SACRAMENTO — Faced with the threat of a statewide ballot initiative next year that appears to be popular among voters, financial groups Thursday abandoned their fight against what could become the strongest financial privacy law in the nation.
The deal represents a complete reversal of the financial industry’s four-year opposition to legislation by Sen. Jackie Speier, a Daly City Democrat. And it gives lawmakers just a few days to push through a controversial bill that’s stalled in the Legislature for four years.
If successful, the measure would require insurance companies, banks and other businesses to get customer permission before sharing or selling financial information such as a customer’s spending habits or bank balances. It would also allow customers to opt out of allowing the companies to pass the information along to affiliates.
Three similar bills have been killed in as many years after financial heavyweights, such as Wells Fargo and Bank of America, spent millions of dollars to defeat them. This year, Speier’s bill stalled in the Assembly banking committee.
“It wasn’t until the double-whammy of both the initiative qualifying and the court decision … that everyone recognized maybe the better part of common sense was to come together and negotiate a responsible bill,” Speier said, referring to a recent federal court decision allowing counties and cities to set up their own restrictions on the sharing of information.
As a result, dozens of financial groups and companies have agreed to the compromise and withdraw their opposition to the bill, she said.
“We were preparing to fight an initiative so this last-minute negotiation is really a benefit for all of us,” said James Clark, spokesman for the California Bankers Association.
The compromise bill will take effect July 1 instead of in January and allows companies to use an alternative notice to get customer permission to share information. It also lets the federal government decide what permission forms banks use and takes enforcement authority away from local district attorneys.
Lawmakers have until Wednesday to pass the bill out of both houses or Chris Larsen, the Silicon Valley businessman who pumped $1 million into the initiative push, says he’ll turn in the 600,000 signatures to qualify the measure for the March 2004 ballot.
At least one consumer organization said they oppose abandoning the ballot initiative, which would have also required banks to get permission to share information with affiliates.
“Californians deserve the right to vote to protect their privacy if the Legislature cannot deliver a comparable safeguard,” Jerry Flanagan, the Northern California director for the Foundation for Taxpayer and Consumer Rights, wrote in a letter to Gov. Gray Davis.
Bankers and lawmakers, however, said they would prefer the legislative solution.
“The initiative would conceivably be challenged in court … in part because it’s very simple and straightforward,” Speier said. “If you look at (the bill) it is a very complex piece of legislation that attempts to address workability issues for commerce and consumer issues as well.”
On the Net: Check out SB1 at: http://www.leginfo.ca.gov