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Initiative Set for Ballot, Backers Say

Times Staff Writer

Sponsors of a proposed ballot initiative that would give Californians new controls over the release and sale of their private financial information said Wednesday they have collected enough signatures to qualify it for the March 2 election, but will not put it on the ballot if the Legislature acts quickly to pass a privacy protection bill.

Consumer proponents of the plan said they would rather get a deal in the Legislature with their adversaries from big business than wage a costly campaign against high-powered corporations that they conceded would outspend them astronomically.

“We’re done. We’re calling in our [signature-gathering] troops,” said Dan Schnur, the veteran Republican operative hired to run the campaign.

But, he said, the coalition of consumer privacy advocates decided to give the Legislature and Gov. Gray Davis a last chance to resuscitate and approve a controversial bill by Sen. Jackie Speier (D-Hillsborough) that would achieve the purposes of the ballot plan although it is considered not as strong.

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The bill, SB1 -- recently endorsed by Davis, who had opposed similar proposals -- was approved by the Senate, but was defeated last month at the behest of the financial services industry in the Democrat-dominated Assembly Banking Committee. It was the fourth time in four years that such a bill had failed.

“We want to give the legislative process every last possible chance for success. We are asking the opponents to take advantage of this window of last opportunity,” Schnur told reporters.

Immediately, Fred Main, a vice president of the California Chamber of Commerce who heads the coalition of businesses that had scuttled Speier’s bill, agreed to open negotiations.

He said he believed that it was possible to craft a “reasonable, workable bill” within the next three weeks, adding that the Legislature rather than the ballot box “is the right place to do such complicated policy.”

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But under a deadline set by the proponents, known as Californians for Privacy Now, the Legislature must write and pass a compromise bill by Aug. 19, one day after the lawmakers are scheduled to return from vacation. Unless such a bill is passed, they said, they would file their signatures on Aug. 20, the last day they can do so to ensure a spot on the March 2 ballot.

The take-it-or-leave-it timetable gives the combatants three weeks to work out a deal, said Shelley Curran, lobbyist for Consumers Union. “But if it comes to substantive changes that give consumers less control, we wouldn’t compromise,” she said.

Backers of the initiative, whose signature solicitations were financed by a nearly $1-million contribution from Silicon Valley businessman Chris Larsen, said they gathered 550,000 signatures. They needed 373,816.

Both the ballot plan and Speier’s bill seek to make financial privacy safeguards in California the strongest in the nation by imposing new restrictions on the sale and sharing of consumer financial information by such financial institutions as insurance carriers, banks, credit card companies and Wall Street investment agencies.

Supporters of the bill have testified that information such as a customer’s income, bank account balance, home mortgage and tax payments and other private data are being sold and traded for marketing purposes without a consumer’s knowledge or consent.

But opponents of the bill argued that they already are tightly regulated by federal law. They said the California bill would so restrict their operations that they would be unable to share customer information with members of their own corporate “family,” such as affiliates that may sell products unrelated to financial services.

The Speier bill contains several options to control the release and use of private information. One option would allow a financial services company such as a bank to share a customer’s financial data with a wholly owned subsidiary in the banking business. This would not require the customer’s consent.

A second option would allow the sharing of information with another financial institution, unless the consumer said no.

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A third option would prohibit, without consumer consent, the sharing of financial data with a third party that was not a financial institution. This could include telemarketers.

Speier, whom an aide said was not advised in advance by initiative backers of their plan, said that she was happy to negotiate with opponents but that time was running short.

She said that a couple of unidentified banks had sent signals that they were interested in reaching a compromise on the bill, rather than fight an initiative battle that she estimated would cost foes $30 million.

In seeking to kill the bill, Speier said, the banks privately indicated that their lobbyists “overplayed their hand.” She added that some parties had said that their interests were in conflict with those of other members of the business coalition and wanted to try to negotiate a legislative resolution.

She asserted -- and Main denied -- that a federal court judge’s ruling Tuesday encouraged opponents to seek a legislative compromise. The court upheld the authority of several Bay Area counties to prohibit banks from sharing consumer financial information without a customer’s consent.

But Judge Claudia Wilkin also handed banks a victory by striking down provisions of the ordinances that forbade the banks from sharing information with affiliates without a customer’s consent.

Main said he believed that the part of the ruling affecting information-sharing with affiliates jeopardized a critical piece of the proposed ballot initiative.

Speier denied it, asserting that the part of the decision upholding the authority of local governments to prohibit information-sharing without approval of customers was a “huge blow” to banks and other coalition members “who thought they had this thing wired.”

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