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Privacy Dies a Back Room Death
by Amy Radil
April 24, 2000
Part of MPR's Session 2000 coverage
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Capitol observers predicted consumer privacy would be a hot political issue this session. Republicans and DFLers both seemed eager to address constituent complaints about how businesses - and in particular, telemarketers - gather and use consumer information. Numerous bills were introduced, but nearly three months into the session, nothing has passed and few bills have seen floor debate. One reason is the strenuous and unanimous opposition of the state's business lobby.
"I don't think U.S. Bank wanted to be in this situation, but they're the ones who put themselves in it," says Senator Don Betzold.

LAST WEEK, A BILL AFFECTING THE TELEMARKETING INDUSTRY died in the House Commerce Committee. The bill would have prohibited phone companies from selling information on who individual customers are calling, and would have prohibited telemarketers from charging people's credit cards unless those people gave them at least the last four digits of their credit-card number. The committee chair remarked that 59 lobbyists had contacted him to discuss the proposal. The bill's sponsor, DFLer Matt Entenza of St. Paul, says the committee room was packed with representatives of the banking and utility industries.

"Every time there was a vote the, overwhelming majority of members would vote for it," he says. "But when it came time to pass the bill, the Republican majority moved quickly - and without debate - to table and get rid of the bill. That speaks to the power of the lobbyists, despite the overwhelming support of the public."

Entenza says his bill is designed to stop companies from charging people's credit cards without their consent. The bill is an extension of the privacy crusade being waged by Minnesota Attorney General Mike Hatch, who last week announced a settlement of the suit he brought against Stamford, Connecticut-based Memberworks over its use of credit-card data it bought from U.S. Bancorp.

"We played tapes of these senior citizens who clearly didn't understand what they were buying who in many cases said, 'I don't want to buy it,'" Hatch said. "They were charged anyway."

"We wouldn't like to see any privacy legislation pass."

- Annette Henkel
the Minnesota Retail Merchants Association
Memberworks paid $75,000 in litigation expenses, but admitted no wrongdoing. The settlement followed from Hatch's lawsuit against U.S. Bancorp last June over selling customer information. The attorney general seemed to have found a hot issue with voters, and legislators followed in Hatch's footsteps this year with their own privacy proposals.

But those attempting to change the way telemarketers do business, soon found they faced the opposition of the state's entire business lobby. Representatives of insurance, banking and other industries formed the Fair Information Practices Coalition, opposing restrictions that will set Minnesota apart from other states.

"We wouldn't like to see any privacy legislation pass," says Annette Henkel of the Minnesota Retail Merchants Association is a coalition member. "We don't think in this short session we've given it the time and the deliberation and the education that is needed to do something very thoughtful."

Henkel says having consumers read back the last four digits of their credit card to confirm a sale could encourage fraud, since most telemarketers don't actually have people's credit-card numbers in from of them when they call. But she concedes her organization doesn't want to spook people about giving out their credit-card number over the phone, which happens in many telephone sales.

"If a charge is made to their account, which they did not authorize, all you need to do is call and take it off," Henkel says. "The abuses are very limited, but why open up one more avenue to do it?"

Americans enjoy unlimited benefits from new technologies in a wired world. But those wires send information in two directions, and the access to our personal data has never been more open for abuse. It's not just the Internet that erodes our privacy. In dozens, possibly hundreds, of every-day activities, you leave a trail of who you are. As technology brings us closer together, the fragments of information about you are becoming much easier to piece together, revealing the most intimate details of your life. Read more in MPR's The Surveillance Society.
But Attorney General Mike Hatch says there's another reason for telemarketers' opposition. "What is the problem with simply saying before you can charge someone's credit card account you've got to get the last four digits of the credit card?" asks Hatch. "The reason why they're heavily fighting it is most of the these customers don't want to buy a product.

Critics of the Entenza bill say it's already illegal to charge a credit card without the owner's knowledge. They also point out consumers can ask telemarketers to place their names on their companies' do-not-call lists.

Another proposal circulating at the Capitol would create a statewide do-not-call list, which all telemarketers would have to obey. Opponents of the proposal include a national organization called the Direct Marketing Association, which says it already maintains a list consumers can join anytime.

Representative Matt Entenza says the DMA list has nowhere near the force of law and a statewide list would be more effective at cutting unwanted phonecalls.

There's now little likelihood of any strong telemarketing restrictions passing the Legislature this year. Budget negotiations are hogging the limelight and there's little will left among either Republicans or DFLers to push for big policy changes. Since no one wants to be seen opposing privacy, many measures likely face a quiet death.

House Majority Leader Tim Pawlenty says some milder privacy protections may be debated on the House floor this week. "I think people are annoyed and bugged by telemarketers, and we've got to make sure we act appropriately in terms of government's role in regulating businesses," Pawlenty says. "We as Republicans get a little nervous when we talk about government sticking its nose into business; at the same time we want to make sure telemarketers are acting appropriately."

One bill, which the Direct Marketing Association does not oppose, and which could pass the House, would require telemarketing firms to register with the state. DFL Senator Don Betzold of Fridley has been involved in privacy issues for several years. He says even if no privacy legislation succeeds this year, businesses would be wise to scrutinize their uses of customer information, since one egregious example could be the catalyst for future law.

"It's going on; we know that, and that's why I think the businesses would be better served to rein in themselves before the next crisis hits and then the Legislature feels compelled to go in and solve it for them," says Betzold. "I don't think U.S. Bank wanted to be in this situation but they're the ones who put themselves in it."

The issue of consumer privacy will remain on the political scene as well. Attorney General Hatch is already pledging to make great use of politicians' privacy votes in this fall's election.