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The Daily News of Los Angeles

Consumers whose mailboxes are inundated with solicitations for credit cards, insurance policies and financial planning can expect some relief next summer with a sweeping consumer privacy bill signed into law Wednesday by Gov. Gray Davis.

“This is a huge win for consumers in California,” said Shelly Curran of Consumers Union. “It represents four years of hard work and ultimately goes to show that in the end, regular Californians were heard over large corporations.”

Under the California Financial Information Privacy Act, which takes effect next July 1, banks, insurance companies and other financial institutions are automatically blocked from selling consumers’ private information with unaffiliated third parties.

“Say I took out a car loan. My bank can’t share my info with a drag racing magazine,” said Russ Lopez, a spokesman for Davis. “If I take a trip somewhere, (the credit card company) can’t share that with Disneyland or Carnival Cruises.”

The second part of the law, which goes a step further and blocks financial institutions from sharing information with its own affiliates, requires consumers to fill out a form expressly forbidding that information swap.

Affiliates are companies financial institutions have a stake in, for example a bank with separate arms for mortgage lending and financial planning. Large banking institutions share customer information such as spending habits with those home loan and auto financing affiliates, for example. Then, those affiliates market specific products to consumers based on their history.

Consumer advocates say the new law will not only cut down on evening telemarketing calls and junk mail, but also will cut the risks of identity theft.

“This enhances security,” said Robert Herrell, chief of staff to Sen. Jackie Speier, sponsor of the bill. “The free bartering and selling of information is absolutely leading to identity theft.”

But banks say sharing information is all part of meeting customers’ needs.

“To service customers, you have to be able to access information,” said Harvey Radin, a spokesman for Bank of America, California’s largest bank. He said the bank has had a long-standing policy against selling customer information to third parties. It does share information with financial services, insurance, auto financing real estate affiliates.

After July 1, Californians can expect to notice a drop in telemarketing calls and marketing mail and should receive letters from banks that include the opt-out form to block sharing information with affiliates. The third-party block is automatic on July 1.

Still, concerns persist among watchdog groups that federal legislation could trump California law. A House bill proposes amending the Fair Credit Reporting Act so that states would have to allow banks to share private consumer information with affiliates.

The legislation passed out of the House Financial Services Committee in late July and goes to the full floor after Labor Day.

“It’s good news that California now has the strongest privacy laws in the nation,” said Jerry Flanagan, spokesman for the Santa Monica-based Foundation for Taxpayer and Consumer Rights. “Now the fight is in Washington, D.C., because if (President George W.) Bush has his way, Californians’ privacy will not be protected and banks will be allowed to override the California law.”
Contact Barbara Correa, (818) 713-3634 or [email protected]

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