I can't find any independent verification of this, but if this is true, I have several areas of concern. This just seems like there is way too much potential for severe compromising of your individual privacy. Am I reading too much into this? Would you want all of your personal information collected and sent to a private company? As a victim of identity theft in the past, this makes me very, very nervous.

Wired (h/t OK)

A program to standardize state driver's licenses to create a de facto national I.D. should use a third-party -- most likely a private contractor -- to verify that a person is eligible for a driver's license or state identification card, according to a document provided to 27B by a privacy activist. The document appears to be a portion of the rules that Homeland Security is proposing for the program, which are currently being evaluated by the Office of Management and Budget before they are presented to the public for comment.
According to the document (.txt) that Bill Scannell of UnReal ID says he got from a government official (but which 27B has not yet verified), DHS suggests that there are three models for states to follow to insure that a person has the right documents and does not have a driver's license in another state. One is to let them figure out how to communicate with each other. The second is to create a federated model, where a central service includes pointers to records in all the states' databases which all have a standard lookup interface. This is similar architecture to the one used for trucking licenses, where a state can find information about an applicant by checking a central clearinghouse that doesn't store all the records, but simply knows where to look for records.
The third, and favored option, according to the document, is to have a centralized service, likely a private company, that vets anyone seeking to get a driver's license. The state would collect the necessary information -- including social security numbers, certified birth certificate and possibly fingerprints -- send it along to the service, which would then check all the states, run the name against watchlists, verify the social security number through the immigrant-verification program known as SAVE and verify birth certificate information through EVVE.