Assembly OKs Privacy Bill, Heading Off Ballot Plan

Under the threat of a ballot initiative, the Assembly on Monday exhumed, resuscitated and overwhelmingly passed a consumer financial privacy bill that backers predicted would become a national model.

Acting with rare speed, the Assembly met a deadline imposed by sponsors of the ballot plan by sending the newly negotiated compromise bill to the Senate in three hours and 60 seconds, climaxing three hastily called back-to-back committee hearings and a floor session. Such action would ordinarily take days, if not weeks, to arrange.

The vote was 76 to 1 with Assemblyman Ray Haynes (R-Murrieta) casting the single dissenting vote. The bill is expected to be approved by the Senate today and quickly sent to Gov. Gray Davis for his signature. In a reversal last month, Davis, harried by the recall election, abandoned his long opposition to the proposal and embraced it as an important protection for personal privacy.

The centerpiece of the bill (SB 1) by Sen. Jackie Speier (D-Hillsborough) would require that banks, credit card companies, insurance carriers, stockbrokers and other such businesses get the written consent of the customer before selling private financial data to other firms hoping to attract the customer’s business.

On hand as a delighted spectator was Chris Larsen, an online loan company operator, who spent almost $1 million to gather the 600,000 signatures required to place the privacy issues directly in the hands of voters. His more stringent financial privacy plan would have made the presidential primary ballot on March 2.

“It’s a victory for all the people who signed” the petitions, Larsen said, as the Assembly Banking Committee, which had defeated the bill several weeks ago, reversed itself and unanimously approved it. The bill also was approved by the Judiciary and Appropriations committees.

Although his ballot proposition would have been more restrictive on the selling and sharing of the confidential details of a customer’s financial history, Larsen endorsed the Speier bill and said it would be the strongest law of its kind in the country.

The bill is Speier’s fourth attempt in as many years to enact stricter safeguards for financial privacy. Previously, she has been beaten back by an estimated $20-million lobbying campaign waged by some of the most powerful financial interests in the country, including electronics manufacturers, Citigroup, Bank of America, Wells Fargo Bank and a long list of insurance companies.

“I’m elated,” Speier said after the Assembly vote. “I don’t care how people get religion, as long as they get religion.”

In a floor speech, Assemblyman John Dutra (D-Fremont), who had opposed Speier’s earlier attempts, called the compromise bill a “truce.” He credited Speier for her tenacity and willingness to “make her bill work for both consumers and business.”

But consumer activists said it was the prospect of a costly campaign and the possibility that Larsen’s ballot initiative could win voters’ approval that brought business organizations to the negotiating table for talks during the lawmakers’ just-concluded summer vacation.

When the settlement was disclosed last week, major businesses withdrew their opposition to the bill. In exchange, they got concessions that would make it easier for corporations to share customer information within their own families of affiliates without consumer consent, provided the affiliates were in the same business as the parent.

Business witnesses called the compromise “fair, workable and reasonable.” As soon as business reached the compromise, Assembly Republicans and a group of “business Democrats” who had repeatedly torpedoed the plan in the past quit the fight and rushed to endorse it. Some pleaded to become co-authors.

The bill would prohibit a company from releasing or selling a consumer’s financial information without specific consent or face fines of $500,000 per violation. Companies would seek consent by sending the customer a letter and a preaddressed, postage-paid envelope, and awaiting a response.

Fred Main, a top executive of the California Chamber of Commerce and leader of a coalition opposed to the bill, said Monday that California businesses could “reasonably comply” with the legislation.

But he testified that some companies still favor a nationwide law. Congress is considering financial privacy legislation, but some consumer activists fear a federal act would be too weak.

The bill was supported by an array of consumer advocates and other interests, including the California Credit Union League, California Motor Car Dealers Assn., California Public Interest Research Group, AARP and the ACLU.

Times staff writer Nancy Vogel contributed to this report.