Privacy issues aren't just for the private sector

Stephen M. Ryan

Editor and writer H.L. Mencken said, 'There are some politicians who, if their constituents were cannibals, would promise them missionaries for dinner.' Few politicians are quite that crass, but they do carefully watch what their constituents want.

Politicians follow poll results. They notice spikes when citizens are asked about privacy and computers. And so, we should expect political attention on the subject.

Senators such as Ron Wyden (D-Ore.), a friend to both high-tech industry leaders and consumer advocates, will help define the coming debate. The Clinton administration has proposed a bill to amend last year's banking reform law and has identified as a critical issue the use of people's financial data by private institutions.

The banking legislation passed last year lets customers choose not to have their data released. For example, if I provide my financial data to obtain a mortgage, that data could be made available to an insurance affiliate, which would send me product offers. Maybe I don't want to receive such offers. The new legislation would give me a way of saying no to such data sharing.

The government needs to recognize that any such privacy rules can and should apply to it as well. Not all federal agencies act consistently on such concerns. Take the IRS, for example.

Some IRS bureaus win awards for their privacy policies. But some tax regulations are 25 years old, hopelessly outdated and reflect a two-faced attitude toward privacy.

The agency for instance permits taxpayers to share information with tax preparers to obtain, for example, instant loans against refunds. But tax preparers must get taxpayers' written consent.

In an electronic transaction, written consent comes via a click-through screen. Some companies already take consents electronically, but the IRS, which regulates the use of such data, should make it clear that an online consent is the equivalent of a handwritten consent.

The IRS requires a separate handwritten consent form for each service offered by tax preparers or software companies that make tax programs. So if you want information on a mutual fund, you conceivably would have to sign a separate consent form in addition to the one you sign for insurance information.

The IRS has announced that it will give tax preparation and software companies'some of which I represent'incentives to lower their prices to zero to drive up the use of electronic returns. One proposed incentive would permit a more-relaxed use of taxpayers' financial data for companies that participate. In other words, the agency wants to establish two sets of regulations based on a company's pricing policies.

That's unfair.'The IRS is not the Federal Communications Commission, a regulatory group that sets rates for services and tries to manage competition, nor should it be.

Like the IRS, the Postal Service is pushing the limits of reinvention. In April, USPS announced the launch of an electronic bill payment service'a service that will clearly compete with similar industry offerings.

Last March, the Progressive Policy Institute, the policy arm of the Democratic Leadership Council, issued a report, Digital Government: The Next Step To Re-engineering the Federal Government, that strongly rebuked both the IRS and the Postal Service for their continued mission creep.

President Clinton created the council and the institute when he was governor of Arkansas. They have supplied much of the thought behind Clinton's current policies.

Principle that counts

One of the report's principles for implementing digital government is that 'federal efforts should complement, not duplicate, private-sector efforts.'

There is a critical distinction between agencies that provide electronic services to the public, which is a good thing, and a government that exceeds its reach by competing in the commercial electronic-commerce marketplace.

The question is, does Congress care?'The House Government Reform Committee might answer this question soon when it considers HR 22, a bill that would encourage even greater Postal Service development. Will the Postal Service be required to follow the same privacy policies imposed on the private sector, or, like the IRS, will it assume ownership of taxpayers' data?

Stephen M. Ryan is a partner in the Washington law firm of Manatt, Phelps and Phillips. He has long experience in federal information technology issues. E-mail him at [email protected].


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