California gets more financial privacy

By Ron Harris
Associated Press

SAN FRANCISCO — Gov. Gray Davis signed some of the nation's most sweeping financial privacy legislation yesterday, giving California consumers the right to block banks, insurance companies and other institutions from sharing much of their personal information.

The California Financial Information Privacy Act faced consistent opposition from business groups and financial firms.

After four years of wrangling, the Legislature approved the bill last week — but only after supporters gathered enough signatures to put an even more restrictive initiative on the March 2004 ballot.

The ceremony at the Pacific Stock Exchange gave Davis the chance to appear productive amid the frenzy of political maneuvering that has characterized the effort to recall him from office on the Oct. 7 ballot. The privacy legislation has been one of the showpiece acts Davis hopes will resonate with voters who tell pollsters they are not inclined to let him keep his job.

"Most Californians are stunned to learn that financial corporations trade their names for money," Davis said, surrounded by dozens of stockbrokers on the exchange floor. "That is wrong, and when I sign this bill, that practice will stop."

The law, which takes effect July 1, will require permission from a customer before financial institutions share with an unaffiliated company information such as bank balances or spending habits.

The bill, sponsored by Sen. Jackie Speier, D-Daly City, also includes a provision under which consumers could bar a company from sharing information with an affiliated firm if it was in a different line of business.

Still, concerns persist among some privacy watchdog groups that federal legislation could trump California law. A bill now in Congress would amend the Fair Credit Reporting Act and bar any state from having the authority to prevent banks from sharing private consumer information with affiliates.

"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 & Consumer Rights. "Now the fight is in Washington, D.C., because if (President) Bush has his way, Californians' privacy will not be protected and banks will be allowed to override the California law."

Davis acknowledged that federal legislation could undermine California's new standards, but predicted California had started a trend other states would follow.

"I predict it will sweep across America like a prairie wildfire," he said of the protections behind the bill.