Features

Legislation that would require
customer permission to share
info stalled on floor of Assembly 

SACRAMENTO – Attempts to tighten restrictions on how banks could share consumers’ financial information have been stalled for three years, but the lawmaker pushing those reforms could be helped by the threat of a voter initiative on privacy. 

Sen. Jackie Speier’s bill, which would require financial institutions to get consumers’ permission before sharing or selling information to other companies, remains stalled on the floor of the Assembly. 

But it could be revived under the threat of an initiative financed by the president of E-Loan. Chris Larsen put $1 million aside and formed a group called Californians for Privacy Now to put a privacy initiative on the ballot in 2003 or 2004. 

Under federal law, customers can ask banks not to share their personal information with other companies and other third parties. Companies can share that information with affiliated companies without permission. 

Speier’s bill would require banks to get customers’ permission before sharing consumers’ financial information with other companies — an “opt-in” system. The banks could share information with businesses that were within the same corporate family, but customers could “opt out” by requesting their information not be shared. 

“There’s no question in my mind that if an initiative went to the voters, that the opt-out/opt-in approach we’ve taken wouldn’t be good enough,” she said. “The initiative would be stronger.” 

Giving voters a direct say on the issue would be “a wake-up-and-smell-the-coffee call to the banks and insurance companies in this state,” Speier said. 

With a few exceptions, Speier has battled banks and insurance companies over the bill — which has been amended from a strict “opt-in” policy to the hybrid version it is now. But banks, credit unions and other financial companies haven’t budged in their opposition. 

“We think Sen. Speier’s bill is bad, and from what I understand about the ballot measure, it would be worse,” said Fred Main, senior vice president of the California Chamber of Commerce. 

California is “an exaggerated example of the borderless economy we are now,” said Anissa Yates, a spokeswoman for the California Bankers Association. “Trying to have state solutions to information sharing becomes unwieldily and unmanageable. 

“We really do think the best solution is one that is federal,” she said. 

Larsen agreed that a federal law would be best. But he said he had been pursuing that goal for three years, and hasn’t gotten anywhere. 

After becoming frustrated with the fight over Speier’s legislation, Larsen has focused on the initiative. His contribution of $1 million just about guarantees enough signatures can be gathered to put the measure on the ballot. 

Speier has another ally in the fight — a North Dakota Republican, Rep. Jim Kaster, who traveled to Sacramento last week following a landslide victory of a voter referendum he pushed in that state. 

In June, North Dakota voted to throw out a new state law on information sharing and go back to a 1985 statute that requires companies to get written permission before sharing data with other companies. 

Kaster, who considers himself a conservative Republican, visited with lawmakers from both parties to try and convince them that privacy is an issue that both parties should get behind. 

Speier’s bill has been a compromise between consumer and privacy advocates and the financial industry, Larsen said, and would be a better law for banks. 

“Initiatives are generally not a good thing. They’re used when government fails,” he said. 

But as technology that allows companies to build profiles of customers grows, “privacy fears are increasing,” he said. Those fears are growing faster than laws that govern how that information can be used or shared, he said. 

Companies such as E-Loan “really can’t grow with that fear,” he said. Online businesses depend on “consumers feeling comfortable giving out their most private financial information.” 

But the bill’s opponents aren’t interested in compromising to avoid a ballot measure, said Main. 

“We’re still going to continue to oppose the bill, even under the threat of an initiative,” Main said. 

That, Larsen said, is shortsighted. An initiative could be stronger than the Speier bill — and if approved by voters, could be a “tipping point” for a national law, he said. 

But Main’s not convinced that California voters would follow North Dakota’s example. The North Dakota referendum called for a “no” vote to overturn a law, which is easier to get from voters than a “yes” vote to enact a new law, he said. 

Kaster disagreed, saying privacy is an issue that will resonate with voters from California, just as it did with North Dakota voters who approved the referendum with 74 percent of the vote. He said he doubts banks will be able to craft an opposition campaign that will turn that around. 

“They can’t come up with a campaign ad that says ’we promise we will handle your confidential financial information in a very protective way, but we’re going to sell it wherever we want,”’ Kaster said.