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State Financial Services Regulations
In November, 1999 Congress passed the Gramm-Leach-Bliley Act (GLB Act), a long-awaited federal regulatory modernization bill for the financial services industry. Title V of the GLB Act set forward a stringent set of regulations that restrict the use of consumer information by financial institutions. During conference, an amendment was slipped into the bill that allowed states to add their own regulations on top of the federal ones.
Although no one will know the impact of the GLB Act until after implementation, state legislatures are already moving quickly to enact even more restrictive laws. In their haste, however, they could complicate the federal implementation process, negate the goals of the GLB Act, and even duplicate existing federal laws.
Laws protecting consumer privacy are already enforced on a variety of industries including financial services, health care, telecommunications, and even Internet services. Examples of such statutes are the Fair Credit Reporting Act, the Electronic Fund Transfer Act, the Truth-in-Lending Act, the Fair Credit Billing Act, the Truth-in-Savings Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Electronic Communications Privacy Act, and the Right to Financial Privacy Act.
State legislators should carefully study the impact of any new laws on both consumers and businesses before they vote to impose them, especially with the implementation of new federal regulations underway. Because there is a comprehensive regulatory structure at the federal level, and because financial services markets are increasingly national and international, new state laws and regulations are likely to do little more than unnecessarily interfere with interstate commerce.
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