Union Tribune

November 6, 2003

Senate privacy bill OK'd; law for Calif. would be trumped


WASHINGTON A key part of California's landmark financial privacy law appeared headed for the dustbin after the Senate approved legislation yesterday that would override the state safeguard.

The bill would pre-empt provisions in the state's law that allow consumers to prevent banks and other financial services companies from sharing information about them such as account balances and spending patterns with affiliated businesses.

The House has passed a similar bill. Negotiators from the two chambers will attempt to work out the differences and deliver a bill to President Bush this year, before a federal law that trumps state privacy standards expires.

While other parts of the California law would not be affected by the legislation, the affiliate-sharing issue was the subject of fierce debate on Capitol Hill, pitting consumer groups against businesses.

The Senate bill contains several consumer safeguards, but it would not go as far as the California law in allowing people to keep their financial data from being freely shared among corporate subsidiaries. For instance, customers could not block a bank from sharing information about them with an affiliated insurance company, unless the information is to be used for marketing or solicitation.

The Senate voted 95-2 to make permanent provisions of the federal Fair Credit Reporting Act that prevent states from enacting more stringent rules on how affiliated companies share information.

The vote came a day after lawmakers rejected an amendment by California Sens. Dianne Feinstein and Barbara Boxer that would have applied data-sharing limits modeled on the California law to the entire nation.

An aide to state Sen. Jackie Speier, D-Burlingame, the author of the California law, pointed out that other provisions of the state law will take effect as planned July 1.

Companies will still have to get permission from customers before sharing their data with nonaffiliated enterprises. And consumers will be able to keep unrelated companies that jointly offer financial products or services from sharing information about them.

The Senate bill includes some things welcomed by consumer advocates:

Requiring corporate affiliates to notify customers when they plan to share information about them for marketing or solicitation. The customers could block or limit the use of the information, unless they had a "pre-existing relationship" with the companies.

Requiring credit bureaus to place fraud alerts on the accounts of identity-theft victims.

Entitling people to a free copy of their own credit reports once a year.

The Fair Credit Reporting Act, originally approved in 1970, created uniform national credit reporting standards to facilitate credit card applications, loans and other financial transactions.

The Senate and House bills would make permanent several provisions of the law that were set to expire at the end of this year, including the prohibition on state financial privacy laws that are stricter than federal standards.