SACRAMENTO, Calif. - Proposed privacy legislation that would directly affect financial institutions loomed as the overriding issue at the California Credit Union League's annual government relations rally here. Three bills have been proposed in the California Legislature that would limit the sharing of an individual's financial information either between affiliates of the institution or third parties unless each person approved the arrangement. The California league, along with other financial, insurance and high-tech industry groups, have gone on record opposing the measures, which were proposed in the wake of passage of the Gramm-Leach-Biley Act (S900) by Congress. They argued that the California bills were inconsistent with the new federal rules, that they attempted to legislate in an area preempted by federal law, and that the requirements would impose greater costs and burdens with no added customer benefits. The federal measure, not scheduled to take effect until November, would give individuals the ability to "opt-out" of having their information provided to third parties for marketing purposes. The information can be shared among affiliated entities. Under the federal law, however, states can adopt stricter measures which would then take precedence, according to Chris Kerecman, vice president of federal government affairs for the league. While credit unions could live with the federal law - "It's not as bad as we had feared," Kerecman said - they launched a major offensive against the two Senate and one Assembly bills pending in the California Legislature during their government affairs rally held here April 11-12. More than 150 credit union representatives attended the two-day session, which included a morning of lobbying members of the state Assembly and Senate. "Privacy is a big issue facing us," said David Chatfield, league president and chief executive officer. "Certainly we are on the side of the consumer and protection of the consumer . (but) in a way that allows credit unions to do what they can do to serve their members." Credit union representatives described the proposed measures "a solution looking for a problem" and suggested that lawmakers hold off on taking any action until they saw how the federal law was working. Republican state Sen. Tim Leslie, author of S.B.1372, one of the two Senate bills on financial privacy matters, called S.900 "weak" and argued that consumers should not have to opt out of having their information shared. Rather, he said, financial institutions should be required to have consumers "opt-in" - by agreeing to have their information shared. "I can't for the life of me figure out why the burden should lie upon the consumer (to notify others that they want to opt out)," Leslie said during a panel discussion on the privacy issue. "It's unfair to the consumer to deal with that." Leslie said that he was willing to compromise and would consider an opt-out measure. Supporting the opt-in view during the panel discussion was Shelly Curran of Consumer's Union. "We aren't opposed to information sharing," she said. "We simply think that the onus should not be on the consumer to try to opt out. We would like to see legislation passed that gives consumers an affirmative opportunity to opt-in." Curran said financial institutions would need to convince consumers that it was in their best interest to have their information shared among affiliates and third parties - prompting them to opt in - rather than routinely sharing that information until consumers objected and opted out. "Under federal law, we have more protection regarding the movies that we rent from Blockbuster than we do about the types of information that is shared among affiliates," she said. Curran cited a survey by the American Association of Retired Persons (AARP) which she said showed that 81 of respondents did not want their financial information shared among affiliates and 92% did not want the information sold to third parties. She did not say how many persons were survey, when the survey was conducted of what questions were asked, something she was later questioned on before a state Senate committee hearing. According to the AARP, a nationwide telephone survey of 1,000 people between Feb. 3 and Feb. 27 showed an "overwhelming majority" - 93% - believe that any personal information that they give during a business transaction should remain the property of the consumer and not be shared with other businesses without the permission of that consumer. Forty-five percent of the respondents said they would not permit businesses to share their financial information with other businesses under any conditions. Thirty percent of those surveyed said they would allow information sharing among businesses if they were notified and had the opportunity to say "no." Although the survey focused on the security of e-commerce, it also asked people how they felt about sharing of financial information. The survey was conducted by Market Facts, Inc., of Arlington Heights, Ill., the AARP reported. GOP Assemblyman Tom McClintock called the opt-in proposals "radical notions" and said they would simply limit choices for consumers. "Essentially it's a question of liberty," he said. "Are we going to be free to choose, to exercise our choice of the widest possible range or goods and services or are we going to see participants in the marketplace literally gagged by the heavy hand of government? That's the issue, the crux of this debate. "The more information there is available to consumers the more choices that they have to find that good or service that best meets their needs at the lowest possible cost," McClintock said. "It gives them the ability to compare an infinitely larger selection of goods and services." He noted that more information was available to consumers today "than ever before in human history by a quantum magnitude." "And that quantum magnitude will continue to grow," McClintock said. "The bad news is that government is there to try to take away that access to information." Bob Arnould, vice president of state government affairs for the league, urged credit union officials to lobby their elected officials and explain how the proposed measures would impact their operations. "They need to hear from credit unions," he said. "They need to see the chaos the bill will create." -
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