California Senate Considers Financial Privacy Bills

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The California Senate Finance, Investment and Trade Committee is scheduled to hold a hearing April 12 to consider two financial-privacy bills that would make it more difficult for banks to share customer information with third parties and affiliates.

Both bills propose an across-the-board opt-in regime requiring banks to gain affirmative customer approval before sharing nonpublic information about their customers.

The measures lay the burden for consumer privacy on the banks, unlike the federal Gramm-Leach-Bliley Act, scheduled to take effect in November, which stipulates that an opt-out platform is sufficient for protecting consumer privacy. Gramm-Leach-Bliley also imposes no restrictions on sharing customer information with affiliates, such as securities firms that are owned by banks.

Direct marketers generally consider opt-in formats for data sharing to be an impediment to their efforts because fewer customers could be expected to make the effort to choose affirmatively to have their information shared.

The two bills in the California Senate are similar to each other in most respects, according to Jedd Medefind, a spokesman for State Sen. Tim Leslie, who introduced one of the measures and is chairman of the Finance, Investment and International Trade Committee. Leslie's bill lacks the large fines that were proposed in the other Senate bill, which was introduced by Sen. Jackie Speier.

If one or both bills pass through Wednesday's committee meeting, they will likely go to the Senate floor for a vote, Medefind said. If they pass, they could then be reconciled with a similar bill that recently was approved by the Assembly Judiciary Committee and is scheduled for an April 24 vote in the Assembly Banking Committee. That bill has yet to go before the full Assembly.

Meanwhile, U.S. Sen. Richard Shelby, R-AL, on April 5 introduced the Freedom from Behavioral Profiling Act of 2000, an amendment to Gramm-Leach-Bliley that would require banks to gain "affirmative consent" before they share any behavior-related data, such as purchasing histories. It was not immediately clear whether Shelby intended the "affirmative consent" phrase to indicate an opt-in structure.

His office did not return calls at press time, and a spokeswoman for the American Bankers Association said she was not sure if the measure was intended to require opt-in data protection.

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