Financial Privacy Bill Signed

Gov. Gray Davis on Wednesday signed the nation’s most far-reaching financial privacy legislation, culminating a bitter four-year battle between consumer advocates and business interests.

The new law will enable consumers to block the sale of their personal financial information by banks, credit card companies and other businesses. Consumer groups praised the measure by state Sen. Jackie Speier (D-Hillsborough) as a landmark victory in the fight to safeguard such information and deter identity theft.

“We’re giving Californians the strongest privacy protection in the country,” said Shelley Curran, a policy analyst with Consumers Union in San Francisco.

Davis signed Senate Bill 1 on the trading floor of the Pacific Stock Exchange in a ceremony attended by key lawmakers, local government officials and consumer advocates.

It was the latest in a series of high-profile bill signings by the Democratic governor as he fights to save his job in the Oct. 7 special recall election.

Speier and consumer advocates said it was the threat of a ballot initiative on financial privacy rather than the recall that persuaded business groups earlier this month to support a compromise bill endorsed by Davis in June.

The governor had opposed earlier versions of the bill and had urged Speier and consumer advocates to support amendments that would address some of the objections raised by business groups.

While lauding the new protections Californians will enjoy, Davis, Democratic U.S. Sen. Barbara Boxer and consumer advocates warned that the California law could be undone by an effort in Congress to override the growing efforts of states and local governments to ensure financial privacy.

House Resolution 2622 -- approved last month by the House Financial Services Committee and supported by the Bush administration and business groups -- would bar any financial privacy controls that are tougher than those established by Congress under the Fair Credit Reporting Act.

Consumer advocates say the protections offered by existing federal laws are far too weak, resulting in rampant identity theft.

Privacy safeguards are so loose that it is possible to buy the Social Security numbers of top federal officials -- including Atty. Gen. John Ashcroft and CIA Director George J. Tenet -- on the Internet, said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

California’s new law “is on a collision course with the Republican Congress and the Bush White House,” said Court, who was in Washington on Wednesday to campaign against congressional attempts to override state and local privacy measures. “Banks and insurers are trying an end run around the California law.”

Business interests opposed to the California legislation had argued that the sale of personal financial information should be regulated by a single national law rather than a patchwork of state measures.

“We strongly favor a uniform national standard on privacy protection rather than a multitude of laws in different states or other jurisdictions,” said Harvey Radin, a spokesman for Bank of America in San Francisco, which opposed even the compromise measure signed by Davis.

“Our other concern about some of the privacy measures all along results from our need to provide customer service. We need to be able to use information internally to provide customer service,” Radin said.

Consumer groups had fought for an even tougher bill than the one Davis signed, but nonetheless praised the final version as a standard for the rest of the nation.

“This is still the strongest privacy law in the nation, and we have to support it,” Court said. “Now our goal is to make President Bush live up to his campaign promises to pass an even stronger national law.”

Boxer introduced Davis as “a real fighter for the people of California” and praised the bill as an example of the Legislature and the governor working together to improve the lives of Californians.

Davis praised the law as a “national model” that “will sweep across the country like a prairie fire.”

Speier, who led the fight in the Legislature, thanked Davis for “standing up for Californians” and declared the measure “the first step in a national movement to take back our financial privacy.”

Activists had initially sought to require that companies obtain consumer approval before sharing any personal financial information with their affiliates.

Amendments advocated by Davis and accepted by Speier in June won’t go as far and will allow financial institutions to continue sharing personal financial information with affiliated companies without consumer approval if they meet four tests: the affiliated firm is a wholly owned subsidiary; the company is in the same line of business; it bears the same brand name; and it is regulated by the same government entity.

Companies caught mishandling information could be fined $2,500 per customer and up to $500,000 for mass violations unless the offenses were deliberate -- in which case there would be no limit. If an incident resulted in the theft of a consumer’s identity, penalties would double.

Speier’s bill fell three votes short of the 41 needed to pass the Assembly last year after an intense lobbying campaign by banking and insurance firms.

Business groups had continued to object to the bill this year, even after Speier agreed to address some of their concerns with a series of amendments.

Earlier this month, facing a deadline set by supporters of a ballot initiative on financial privacy, which would have placed far greater restrictions on businesses than SB 1, business groups agreed to the compromise legislation and the Senate and the Assembly approved the measure.

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Times staff writer Carl Ingram contributed to this report.