June 14, 2006 – Dubbed the "worst data bill ever" by PIRG, the House of Representatives is getting ready to vote on HR 3997. The bill was sponsored by Rep. Steve LaTourette (R-OH). LaTourette has tried to position his bill as a consumer protection measure; giving it the name the Financial Data and Security Act. But consumers should not be fooled. The bills name is simply a lie to confuse the general public.
In a nutshell, HR 3997 would pre-empt a number of much stronger state laws. Its sponsor is pushing his legislation in return for significant campaign contributions and perks from credit reporting agencies and the banking industry.
At least 17 states have passed laws that give consumers some ability to freeze there credit file. In every state that allows credit freezes, the laws are significantly stronger than HR 3997. The bill, which only allows consumers to freeze their credit file after they have become victims of identity theft and which limits their ability to file law suits, will render existing state laws useless if it becomes law.
Note: A credit freeze is the only known way to stop identity theft nearly 100% of the time. It cuts off the ability of potential creditors to run a credit check without your permission.
Just as worrisome are the data breach provisions of the bill. At least 30 states have passed data breach notification laws over the past 18 months. Most of these laws have already gone into effect. They require companies that store data on consumers to notify consumers when their data is stolen or accessed but unauthorized parties.
Data breach laws came to the attention of state legislators last year when ChoicePoint, a company that collects and sells consumer data, had their system compromised. This particular breach resulted in 145,000 people being exposed to identity theft.
Since the ChoicePoint incident, there have been numerous other data breaches in the private sector, resulting in millions of American’s being exposed to potential identity theft. The only reason that the public knows about any of these incidents is because of strict state laws requiring notification of consumers. Many states provide businesses with no loopholes for notification. Businesses that fail to notify consumers in a timely manner after a data breach has been discovered face stiff fines and other penalties.
If HR 3997 becomes law, all of the state data breach laws currently on the books will also be rendered useless.
HR 3997 would set a weak national standard for data protection. This is just downright frightening when you consider the federal government’s record of protecting consumer data. Within the past 30 days the government has had to announce that 26.5 million veterans and active duty military personnel had their data compromised when a VA analyst’s computer was stolen from his home. Just last week the Department of Energy was forced to announce that 1,500 contractors and employees of the National Nuclear Security Agency (this is the agency responsible for US nuclear weapons programs) had their personal data stolen by computer hackers. Stealing the identities of any of these people could affect national security.
For his part, Rep. LaTourette has been completely two faced. In one case he claimed that a 33 year old disabled veteran from his district may have had his identity stolen as a result of the VA data breach. Yet when VA Secretary Jim Nelson testified before Congress about the breach, LaTourette said that Nelson’s testimony was the "first time" that he had been told that veterans might be impacted by the data breach.
LaTourette wants everyone to think that weakening state laws is necessary to keep the economy from crashing. He said, "Even the simplest process of buying groceries with your credit or debit card will break down if we allow a patchwork of competing and conflicting state laws." But the evidence does not support his claims.
California was the first state to allow consumer credit freezes. As a result, the state has actually seen a slowdown in the rate of identity theft growth. At the same time, the state’s economy remains robust. LaTourette’s "Chicken Little" cries of "the sky is falling" have not panned out. Nor has there been any significant problem in any other state that allows credit freezes.
HR 3997 is opposed by the Attorney’s General of 48 states. If the bill becomes law, these state attorney’s general will be forbidden from enforcing the law. Instead, this responsibility will be left to the federal government.
In short, HR 3997 is a complete sell out by Congress to special interests. Consumers who are interested in taking some form of action can call their congressional representative’s office by using the form below.
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