Banks Sue to Block Landmark California Financial Privacy Law
By Consumers Union on Tuesday, April 20th, 2004
FOR IMMEDIATE RELEASE
Tuesday, April 20, 2004
FOR MORE INFORMATION:
Shelley Curran or Gail Hillebrand: 415-431-6747
FINANCIAL INSTITUTIONS FILE LAWSUIT TO CHALLENGE LANDMARK CALIFORNIA FINANCIAL PRIVACY LAW
SACRAMENTO, CA – Less than one year after some of the nation’s largest financial institutions signed off on a legislative package that gave California the strongest financial privacy law in the country, their trade associations went to court today to challenge a key part of the new statute. The law is set to go into effect on July 1, but some provisions of the statute could be tied up in court as a result of the lawsuit.
“When this law was enacted last year, financial industry lobbyists said it represented a ‘reasonable and workable’ compromise,” said Shelley Curran, a Policy Analyst with Consumers Union’s West Coast Regional Office. “Now they’re in court to challenge it. This lawsuit makes it clear that these financial institutions are more interested in protecting their profits than their customers’ financial privacy.”
Under the new law, Californians will have the right to stop the sharing of information by financial institutions with certain affiliates. The law requires financial institutions to obtain a consumer’s affirmative consent before sharing information with most third parties. It also establishes standards that financial institutions will be required to follow to inform consumers of their privacy rights. These protections will provide Californians with the strongest financial privacy safeguards in the nation.
Current federal law gives consumers very little control over how their personal information is used among financial institutions and their affiliates and leaves consumers vulnerable to identity theft, aggressive marketing practices and fraud. Some financial institutions have thousands of “affiliates” and routinely share with them such information as customers’ Social Security numbers, account balances, and spending habits without any restriction.
The lawsuit filed by the American Bankers Association, Financial Services Roundtable, and Consumer Bankers Association in the U.S. District Court in Sacramento challenges the provision of California’s law that restricts the sharing of customer information with financial institution affiliates. While the financial industry has successfully challenged the ability of states to regulate certain bank practices, Congress explicitly left the door open for states to enact tougher financial privacy protections for consumers. When Congress passed the Gramm-Leach-Bliley Act in 1999, it specifically invited the states to enact stronger financial privacy protections than those contained in the federal law.
“Most people don’t want the intimate details of their financial lives shared widely or sold for profit,” said Curran. “These financial institutions are filing suit today because they know that consumers will exercise their privacy rights if given the choice.”