California Privacy Act a Key Victory in Ongoing Financial Privacy Battle, ACLU Says

August 27, 2003 12:00 am

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California Bill Signed Into Law Today;
ACLU Urges Other States to Follow Suit


NEW YORK — The American Civil Liberties Union hailed the California privacy bill being signed into law today – the toughest in the nation – as a turning point in a fierce but often overlooked battle over financial privacy that has been underway in state capitals around the country since 1999.

“This has been a long and agonizing fight,” said Valerie Small Navarro, an attorney with the American Civil Liberties Union of Northern California. “It is extremely gratifying to see our efforts pay off. It would never have happened without the strenuous effort of a wide collection of privacy activists – and without deep public support for protecting the privacy of individuals’ financial lives.”

The law prohibits financial companies from sharing the details of a customer’s financial transactions with third parties without the customer’s permission. California consumers will also have the right to stop companies from sharing information with affiliated companies unless they meet very stringent criteria.

“This is a very significant development in the ongoing national fight for financial privacy,” said Barry Steinhardt, Director of the Technology and Liberty Program at the national ACLU. “It is kind of sad that it took such a battle to secure privacy rights that so many Americans have always taken for granted. We are working to ensure that the residents of other states can also be protected against betrayal of their privacy by their financial institutions.”

After years of being thwarted by powerful financial interests, the privacy legislation only became law after Californians For Privacy Now, a coalition of privacy advocates, obtained the signatures necessary to put the issue before the voters on a state ballot initiative. “Given the experience in North Dakota a year earlier, when a blizzard of misleading advertising and scare-tactics failed to dissuade 72 percent of North Dakotans from approving a similar measure, the financial interests saw the writing on the wall,” said Navarro. The legislature then passed the bill in record time.

While the new law is not perfect, the ACLU said that California has now come closer to restoring financial privacy than any other state.

The current round in the battle over financial privacy began after Congress passed the Gramm-Leach-Bliley Act in 1999. Although Gramm-Leach is sometimes described as a “financial privacy law,” it created a weak privacy standard that actually had the effect of ratifying the increasing abandonment of customer privacy by banks, insurance companies, and other financial companies.

Under Gramm-Leach, financial institutions can sell their customers’ financial data to anyone they choose – including account balances, the date, amount, and recipient of credit card charges or checks a customer has written, and the personal details consumers provide when they fill out applications to get a loan, buy insurance, or purchase securities.

Fortunately, one bright spot in Gramm-Leach is that it does at least give states the option of superceding the federal law and passing stronger privacy protections for their citizens. So far North Dakota, Alaska, Connecticut, Illinois, Vermont, and now California have done so.

The ACLU pointed out that a battle is now underway in Congress over whether states will have a similar right to pass legislation strengthening weak privacy provisions of the Fair Credit Reporting Act, one of the key U.S. laws intended to safeguard the interests of consumers.

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