SACRAMENTO, Calif. - Two separate financial privacy laws which would limit the sharing of an individual's information by credit unions and other financial institutions have failed to muster enough votes to get out of the state Senate Finance Committee. Both measures are scheduled to be reconsidered by the committee on April 26. A third measure introduced in the Assembly is slated for a committee hearing April 24. Both Senate Bill 1337, authored by Democratic state Sen. Jackie Speier, and S.B.1372 by Republican Sens. Tim Leslie and K. Maurice Johannessen, started out as "opt-in" bills. Their measures would require financial institutions to get customer approval before any customer information could be shared between affiliates or third parties. By the end of the afternoon hearing on Tuesday, April 12, on the Senate bills, Leslie had amended his measure to be an "opt-out," which would require individuals to indicate they did not want to have their financial information shared with affiliated entities or third parties. Speier's bill failed on a 2-1 committee vote. Leslie's amended measure went down on a 3-1 vote. Both measures needed five affirmative votes to move out of the committee. The votes came after a lengthy hearing in which consumer advocate groups, joined by the attorney general's office, argued that the sharing of an individual's financial information between financial institutions and their affiliates or third parties would result in widespread abuse. They cited examples of banks selling credit card account numbers to a convicted felon and elderly bank customers who they claimed were duped into transferring their life savings into uninsured and risky investments. Some senators, however, questioned whether the examples of abuse cited by the groups were actually due to the sharing of information between banks and their affiliates or were due to bad financial advice given by the affiliates. They wondered aloud whether the customers would have complained if their investments had increased in value, rather than decreased. They also questioned whether consumers who said they suffered by the sharing of their information fully understood what was being offered to them. In one of the examples given by a consumer advocate group, the customer understood little English. Consumer's Union representatives, pushing hard for passage of an opt-in measure, were forced to admit under committee questioning that their organization had shared member information with other groups. Testifying on behalf of the California Credit Union League was Bob Arnould, vice president of state government affairs for the league, and Pat Wagner, president and chief executive officer of New World Federal Credit Union in Lafayette, Calif. Wagner testified that New World's members, like members at other credit unions, relied on products and services offered by the credit union's affiliates and third parties. Credit union officials have suggested that state lawmakers let federal legislation regarding privacy matters take effect before they consider enacting stricter measures. The federal law provides an opt-out procedure for individuals who do not want their financial information shared with third parties. It does not preclude financial institutions from sharing that information among affiliated entities. The Senate hearings came on the second day of the league's Government Relations Rally, during which credit union leaders from around the state had a chance to lobby legislators and hear about upcoming legislation. -
pjheller@west.net
