Protecting Consumer Data

Visa may be everywhere you want to be, but the credit card giant and others won’t be nosing into unwitting consumers’ business anymore if Assemblyman Mike Machado (D-Stockton) has his way.

Machado plans to move forward next year with AB 1435, a bill that would require creditors to get written permission from cardholders before selling information about their spending habits to marketing firms. Other similar measures intended to protect Californians’ consumer, employment and medical information are also likely to be introduced when the Legislature returns from its recess Jan. 5.

Consumer advocates say that in addition to privacy concerns, the widespread sale and dissemination of this information is fueling the rise of identity theft.

“Right now [credit card companies] can use your information unless you tell them no,” said Jody Fujii, Machado’s legislative director.

Bankers and creditors such as American Express, Visa USA and Discover opposed the measure this year because direct-marketing firms pay them big money to buy information about their cardholders’ purchasing habits.

The New York-based Direct Marketing Assn. estimates that direct-marketing advertising expenditures reached $153 billion in 1996.

James Clark, a lobbyist for the California Bankers Assn., said credit card issuers are already required to alert cardholders that their information will be disclosed to a third party, an obstacle other businesses do not face.

Machado, a conservative Democrat, will now resubmit his bill to the Senate Judiciary Committee, where a hearing on the measure in July was canceled at his request. Machado said he knew the bill would invite a veto as anti-business from Republican Gov. Pete Wilson, given the opposition of Republicans when the measure passed the Assembly on a 47-27 vote in April.

But this time around, he said, Machado believes he’s “caught the attention of the industry,” which may be more willing to forge a compromise in 1998. The lawmaker, who has the support of consumer watchdog groups such as Consumers Union and the California Public Interest Research Group, thinks a simple solution would be to allow cardholders the option of releasing their information when they activate a new credit card on a touch-tone phone.

Clark said he thinks the industry is being unfairly singled out but would be willing to deal with Machado. Many credit card companies already voluntarily remind cardholders each year that they can “opt out” of the lists by writing a letter. That practice could become the industrywide standard because access to information about spending habits is a critical component of its marketing.

“Knowing what someone has purchased gives you an idea of what someone is willing to buy,” Clark said. “Selling stuff is really what America is all about.”

HOT BILLS

Tax Break for Warehouse Storage Bottom Line: The American Warehouse Assn., the Teamsters Union and distribution companies want an exemption from income and franchise taxes for companies whose only business in California is storing goods for shipment overseas or for distribution throughout the state. They argue the assessment encourages out-of-state companies to contract with Nevada storage firms because they will not be taxed there.

Chances: AB 1271 sailed through the Assembly on a 79-0 vote in June but stalled in the Senate this summer when state tax officials raised concerns that the state could lose $1 million annually.

Next Step: The bill will face a hearing in the Senate Revenue and Taxation Committee when the Legislature returns next year.

Details: AB 1271 author Assemblyman Lou Papan (D-Millbrae) can be reached at (916) 445-8020.