Calif. Group Steps Up Push For Referendum on Privacy

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The American Banker

WASHINGTON: Privacy hawks in California are readying a fund-raising campaign for a ballot initiative that would force banks to change the way they use customer information.

“It’s going to take a concerted effort to raise funds because the financial industry probably plans to spend millions to defeat our effort,” said Tiffany Kelley, a spokeswoman for E-Loan Inc. chief executive officer and chairman Christian A. Larsen.

In June, Mr. Larsen gave $1 million of seed money to the campaign. Beyond Dublin, Calif.-based E-Loan, the coalition seeking the referendum includes AARP, Consumers Union, the state and federal arms of Public Interest Research Group, the American Civil Liberties Union, the Consumer Federation of California, the Foundation for Taxpayer and Consumer Rights, and the Privacy Rights Clearinghouse.

The coalition is finalizing the wording of the initiative and plans to kick off a fund-raising and signature-collection drive soon to try to get the referendum on the ballot in 2004.

Its members got serious about going straight to the voters after the California Legislature failed in September — for the third consecutive year — to enact a law that would exceed the protections in the Gramm-Leach-Bliley Act. The San Francisco Chronicle reported that the financial services industry spent $20 million to defeat the bill, which was sponsored by Democratic state Sen. Jackie Speier.

Whether the coalition will muster sufficient money to combat the industry remains to be seen. As of Sept. 30, it had received one donation other than Mr. Larsen’s: $100 from his father, James Larsen, according to the California secretary of state’s Web site. The coalition had spent about $26,000.

If the Legislature does not act this year on the bill reintroduced by Sen. Speier in December, the coalition supports plans to push for the referendum to be held in the spring or fall of 2004.

Though the coalition has not settled on the ’04 referendum’s language, it has posted a list of goals on its Web site, Its main objective is a requirement that companies get customer permission to share information with third parties and affiliates.

“The heart of the initiative measure will provide consumers with an opt-in to information sharing,” the site says. “This means that financial institutions must first obtain your explicit consent before sharing your personal information with other companies for any purpose other than to complete a transaction initiated by you.

“The financial services industry has strongly objected to any legislative proposals restricting their ability to share consumer information among their ‘family of companies’ or affiliates. A financial institution may have hundreds of affiliates with whom your personal information may be shared without your knowledge. The initiative will contain stricter limits over a financial institution’s ability to share your information with its affiliates.”

Shelley Curran, a policy analyst with Consumers Union, said the coalition will finalize the wording of the referendum in the next few months. “A final decision has not been made (about) what the initiative will look like when it comes to affiliate sharing, but it will be stronger than the Speier bill,” she said.

The Speier bill would require a bank to get a customer’s permission before sharing information with unrelated companies, but banks could share data internally unless the customer specifically asked the bank not to. In the parlance of the privacy debate, this is an “opt-in” for sharing with third-party companies and an “opt-out” for bank affiliates.

The referendum would be tougher in that it would mandate an opt-in scheme for affiliate sharing.

Still, the referendum proponents support Sen. Speier’s bill and say they would back off if it passes.

“If Senator Speier’s bill is enacted with its basic framework intact, then I see no need to go ahead with the financial privacy ballot initiative,” Ms. Curran said. “If it is weakened or dies, we will move forward with the ballot initiative.”

Consumer Watchdog
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