Panel flips, OKs financial-privacy bill

By Kevin Yamamura Bee Capitol Bureau (Published July 17, 2001)

A powerful Assembly committee Monday quickly passed a consumer privacy measure three weeks after killing it in dramatic fashion.

The controversial proposal, SB 773, would force financial institutions to obtain explicit permission before distributing Californians' personal information.

When the Assembly Committee on Banking and Finance narrowly snuffed the bill June 25, it was considered a major victory for business groups, which lobbied heavily against the proposal.

But consumer groups claimed victory Monday, calling the measure's passage a big step in privacy protection.

"The politicians know this is an issue people are concerned about," said Dan Jacobson, legislative advocate for the California Public Interest Research Group. "I think this is only a benefit for consumers."

As part of a 1999 federal law, companies can sell information such as bank balances and phone numbers but must notify consumers of their "opt out" ability to stop the practice.

The author of SB 773, state Sen. Jackie Speier, D-Hillsborough, criticized the industry for burying the "opt out" disclosure in small-type statements. Too many people miss the information, allowing silence to equal consent, she said.

Speier's bill would shift the burden to companies by requiring them to obtain notification from consumers before distributing personal information. The policy is known as "opt in."

Under changes made before last month's hearing, companies must use "opt in" when selling information to outside firms, but they can use "opt out" when dealing with their own affiliates.

Financial groups acknowledged the existing system is profitable. But they stressed that without a free flow of information, they would not be able to offer an array of services.

"It's obviously going to cut off the ability of small and large institutions to offer products to their customers unless they have affirmatively opted in," said Edward Levy, who represents the Western League of Savings Institutions.

Proponents considered the Assembly banking committee the chief hurdle to passage of the bill. Besides Speier's bill, a similar measure by Assemblywoman Hannah-Beth Jackson, D-Santa Barbara, was previously quashed by the committee.

The committee's about-face came as three Democrats who abstained earlier voted for the bill Monday. Two of them -- Assemblyman Carl Washington, D-Paramount, and Assemblywoman Patricia Wiggins, D-Santa Rosa -- said in June that they disliked last-minute amendments to the bill. Assemblyman Ed Chavez, D-La Puente, was absent at the previous vote.

After the bill failed in a June showdown, Speier called it "one of the most offensive hearings" she had ever seen, charging that business lobbyists had swayed abstaining Democrats.

On Monday, Wiggins said an amendment excluding smaller community banks from the "opt in" system satisfied her concerns. Speier and other proponents of the bill said they felt heavy voter interest also played a part.

"I've got to believe the public spoke out," Speier said. "I would venture to say that the e-mails sent show the outrage, the sense of feeling violated by people they have entrusted with their money."

The bill moves next to the Assembly Judiciary Committee. Gov. Gray Davis has taken no position on SB 773, but he has said he supports an approach similar to Speier's.

 

The Bee's Kevin Yamamura can be reached at (916) 326-5542 or kyamamura@sacbee.com .