STAND. COM. REP. NO. 413-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 1877
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Consumer Protection and Commerce and
Judiciary and Hawaiian Affairs, to which was referred H.B. No.
1877 entitled: 

     "A BILL FOR AN ACT RELATING TO INFORMATIONAL PRIVACY,"

beg leave to report as follows:

     The purpose of this measure is to establish personal privacy
protections to enhance and support the use of the internet as a
commercial marketplace in this state.  This measure regulates the
collection, use, and disclosure of personal information by
private organizations, thereby encouraging Hawaii's citizens to
use the internet to transact business, and making possible,
international exchange of information with nations with
established personal information protection requirements.

     Testimony in support of this measure was submitted by the
Office of Information Practices, League of Women Voters of Hawaii
(LWVH), Australian Privacy Charter Council, a professor of
information technology law at the University of New South Wales,
and the Australia Federal Privacy Commissioner.  LWVH also
proposed amendments.  Your Committees heard testimony in support
of the intent of this measure but requesting that the measure be
held in committee, from the Retail Merchants of Hawaii and the
Hawaii League of Savings Institutions.

     The Hawaii Food Industry Association stated that they were
not opposed to the intent of the bill but needed time for further
review of its provisions.  The Department of Commerce and

 
 
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Consumer Affairs, American Council of Life Insurance, Common
Cause Hawaii, and Hawaii Government Employees Association
commented on the bill.

     Testimony opposed to this measure was submitted by the
Hawaii Financial Services Association, Mortgage Bankers
Association of Hawaii, Associated Credit Bureaus, Inc., Hawaii
Insurers Council, State Farm Insurance Companies, Hawaii State
Association of Life Underwriters, Hawaii Chapter of Society of
Human Resource Management, Hawaii Bankers Association, Hawaii
Association of Realtors, and the University of Hawaii
Professional Assembly.

     Your Committees heard testimony that in countries taking the
lead in the development of the information economy, such as
Australia, there is clear evidence of consumer demand for
protection of personal information.  There was testimony that the
bill follows the "Asia-Pacific" model, an information protection
solution that learns from more than 20 years of data protection
and privacy regulation around the world.  Although the model
provides the same level of protection required under European
data protection laws and thus facilitates data exchange with
Europe, it differs in that it is "light-touch" legislation
providing a moderate and flexible means of privacy protection.
The most distinctive feature of the model is its co-regulatory
scheme consisting of the provision made for industry-specific
codes of practice.  Legislation containing elements of the Asia-
Pacific model was enacted in New Zealand in 1993, and Hong Kong
in 1995.  In Australia, bills based on a co-regulatory approach
are proceeding in the State of Victoria and the Federal
Government.

     Your Committees heard a number of concerns expressed about
the bill, which include:

     (1)  The cost of implementing the bill is unknown, and the
          bill needs further study and review;

     (2)  The "opt-in" consumer provision would in practice
          require a customer to give consent each time
          information is collected and used, and would negatively
          impact the flow of information between, and costs to
          businesses.  Testifiers requested that an "opt-out"
          requirement be substituted, allowing customers to
          notify a business that it does not want personal
          information to be collected, used, or shared;

     (3)  The law would duplicate federal information protections
          under federal laws, would cause uniformity problems for

 
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          institutions operating on a national basis, and might
          cause problems because of regulations not yet
          finalized, but scheduled to be adopted under the Gramm-
          Leach-Bliley Act; and

     (4)  Labor unions would be unable to fulfill representation
          and benefit program obligations because the law would
          require innumerable consents be obtained as personal
          information of employees was transmitted between
          employees, the organization, and agencies including the
          Employees Retirement System, and the Public Employees
          Health Fund.

     Your Committees recognize the concerns of those testifying,
and at the same time, find that personal privacy protections are
a necessary part of the new informational economy, the success of
which will benefit all consumers and businesses in this state.
In recognition of testifiers' concerns stated in this report and
heard by your Committees during their joint hearing, your
Committees have made many amendments to this bill, including the
following amendments to:

     (1)  Exempt from regulation under the measure institutions
          currently subject to informational privacy regulation
          under federal law, and under the State's newly-enacted
          Privacy of Healthcare Information Act;

     (2)  Exclude publicly available information from the scope
          of the measure, remove restrictions on the collection
          of information, and focus regulation on:

          (A)  The use of personal information for a purpose
               other than the one originally intended and
               provided for; and

          (B)  The disclosure of information to a nonaffiliated
               organization;

     (3)  Replace the "opt-in" consumer provision, with an "opt-
          out" provision modelled on that included in the Gramm-
          Leach-Bliley Act;

     (4)  Remove, in light of fiscal constraints, duties of OIP
          that are not essential to personal information
          protection, and also redundant powers, and those with
          no apparent function;

     (5)  Clarify that there is no private right of action under
          the bill;

 
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     (6)  Clarify the authority of the OIP Director to
          interpretation and application of the law, and provides
          that the Director may enforce codes of information
          practice by issuing formal interpretations of a code
          and issuing cease and desist orders;

     (7)  Remove provisions making owners, partners, the
          president, or all members of the board of directors of
          a corporation accountable for compliance with the
          chapter in the absence of the appointment of an
          individual responsible for compliance;

     (8)  Clarify venue for chapter 91 appeals of cease and
          desist orders, and the prosecution by the Attorney
          General, of violation of these orders; and

     (9)  Add repeal language consistent with provisions calling
          for a reevaluation of the law in the fourth year of
          enactment.

     Finally, numerous technical, nonsubstantive amendments have
also been made for purposes of clarity, consistency, and style.
Your Committees have also removed the effective date of this
measure to ensure that the issues raised by those testifying on
this bill receive further consideration.

     As affirmed by the records of votes of the members of your
Committees on Consumer Protection and Commerce and Judiciary and
Hawaiian Affairs that are attached to this report, your
Committees are in accord with the intent and purpose of H.B. No.
1877, as amended herein, and recommend that it pass Second
Reading in the form attached hereto as H.B. No. 1877, H.D. 1, and
be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Consumer
                                   Protection and Commerce and
                                   Judiciary and Hawaiian
                                   Affairs,

                                   
                                   
                                   
                                   
______________________________     ______________________________
ERIC G. HAMAKAWA, Chair            RON MENOR, Chair