Ventura County Star (California)
SACRAMENTO, CA — Averting a ballot initiative campaign that would have cost tens of millions of dollars, the banking and insurance industries have dropped their opposition to a bill that would give California consumers the highest level of financial privacy protection in the nation.
The agreement was announced Thursday by Sen. Jackie Speier, D-Hillsborough, who has waged a four-year fight in the Legislature to allow consumers greater say in how financial institutions deal with information customers give them when applying for a loan, using a credit card, opening a brokerage account or making other financial transactions.
The compromise is contingent on one condition: Both houses of the Legislature must pass the bill by Tuesday. If not, the organizer of an initiative campaign said he will submit to the secretary of state the 600,000 signatures that have already been collected.
Wednesday is the last day to submit the signatures in order to have the measure qualify for the March ballot.
“This is a major victory for individual interests over special interests,” said Chris Larsen, the CEO of E-loan, whose $700,000 contribution paid for the signature-gathering campaign. “I strongly believe this will be a bellwether for the country.”
At issue is whether financial institutions can sell or share such information as credit card spending patterns, household income and loan balances of their customers. A federal law allows for the unfettered sharing of information among affiliated companies and gives consumers the ability to deny the selling of their information to third parties.
The proposed California law would put the burden on financial institutions to first get the consent of customers before selling information and allow customers to opt out of having their information shared with affiliated companies.
The agreement apparently will fulfill one of the objectives an embattled Gov. Gray Davis has said he hopes to achieve before the end of the legislative session Sept. 12. Davis announced his support for the bill in June, and supporters said his intervention helped to break the negotiating stalemate.
“This is a giant step forward for California consumers,” Davis said. “Information about their bank balances and their spending patterns shouldn’t be bought and sold like baseball cards.”
Industry representatives were less than enthusiastic about the bill but said they will drop their opposition. A negotiated, legislative solution, they said, is far preferable to an initiative.
“The more thoughtful legislative process is always a E more desirable approach for addressing complex issues than the take-it-or-leave-it nature of the initiative process,” said Diane Colburn, an executive with the Personal Insurance Federation of California.
Most consumer groups, including Consumers Union, praised the modified bill as a model that other states and Congress should follow.
One more radical group, the Foundation for Taxpayer and Consumer Rights, complained that the compromise gives too much ground and accused Davis of accepting a watered-down measure just to boost his image in the midst of a recall campaign.
The group’s leading activist, Jamie Court, was censured this summer for posting on the Internet the last four digits of the Social Security numbers of members of an Assembly committee who voted to kill a previous version of the privacy bill.
Court said he did so to make a point about the need for greater security for private financial information, but lawmakers said the tactic was designed to intimidate them.
Assemblywoman Hannah-Beth Jackson, D-Santa Barbara, who authored one of the first failed bills on financial privacy, said that if not for the threatof initiative, the financial services industry would have never capitulated.
“It made them realize that the public is very serious about financial privacy, and it made them temper their greed,” she said.
Larsen, whose Internet-based company offers mortgages and other consumer loans, said he believes the financial services industry has been shortsighted in opposing privacy protections.
“The new economy runs on data,” Larsen said, “but the paradox is that consumers are afraid to use online services out of privacy concerns.”
Rather than fighting regulation, Larsen said, the industry should be proposing greater controls. “There’s an Enron-like privacy catastrophe imminent if we don’t get it under control,” he said.
“This is a major victory for individual interests over special interests. I strongly believe this will be a bellwether for the country.”
Chris Larsen,CEO of E-loan, who paidfor the signature-gathering campaign