Legislature(2001 - 2002)
03/29/2001 01:35 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 66-FINANCIAL INSTITUTIONS
CHAIRMAN RANDY PHILLIPS called the Senate Labor & Commerce
Committee meeting to order at 1:35 pm and announced SB 66 to be up
for consideration.
MR. JOE SCHIERHORN, Senior Vice President, Northrim Bank,
representing the Alaska Bankers Association, supported the primary
provisions of SB 66. He said:
The idea behind the Bankers amended language is a desire
to have state laws nearer the privacy requirements that
have been passed at the national level by congress in the
Gramm-Leach-Bliley (GLBA) bill. The issue revolving
around this is the banks' desire to share information
about products and services that they feel would be
beneficial to their customers. The regulatory scheme
proposed by the State Division of Banking is contrary to
that in GLBA. Alaska banks will be treated differently
than other financial institutions located outside the
state that may choose to do business in the state. Banks
will also be treated differently than insurance
companies.
MR. SCHIERHORN said that the proposed regulatory scheme would
treat smaller banks without affiliates differently than
Alaskan banks with affiliates. This is because the Fair Credit
Reporting Act preempts state law as it pertains to information
sharing among affiliates. They feel it is unequal treatment
and not a level playing field. They, therefore, firmly support
language in the committee substitute.
CHAIRMAN PHILLIPS asked him if he was referring to the F version,
3/29/01. Mr. Schierhorn indicated that was correct, in particularly
since it adopts the privacy provisions in GLBA.
MS. JULIE BAILEY, Vice President, said that GLBA already requires
banks to protect their customers while providing them with choices
that they want and expect. All banks are required to send out
privacy notices to their existing customers annually. The notices
have to include the categories of information a bank collects and
discloses, categories of affiliates and non-affiliates, and
categories of non-public personal information if the bank does
that. It has to include information sharing practices including
categories of service providers or joint marketing exceptions and
it has provide the consumer with the right to opt-out. The notices
must include any disclosures the bank makes under the Fair Credit
Reporting Act and confidentiality and security of customer
information at the particular institution and how they ensure that.
At any point, if any information sharing practices should change,
they are required to send out a new notice and give the customers a
choice of what they want to do.
SENATOR LEMAN asked if the GLBA provisions require that notices
contain identification of who the affiliates are?
MS. BAILEY answered yes.
MR. DAVID LAWER, Sr. Vice President, First National Bank, supported
the SB 66, but Section 4 includes Subsection (b), which the
Bankers' Association doesn't object to, but thinks it is
superfluous.
MR. JERRY WEAVER, Sr. Vice President and Manager Commercial Banking
Group, National Bank of Alaska and Secretary, Alaska Bankers
Association, said they support the draft version of SB 66.
MS. RENEE DEVEREAUX, President, Alaska Mortgage Bankers
Association, and Sr. Vice President Residential Mortgage, said
their main concern was that the opt-in feature was out of the bill,
because that would affect their ability to sell services.
MS. LISA BELL, Sr. Vice President, Alaska Pacific Bank, supported
the committee substitute to SB 66. However, she thought language on
page 3, line 2, "when disclosure is required or permitted under
(a)(2) or (3)", (the exceptions to when it is allowable to release
information) was superfluous, since (a)(3) is a direct reference
back to GLBA. If institutions are working towards an opt-out
situation, they wouldn't want to be notifying the customer within
three days that they have just sent them a mailing. It doesn't make
sense," she said.
Number 1100
MR. TERRY ELDER, Director, Division of Banking, Securities and
Corporations, said he had just received the draft committee
substitute and there wasn't sufficient time to look it over,
although a number of areas look fine. He said the only significant
difference they had with the Bankers Association is on the privacy
provision. The other differences were primarily wording and not
substantive. Page 2, line 26, includes a reference to GLBA and
provides an opt-out for sharing of non-public, personally
identifiable information with non-affiliated third parties.
We continue to take the position that that should be opt-
in. GLBA does allow, under Section 524, states to have a
more stringent privacy policy and given the fact that
we've had for over 30 years, that kind of protection with
Alaska depositors and given the fact that we have the
provision in the state constitution that we have, those
two reasons are reasons enough, in this case, not to be
national in scope, but to be Alaskan in scope and protect
more than the GLBA provides for. Ordinarily, in many
cases, whether we're talking here about banking
regulations or securities regulations, the division takes
the position quite often that we want to be as uniform as
we can and we want to be as like the federal law as we
can. So this is a different position for the division
than it usually takes. The fact that current banking code
has that provision and the state constitution has that
provision, we think it's called for in this case.
The other thing I'll point out in the documents that
we've provided the committee that I've referenced this
afternoon, whether it's opt-in or opt-out, they are just
mechanisms. Regardless of how, every institution is going
to have to have two lists of customers, an okay to share
list and a not okay list. So opt-in and opt-out are just
the mechanisms by which their customers are going to get
themselves on one of those lists. It's not like, whether
you pick opt-out or opt-in, the institutions can share or
not share the information. There is actually no
restriction on the sharing of that information. The only
thing we're really talking about here is the mechanism.
We understand and probably agree with the Bankers
Association that opt-in is more expensive than opt-out,
because people who don't respond, if you want to require
them to make a choice, you're going to have to go back to
those people more often in an opt-in situation than in an
opt-out situation. In an opt-out situation, you never
have to contact them again, until the next year when
you're required to. In an opt-in, of course, if you want
them to be in, you are going to have to do that. However,
under both scenarios, the institution is going to have to
maintain two separate lists and make sure they don't
share information for people who have opted out.
MR. ELDER concluded saying that the legislature would
ultimately have to make the policy decision. He also
recommended deleting "having jurisdiction of the financial
institution;" on page 2, line 25. He explained that language
could be interpreted to require his agency to issue orders
even when it's not the division doing the investigation.
MR. LAWER responded that language was suggested because all banks
very often receive process issued by courts that do not have
jurisdiction over the bank from whom records are being sought.
Number 1600
MS. BELL agreed with Mr. Lawer's comments.
MR. ELDER responded that as Mr. Lawer stated, the banks routinely
resist doing those kinds of things, so he didn't think it would be
a problem to delete it. He said that (a)(3) on page 3, line 2,
needs to be deleted and recommended leaving section (d) on page 3,
line 8, in. Comments from Anchorage suggested that was superfluous
because of (a)(3), which references GLBA, but (d) provides an
exception to the disclosure and approval requirement for financial
institutions' disclosure to any person. They are not saying
"affiliated" or "non-affiliated" person; they are saying both. It
obviates the problem that under opt-in, you might have smaller
institutions that couldn't compete. Section (d) allows them to
disclose information that's necessary for providing services to
customers. This includes things like printing statements and checks
and to the extent of marketing services. He thought this would be
an advantage to an institution without a lot of affiliates.
MR. LAWER responded that these matters are covered by GLBA and this
language is an unnecessary complication. There are two concepts in
(d)(1); disclosure must be necessary. He questioned, "How is
anybody to reckon necessity with respect to disclosure?" and asked,
"What are the essential services of a financial institution? Every
bank in the state offers a different array of financial services
and no two of them are alike."
MR. ELDER responded that he wouldn't object to the elimination of
the word "essential", if they kept "services". GLBA only talks
about sharing with non-affiliated third parties. It's the Fair
Credit Reporting Act that deals with the affiliates. Language in SB
66 doesn't make the distinction and he thought it was important to
do that.
CHAIRMAN PHILLIPS asked Mr. Lawer if he objected to deleting
"essential".
MR. LAWER reiterated that he thought it brought on unnecessary
complications. The Bankers will not oppose it, if it includes this
provision.
MS. BAILEY commented that this would be covered under GLBA and she
didn't know why it was listed again.
MR. ELDER said he noticed on page 2 that (a) has (1)(2) and (3) and
he wasn't sure of the purpose, since banks would continue to verify
sufficient funds. "Perhaps they'll say it is covered under (a)(3),
but my recollection on GLBA is that it does not cover commercial
accounts, for example, and agricultural accounts. So GLBA does not
cover all account and I'm not sure there's any value to dropping
the current provisions of (a)(4) and (5).
CHAIRMAN PHILLIPS said he intended to work on the bill further and
move it out of committee on Tuesday and adjourned the meeting at
2:13 pm.
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