Financial Industry Looks To Avoid ID Restrictions; Congress Eyes Limiting Use Of SSNs As Identifiers

By Jaikumar Vijayan

The possibility that U.S. lawmakers might restrict the widespread use of Social Security numbers as customer identifiers because of data-privacy issues is prompting big concerns within the financial services industry.

Randy Lively Jr., CEO of the American Financial Services Association in Washington, said last week that such a move could deprive banks, insurance firms, credit bureaus and other businesses of a reliable identity verification method while doing little to bolster consumer privacy.

"The Social Security number is the only unique identifier in our country that enables a [company] to be sure that the consumer they are doing business with is the correct John Smith," Lively said. Any attempt to limit the use of the numbers in commercial transactions could disrupt the nation's economy, he argued.

Concerns about the misuse of Social Security numbers and their link to identity theft are valid, Lively acknowledged. But he said that lawmakers need to understand the consequences of barring their use for commercial purposes. "What would be put in place if that number were to go away? And wouldn't that identifier be susceptible to the same kind of fraud?" he asked.
Lively was one of several financial industry representatives who testified at a hearing held in Washington earlier this month by a subcommittee of the House Committee on Energy and Commerce .

Taking a contrary view at the hearing was Marc Rotenberg, executive director of the Electronic Privacy Information Center , a Washington-based advocacy group.

Rotenberg said last week that EPIC supports current efforts by federal legislators to restrict the use of Social Security numbers. One is being led by Rep. Edward Markey (D-Mass.), who is sponsoring a bill that would require the Federal Trade Commission to establish rules limiting the purchase and sale of the numbers except in certain situations. Another bill, sponsored by Rep. Clay Shaw (R-Fla.), seeks to prohibit most sales and public displays of Social Security numbers and limit other uses of them.

"The concern is that use of [Social Security numbers] is contributing to the problem of ID theft," Rotenberg said. Although the numbers aren't the only source of identity information being tapped by companies, he added, "we see [their use] associated with a growing privacy risk."

Cost Worries

But a written statement submitted at the hearing by the Securities Industry Asso ciation's Financial Services Coordinating Council (FSCC) warned that overly broad legislation will raise the cost of credit and force "fundamental and costly changes to internal business operating systems."

In its statement, the FSCC urged that any legislation intended to limit the use of Social Security numbers "be carefully targeted to specifically identified abuses, such as measures to stop identity theft." The council claimed that existing laws such as the Gramm-Leach-Bliley Act and other proposed bills already require companies to protect sensitive information.

In testimony from the FTC, Commissioner Jon Leibowitz said companies and government agencies can take other actions to reduce identity theft, such as implementing better processes for protecting data and developing better fraud-detection technologies.

The FTC itself will continue to move against companies that fail to demonstrate due diligence in protecting sensitive data, Leibowitz said in a statement posted on the commission's Web site.
For example, he noted that the FTC levied a $10 million civil penalty against data aggregator ChoicePoint Inc. in January and required it to pay $5 million in restitution to victims of a data theft. w May 20, 2006.

From Insurance News Net (www.insurancenewsnet.com)