Tough financial-data law faces threat in Congress, Davis says.
The Sacramento Bee
SAN FRANCISCO — After four years during which he was derided by consumer groups as a major obstacle, Gov. Gray Davis on Wednesday signed the country’s toughest financial privacy legislation.
Davis used the floor of the Pacific Stock Exchange here to enact the hard-fought measure, applaud its provisions and warn that efforts were under way in Congress to weaken the new law.
But the governor, at a news conference following the bill signing, also was commended for announcing his support of the popular legislation in early June and working on its behalf — although some critics have attributed the moves to the impending recall election.
“Let me say thank you to Governor Gray Davis for standing up for Californians who are sick and tired of having their financial information traded and bartered and sold like commodities,” said state Sen. Jackie Speier, D-Hillsborough, the bill’s sponsor.
Davis said most Californians would be stunned to learn that their personal financial information is traded and sold for profit by banks, insurance companies and other financial institutions.
“That is wrong, and when I sign this bill, that will stop,” the governor said, though the measure actually becomes law in January and its restrictions don’t take effect until next summer.
Wednesday’s bill-signing culminated four years of work by Speier, consumer groups and others to win passage for improved privacy restrictions.
Until this summer, it appeared her latest measure, SB 1, would go the route of previous proposals: killed in the Assembly because of intense opposition from the financial services industry, a major campaign contributor.
Though Davis said in recent years that he publicly advocated increased privacy protections, supporters of Speier’s bills criticized him for privately working to throttle the measures.
But in July, a federal judge in Oakland ruled that state and local governments can impose tough limits on the consumer information that banks provide unaffiliated businesses. The decision, though, also said only Congress can regulate the sharing of such data between affiliated firms.
Also looming over the debate was a proposed initiative for the March ballot that would bar the sharing of all personal data by financial institutions.
Its proponents had collected sufficient signatures and were ready to submit them when a deal was struck. It was quickly approved by legislators last week and the initiative was shelved.
Under the compromise, a financial company must first obtain permission from its customers before personal information can be sold or shared with unaffiliated firms. That is known as an “opt-in” arrangement.
A financial company also must ask customers if their personal data can be sold or shared with subsidiaries and affiliated firms. But in what is known as “opt-out,” companies can continue to exchange such information until a customer responds to the query and directs that it be stopped.
Chris Larsen, head of the Internet lending firm E-Loan who bankrolled signature-gathering for the privacy initiative, was one of the governor’s harshest critics on the issue. But on Wednesday, Larsen lauded Davis’ work on behalf of the compromise.
“I think he heard the message loud and clear from the people,” Larsen said afterward. “I think he came to his own conclusion when the right time was.”
For his part, Davis deflected suggestions that the recall influenced his attitude toward Speier’s bill. “I’d like to think the bill is in a little better shape than it was four years ago,” he said.
The governor stressed, though, that a measure pending in the House of Representatives would pre-empt state restrictions governing the exchange of consumer information between affiliated companies.
U.S. Sen. Barbara Boxer, D-Calif., said at the news conference that she has asked two key senators to excise the pre-emption provision when the bill reaches the Senate.
The Foundation for Taxpayer and Consumer Rights, which legally bought the Social Security numbers of several federal officials as a demonstration of the availability of such data, urged President Bush to oppose the provision at a news conference outside the White House.
“Banks and insurers should not be able to go to Washington as an end-run around the most protective state privacy laws,” said the group’s executive director, Jamie Court.
The Bee’s Herbert A. Sample can be reached at (510) 382-1978 or [email protected].
The Associated Press contributed to this report.