California Privacy Bill Defeated

By a narrow one-vote margin, a tough new privacy bill was defeated in the California Assembly's Business and Finance Committee. The bill would have required financial institutions to get explicit consumer permission prior to sharing personal information with both third parties and affiliates. The bill far exceeded the privacy measures contained in the Gramm-Leach-Blilely Financial Modernization Act, which put no limits on data sharing among affiliates and required companies to offer consumers the chance to opt-out of third-party data transfers. Consumer activists put a positive spin on the outcome. Ed Mierzwinski, a lobbyist for the U.S. Public Interest Research Group, told the American Banker that "the fact we narrowly lost is a sign that we are on our way up."

The industry won't have much opportunity to celebrate. A similar opt-in requirement was introduced in the U.S. Senate on June 15th by Senator Dianne Feinstein (D-CA) as part of the Privacy Act of 2001. The bill would require explicit customer consent for transfer of sensitive data such as Social Security numbers, and a less stringent opt-out requirement for less sensitive information.