New Hampshire: First Post-GLB Bill Fails But Signals More to Come

June 2000

By Christopher C. Gallagher*
For Privacy Law Report magazine

The New Hampshire House of Representatives had killed, for this year, privacy legislation calling for "opt-in" across-the-board, including choice before information-sharing among affiliates. On April 13, acting on a Commerce Committee Report of Inexpedient to Legislate, the full House voted down HB 1623 and a less-onerous floor amendment calling for "opt-out" to be applied to affiliate information sharing.

Principally sponsored by Rep. Neal Kurk, Chair of the powerful House Finance Committee, the Bill was introduced late and included a number of other technical deficiencies that required more time and attention. Although the Commerce Committee vote of ITL followed a lengthy hearing and was an overwhelming 12 to 1, the informed conclusions of a knowledgeable Committee were not accepted by a similar majority of the full House. Heated debate in the 400-member "citizen" legislative body produced a much closer final tally of 189 to 151 to kill the proposed amendment and the Bill.

During the lobbying efforts responding to the invitation in Title V of the Gramm-Leach-Bliley Act (Act) to add stricter privacy protections (Section 507(b)), New Hampshire legislators seemed persuaded by the following arguments:

The Act promises to better inform people. It should be given a chance to work before new requirements are imposed on in-state financial services providers, who have all they can do now to comply with the Act's present implementation schedule.
How a financial service provider chooses to organize itself (or how it is required by the Act to be structured) should not trigger multiple notifications from the same organization, which will cause customer confusion.
The reality that with either "opt-in" or "opt-out," people concerned with what happens to their information can find a way to protect it, while with an "opt-in" regime those who are not so concerned will be cut-off from marketing opportunities that might otherwise be desirable.
Operational inefficiencies in the contractual, preauthorization process of implementing "opt-in," including detrimental impact on rapidly-evolving e-commerce business models, make its adoption imprudent.

Other arguments were less effective during the lobbying process, including:

Imposition of uneconomic regulatory burdens on domiciliary insurers competing nationwide. See Section 509(8)
The inevitability of expensive delays while the law is vetted at the FTC and tested in the courts. See Section 507(b)
Added regulatory burdens impose costs on financial services providers that will raise prices generally.
Court costs and regulatory paralysis resulting from delays likely from being the first state to enact stricter provisions.

There was no support for arguments that:

Most people are happy with the way things are.
Industry self-regulation is the answer, or
Personal financial issues should not be considered to be as sensitive as personal medical or sexuality information.

This comprehensive bill almost passed. Similar legislation will pass next year if heightened consumer awareness triggered by the Act fails to result in the substantial commitment to customer privacy protections now promised by the financial services industry. Those paying attention to the operational complexities of "opt-in" and affiliate inclusion tended to vote against the Bill, but many others were emotionally eager to support "privacy" whatever the operating complexities. Sensing this, privacy advocates pounced on the announcement by federal banking regulators that compliance with Title V would be "delayed."

A surprise move on the last day of the Session reversed the House's earlier action, adding the amendment to legislation empowering the Insurance Commissioner to enact rules needed to carry out her responsibilities under Gramm-Leach-Bliley. The Senate balked. And what finally resulted is a strong affirmation for legislated privacy protections and a statuatory study committee.

While all of this did not change New Hamshire law affecting privacy, it reveals a change in legislative attitude triggered by the new compliance "grace period." It now seems clear that without demonstrable proof of industry efforts to curtail inappropriate use of personal information, opponents of stricter privacy protection measures will find it difficult to overcome political passion for protecting personal financial information. It is equally clear that without the blizzard of privacy notices forecasted this spring for December of 2000, after the January 2001 opening of state legislatures across the country, it is safe to predict stormy weather along the privacy front.

*Christopher Gallagher is admitted in New Hampshire.

Return to top of page

Return to HOT TOPIC: PRIVACY
Return to Financial Services Articles
Return to Firm Publications