Fight for privacy law gets rougher

Published on

Assemblyman upset by partial SS numbers given out; Majority Leader Chan may order probe

Oakland Tribune

SACRAMENTO — If Californians are going to squelch telemarketers, junk mail and spam, they’ll have to change financial privacy rules themselves with a landmark vote next March.

That’s the way consumer groups and a wealthy East Bay entrepreneur see the situation after the Legislature again failed to pass a privacy bill sharply limiting financial companies’ sales of customers’ personal information.

But with hundreds of millions of dollars in revenue a year at stake, banks and insurers have a very different view of the battle over customers’ financial privacy. And Bay Area lawmakers — liberal though most tend to be — are divided and at the center of the latest and perhaps ugliest clash in the long-running battle over a bill that would give Californians the strongest financial privacy protection in the nation.

A bill advocate even publicized partial Social Security numbers of lawmakers who voted down the measure in committee this past week. Among them was Assemblyman Guy Houston, R-Dublin.

“I guess you can’t stop crazy people from doing crazy things,” said Houston, who agrees with industry arguments the bill would be a costly hindrance to business.

The Republican has put a protective fraud alert on his credit due to the move by consumer advocate Jamie Court and the matter may be probed by a new legislative panel on lobbying tactics, chaired by Assembly Majority Leader Wilma Chan, D-Oakland.

“It’s just amazing how politicians suddenly start caring about privacy issues when it’s their privacy at stake,” said Court, executive director of the Foundation for Taxpayer and Consumer Rights. Court said he was able to purchase the numbers on the Internet for $26.

The latest chapter came Wednesday when Sen. Jackie Speier, D-San Mateo, tried again unsuccessfully to advance a measure that would have severely limited the ability of banks and insurers to share and sell customers’ personal financial information.

The data is valuable in the marketing of everything from stocks and bonds to mortgages to insurance policies.

Key players in the latest clash include Assemblywoman Ellen Corbett, D-San Leandro, who, with Chan, provided two of just three votes for the measure as it went down to defeat in the Assembly Banking and Finance Committee. There were four no votes and five abstentions.

Assemblyman John Dutra, a business-friendly Democrat from Fremont and a bill critic, tried unsuccessfully to bridge the gap between the two sides with amendments.

With the defeat of the bill, consumer groups and Chris Larsen, who heads E-Loan, based in Dublin, stepped up efforts to qualify an even tougher initiative for the March ballot.

It would require companies to obtain a customers’ consent before selling or sharing their personal information with affiliates or third party companies.

“Consumers are fed up with the stalemate over privacy in Sacramento,” Larsen said.

Larsen, who donated $1 million to launch the initiative attempt, acknowledges that his online banking firm stands to gain if the public has fewer fears about privacy.

Advocates of the statewide ballot initiative said they already have collected the signatures of 200,000 registered voters. They need 373,816 by Aug. 22 to place the measure on the March 2004 statewide ballot.

“It’s time for the electorate to take the gloves off and make the decision on privacy,” said San Mateo County Supervisor Michael Nevin, who championed a local consumer privacy ordinance that is supposed to go into effect Sept. 1 but has been challenged in court.

Initiative foes said they would put up sufficient money to defeat the proposal, which they call unreasonable and unworkable.

Still, financial privacy advocates haven’t ruled out finding a solution in Sacramento.

“The battle isn’t over,” said Speier, who is looking at a possible attempt at having the Assembly committee reconsider her Senate-approved bill.

Davis, who threw his support behind this bill after wavering on the issue in past years, said he would assist Speier in the reconsideration. Supporters will focus on the five Democrats from outside the Bay Area who abstained.

“I remain hopeful that the Legislature will respect the will of the people by sending SB1 to me for my signature,” Davis said.

But some bill advocates are unsure how much help will come from Davis, locked in a standoff with lawmakers over a huge budget deficit and facing a likely recall attempt.

The financial industry has spent more than $20 million in campaign contributions and lobbying expenses during its successful two-year fight against Speier’s earlier attempts to legislate financial privacy.

By some estimates, trading and sale of personal financial information is a $900 million per year industry in California, with profits of $500 million. The items that can be shared range from names and addresses of customers to bank balances, spending habits and credit scores.

Under federal law, companies can share such information with outside firms, provided they notify consumers and allow them to “opt out” by signing and submitting forms.

Speier’s three-tier system would allow some financial data to be shared under an opt-out system, some to be shared only with written consent, and some to be shared without restriction. Firms could be fined $2,500 per violation, up to $500,000.

The goal was to restrict the ability of financial firms to sell personal information to telemarketers and others but not prevent companies from sharing with subsidiaries.

Foes — who haven’t ruled out a legislative deal — said the current bill would not only be costly to implement but that it doesn’t adequately address the needs of wildly varying companies.

“We continue to believe that uniform policy on privacy is best addressed at the federal level,” said Harvey Radin, San Francisco spokesman for Bank of America.
Staff writer Jean Whitney contributed to this report.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases