Berkeley may become the first California city to protect consumers from financial companies that sell personal information.
Councilmember Linda Maio is recommending that the city manager develop an ordinance that would prohibit banks, insurance companies, stock brokerages and other financial institutions that do business in Berkeley from sharing confidential consumer data without written permission from customers.
“I was quite appalled to hear that some companies could sell information to other companies to look for a pattern of buying” said Maio. She said it’s wrong for credit card companies, for example, to sell financial statements about drug purchases to the customer’s potential insurance company.
Maio’s proposal comes in response to the defeat of a state privacy ordinance Aug. 31. Drafted by state Sen. Jackie Speier, D-San Mateo, Senate Bill 773 would have made California the first state in the nation to require financial institutions to ask customer permission before sharing information.
Lobbyists for financial companies reportedly spent more than $20 million to defeat the bill.
Under the 1999 federal Financial Services Modernization Act, financial institutions may share or sell consumer information, including credit card purchases, spending analysis and account balances unless the consumer requests in writing to keep the information private.
Maio’s proposal, which is scheduled for consideration at the Sept. 10 City Council meeting, would instead put the onus of safeguarding privacy on finance companies. Companies would be prohibited from using consumer information for profit unless they received written permission to do so.
A company that fails to comply would be subject to city fines. Although Maio said she will rely on city staff to propose penalties, she said the bill will be modeled after a recent San Mateo County ordinance that imposes fines from between $2,500 and $250,000 depending on the number of offenses.
Maio envisions a complaint-driven system enforced by a new arm of the Berkeley Police Department. The city would likely have to hire new staff to run the program she said, but fines would cover the cost of implementation.
Industry leaders argue that sharing information allows finance companies to better serve clients, but consumer advocates counter that the information is often used to sell unnecessary or inferior products to less sophisticated consumers.
Berkeley is now one of several California cities considering privacy legislation. San Mateo County passed the first-ever privacy ordinance Aug. 6, and the cities of Daly City, Burlingame and Belmont are considering ordinances as well.
Maio expects her fellow city council members to support her proposal. “I don’t see how anyone could oppose safeguarding people’s privacy,” she said.
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