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WASHINGTON – California lawmakers are furious over attempts by some in the financial services industry seeking to get Congress to gut tough financial privacy legislation recently approved by the California Legislature. State Sen. Jackie Speier, who championed the bill – SB1 – through the California Legislature after several years of failed attempts, decried what she called the “hypocritical and deeply cynical tactics” of the industry to thwart her bill through the Fair Credit Reporting Act (FCRA). Intense behind-the-scenes negotiations were going on here at press time concerning FCRA and whether a pre-emption provision would be approved that would override stronger state and local legislation on financial privacy. There was even talk of a Democratic filibuster to block the measure. U.S. Sens. Barbara Boxer (D-Calif.) and Diane Feinstein (D-Calif.) have pushed to have key parts of California’s SB1 bill incorporated into the federal law. That provision would prevent financial institutions from sharing customers’ financial information with affiliated companies. Another option reportedly being looked at in Congress would grandfather California’s law into the federal legislation. California Gov. Gray Davis signed Speier’s bill Aug. 27. The bill would take effect July 1. A vote in the Senate on FCRA was expected to come the week of Oct. 27. A pre-emption on state activities will expire Dec. 31 unless Congress votes to extend it. The House in September passed a measure 392-30 that included a provision that permanently extended the pre-emption on state law. The Senate Banking Committee approved a similar pre-emption measure Sept. 23. Feinstein said it was “diabolical” that the financial services industry would agree to Speier’s bill after four years of opposition then seek to have it overturned in Congress. “They (financial institutions) agreed with Speier in their negotiations in Sacramento and then came back here to wipe it out,” Feinstein said. Speier noted that the financial industry said her bill was “workable and reasonable” but then moved to gut the bill. “I decry the hypocritical and deeply cynical tactics of banks, insurance companies, securities firms and others in the financial services industry for their outrageous attempt to pare back California’s hard-fought privacy gains before the ink is even dry on the new law,” Speier said. Speier said attempts to pre-empt the California law “represents the height of cynical special interest politics where large companies directly work against their own customers in a way that increases financial fraud and identity theft.” The California Credit Union League has supported the Speier bill and opposed any federal pre-emption to the California law. “We are supporting the efforts of the senators (Feinstein and Boxer) to preserve the California law,” said Chris Kerecman, league vice president of federal governmental affairs. He said Feinstein and Boxer were “committed to preserving as much privacy protection for California as they possibly can.” “They’re going to preserve what they can,” Kerecman said. “This bill, in its current form, would deny American consumers basic privacy protections,” Feinstein and Boxer said in a letter to their Senate colleagues. “It allows huge conglomerates, with just limited restrictions on marketing, to freely share vast quantities of personal customer information with their affiliated partners even if a consumer asks that the information not be shared. “To make matters worse,” they said, “the bill permanently pre-empts states from taking stronger action. We are particularly dismayed that financial institutions negotiated and signed off on a resolution to this issue in California, and are now trying to pre-empt the law with national legislation.” Financial services firms contend that national rules should apply to the industry rather than individual state laws. Gary Kohn, vice president of legislative affairs and senior legislative counsel for the Credit Union National Association (CUNA), said he expected that amendments to FCRA would be defeated. “We’re confident enough votes are there to get cloture, and to defeat most or all amendments,” Kohn said. CUNA said it felt there wasn’t time before Congress adjourns for the Senate to consider amendments to FCRA. Boxer and Feinstein have suggested that Senate approve a one-year extension to FCRA. The National Association of Federal Credit Unions (NAFCU) also supports the pre-emption provision of FCRA. – [email protected]

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