North Dakota's congressional candidates are sparring over who is the better protector of consumers' financial privacy.
Congressman Earl Pomeroy, D-N.D., and Republican state Rep. Rick Berg both cast votes in that legislative arena about 10 ago and now differ over who made the right choice.
Pomeroy raises the issue in a recent advertisement calling attention to state Berg's vote for a banking a bill that voters repealed the following year. Berg cried foul, explaining that the bill was an attempt to counter bad federal legislation supported by Pomeroy.
Senate Bill 2191, which Berg favored and voters ultimately rejected, had the support of most legislators, who believed the state's bankers when they said they needed different rules because of a new environment created by federal legislation known as the Gramm-Leach-Bliley Act.
In 1999, Senate Republicans introduced Gramm-Leach-Bliley to remove the lines of separation between banking, securities and insurance companies, first imposed in 1933 in response to nation's banking collapse. The U.S. Senate and House each passed versions of Gramm-Leach-Bliley that met up in conference committee. When the final report came out, the Senate voted 90-8 and the House 362-57 to pass the conference bill. Pomeroy and Sen. Kent Conrad voted for the bill, and Sen. Byron Dorgan voted against. President Clinton signed the act on Nov. 12, 1999.
In the bill was a provision requiring financial institutions to provide consumers with a privacy notice explaining how personal information is used and offering consumers a chance to opt out of having their information shared with other parties.
Pomeroy wanted additional privacy safeguards, said Brenden Timpe, spokesman for the Pomeroy campaign, but amendments to strengthen the bill failed to pass. Pomeroy was able to ensure that states such as North Dakota that had stronger privacy rules would be able to retain those laws, he said.
"This bill didn't affect North Dakota at all," Timpe said.
Many North Dakota bankers disagreed.
By defining securities and insurance as financial institutions, it opened up a new level of competition, said Marilyn Foss, general counsel for the North Dakota Banking Association. In theory, small banks could form marketing partnerships with securities and insurance companies to provide the same service as the larger institutions with holding companies and many affiliates, she said. Banks needed different rules to operate in this new world, she said.
They lobbied for Senate Bill 2191, which changed North Dakota's privacy law to coincide with Gramm-Leach-Bliley. Instead of banks needing permission to share information with their marketing partners, consumers would have to opt out to avoid having their information shared.
When the bill passed the state Senate 42-6 and arrived at the House, it caught the eye and ire of Rep. Jim Kasper, R-Fargo, president of a financial management company.
"When I saw the bill I blew a gasket. I said, 'This is absolutely wrong,'" recalled Kasper. "Banks brought along a lot of misinformation and put the full-court press on the legislators."
The House passed the new version 77-20. The Senate followed suit 34-12. The law was referred and rejected by 73 percent of voters.
Contrary to the portrayal in the Pomeroy advertisement, Berg had no ownership nor was he a leader in passage of the bill, Kasper said. Berg chaired the committee that heard the bill but declined to take a vocal position in the interest of giving the bill a fair hearing, he said.
Tom Nelson, spokesman for the Berg campaign, said Pomeroy had more to do with SB 2191 than Berg.
"Senate Bill 2191 never would have been dropped in the hopper if it hadn't been for Gramm-Leach-Bliley," he said.
Pomeroy continues to stand by his argument that North Dakota never needed to change its privacy rules to accommodate Gramm-Leach-Bliley, Timpe said. An Attorney's General's opinion in 2002 determined that banks still could share information needed for necessary functions, such as processing checks and operating ATM machines.
In 2003, Kasper worked with banks to craft new legislation that left consumers' privacy rights intact but made other changes desired by banks.
Because the state didn't adopt the joint marketing provision in the Gramm-Leach-Bliley Act, it leaves differences among banks, insurance and securities companies over how information can be shared, and it can make business more difficult at times, Foss said. However, joint marketing as envisioned under Gramm-Leach-Bliley hasn't taken off to affect financial institutions to the extent that was expected, she said.