It was state Senator Jackie Speier who threw off the most memorable lines during the grand-hoopla signing of the state’s new financial-privacy bill last week at the Pacific Exchange in San Francisco. The politico from Hillsborough opened her remarks with the facetious suggestion that everybody in the crowd should turn to their neighbor and share information about their salary, net worth, bank balance, outstanding loans and debts. After a moment of pause, everybody laughed.
Oh, yeah … that’s what we’re here for: People don’t want strangers to swap and sell their private financial information.
Governor Gray Davis presided over the event, trying to collect political benefits for signing legislation he’d actually done little to encourage during a four-year battle that pitched consumer groups against the state’s powerful banks and financial institutions. It didn’t help that some unexpected organizations—like The Sacramento Bee, in its editorial pages—backed the banks and their so-called need for “a free flow of information” in the financial sector.
Basically, with the new law, a financial company must obtain permission from its customers—this is known as “opting in”—before releasing or selling their personal information to unaffiliated firms. Additionally, financial institutions must ask customers if their data can be shared with subsidiaries and affiliated firms. Customers are given the option to “opt out” of such exchanges. There is no doubt that the swapping of data that has been going on decreases privacy and increases the chances of identity theft, now the most commonly reported financial crime in the country.
Now, everyone knows that the recall—and Davis’ need to let voters know he’s doing something positive for them—had something to do with the sudden support and fanfare signing of this bill. But that’s not the only reason he did it. Consumer activists had gathered all the signatures needed to put an initiative on the March ballot—one that would have done even more to ban the sharing of personal data. With the signing of the California Financial Privacy Information Act, the initiative has been dropped; in other words, a deal was cut. Now, consumer groups who criticized Davis not too long ago are singing his praises from the rooftops.
But ultimately, for whatever reason, a good bill has been signed.
However, the fight is not over. It now proceeds to Washington, D.C., because there’s a provision in federal law that preempts states from doing exactly what California has just done. Senator Barbara Boxer’s presence back at the Pacific Exchange last week signified that the financial-privacy fight is far from over.
Financial institutions argue that a national privacy standard—not a state-by-state one—should be the goal. They are correct. But the chances of passing a good privacy bill in special-interest-dominated D.C. these days are zero to none.
It’s encouraging that even in these weird days of deficit fever and recall madness, for whatever convoluted reasons, our state once again led the charge to enact a reform that is both needed and wanted by ordinary citizens and that likely will be standardized across the nation one day.
That’s how reforms begin. That’s how change happens.