Efforts by financial services firms to get European authorities to recognize U.S. financial privacy rules as being on par with Europe's privacy protections have come up short.
European data protection authorities don't believe that the privacy protections set in the Gramm-Leach-Bliley Act pass the "adequacy" test requirement under Europe's data privacy rules, said Frits Bolkenstein, European Union internal markets commissioner, who is in Washington this week to meet with U.S. officials on data privacy and other issues.
That means that financial services firms face the prospect having to comply with Europe's stringent privacy rules, which require customer consent on many transactions. U.S. firms follow an "opt-out" rule.
The Gramm-Leach-Bliley Act allows closer ties among banks, securities firms and insurance companies, as long as they follow certain guidelines for privacy and security of customer information.
Bolkenstein said he believes the safe harbor agreement that now applies to non-financial service firms should be extended to include financial services.
Under Europe's 1998 data privacy directive, the personal data of European residents can be exported to only countries that offer privacy protections similar to Europe's privacy rules. A so-called safe harbor accord between the U.S. and EU outlined provisions for U.S.-based companies to meet those EU rules.
However, when the U.S. and Europe agreed to safe harbor in 2000, financial services weren't included. Instead, U.S. officials wanted the Europeans to recognize the Gramm-Leach-Bliley Act and other financial privacy laws as providing enough protection to meet Europe's privacy requirements.
But Bolkenstein, in response to a reporter's question during a meeting of the European American Business Council, said he "regrets" that financial services aren't included in safe harbor. Companies that sign up for safe harbor agree to provide European residents with a stringent set of privacy protections, such as seeking consumer consent and agreeing to set limits on the use of individuals' data.
"It seems to me that the easiest way to cover financial services would be to extend the safe harbor agreement to that area," said Bolkenstein. He cited a number of weaknesses in Gramm-Leach-Bliley, including its allowing of sharing of customer data with affiliates.
A U.S. Department of the Treasury official didn't respond to Bolkenstein's comments, but said technical discussions were continuing.
David Leifer, senior counsel at the American Council of Life Insurers in Washington, said safe harbor makes sense for non-financial services firms that aren't faced with privacy rules under Gramm-Leach-Bliley, the Fair Credit Reporting Act and myriad other state rules.
"We feel that we are more than adequately regulated for privacy," said Leifer.