Privacy language unacceptable to the banking industry is emerging as a key issue in financial modernization legislation.

With signs arising that the legislation is stalling after passing the House and Senate Banking Committees, Senate Democrats are signaling that strong privacy protections will be one price they will insist on to support financial modernization legislation. And the securities industry is already asking the House Commerce Committee to insert strong privacy protections in the financial modernization bill when that panel considers it. Given that use of their customer databases to sell securities and insurance products is a key demand for the banking industry in the bill, such privacy protections could slow progress of the bill through the Congress–or serve as an excuse to kill the bill, industry lobbyists say.

Tepid privacy language the industry can live with was inserted in the bill by the House Banking Committee before it passed it March 11. But last week, Democratic Sens. Paul Sarbanes, Md., ranking minority member of the Senate Banking Committee, as well as Chris Dodd, Conn., and Richard Bryan, Nev., issued a statement repeating their demand for "individuals’ fundamental right to privacy."

The bill the Democrats have introduced, and which has been referred to the Senate Banking Committee, would give consumers rights of notice, consent and access when their confidential financial information is to be sold or shared.

Signs that momentum for financial modernization legislation is slowing stems from the decision of the House parliamentarian to give the Commerce Committee a 60-day referral on the bill passed by the House Banking Committee March 11.The reason for the lengthy referal, lobbyists said, is that the commerce committee is hesitant to act on the bill until the Senate does.