators” to the types of financial institutions covered by GLBA. “Data aggregators,” more commonly known as “data brokers,” buy, aggregate, disclose, and sell billions of data elements on Americans with virtually no oversight. For these companies, consumers are the product, not the customer. Most consumers do not even know that data brokers exist, as they have no direct relationship with them. This comes at huge cost to individual privacy and our national security. Data brokers have sold data on military personnel to foreign adversaries and facilitated elder scams. Foreign governments seeking personal data on Americans can simply purchase it from a data broker – no cyberattack needed.
Given the lack of regulation of this industry, it would seem to be a step in the right direction to include data brokers as covered entities under the GLBA. Unfortunately, that is not the case. Adding data brokers to GLBA simply allows them to evade stricter regulations, whether from existing state privacy laws or stronger national standards that may come into effect in the coming years. The so-called privacy protections in GLBA are so weak that some consumer advocates have called for their repeal and said that “In some ways, the GLBA is worse for consumers than nothing.”This is due to the success that entities regulated by the GLBA have had in lobbying state lawmakers to exempt them from stronger state privacy laws. Any data collected pursuant to GLBA is exempt from the California Consumer Privacy Act. In the other four states that have passed comprehensive privacy laws (Colorado, Virginia, Connecticut, and Utah), entities governed by GLBA are exempted entirely, even for data that is not covered by the law. This is why data aggregators would like to be covered by GLBA, as proposed in this bill – such coverage exempts them from stronger privacy laws. The Committee should not include data aggregators under GLBA coverage unless the privacy protections in this bill are substantially improved and set a higher standard than existing state laws.
We ask that this letter be entered in the hearing record. EPIC looks forward to working with the Committee on these issues.