Panel OKs Financial Privacy Bill

A bill that would give California some of the toughest financial privacy protections in the nation passed its first test Tuesday in Sacramento.

AB 1707, sponsored by Assemblywoman Sheila Kuehl (D-Santa Monica), would require banks to obtain a customer’s authorization before disclosing any personal information about the individual to telemarketing firms or affiliated companies.

The bill, one of three proposals on the subject working their way through the Legislature, passed the Assembly Judiciary Committee, which Kuehl heads, by 10 to 5.

But all three bills, including SB 1337 by state Sen. Jackie Speier (D-Daly City) and SB 1372 by state Sen. Tim Leslie (R-Tahoe City), face an uphill battle amid strong opposition from banks and business groups.

Kuehl’s bill now goes to the Assembly Banking and Finance Committee, where it is likely to face a tougher reception. The other two bills are scheduled for hearings in early April.

A key point of dissension is whether California lawmakers should adopt a stricter privacy rule than the one approved last year in Washington. The federal rule, set to take effect in November, will allow banks to share information with telemarketing firms as long as they permit customers the opportunity to opt out of such arrangements.

Kuehl’s bill would take the protection a step further, requiring banks to get a customer’s approval every time they wish to share personal information with third parties or affiliates, and making them disclose exactly what type of information will be released.

State Atty. Gen. Bill Lockyer, who spoke in favor of the bill Tuesday, is investigating the practices of several large California banks that last year admitted selling or disclosing customer account information to telemarketing firms.

Banks and business groups oppose the bill, warning that it could backfire on consumers by restricting the ability of banks to offer products and discounts.

“We want to preserve the consumer benefits that arise from a free flow of information,” said John Dugan, a Washington attorney representing the industry’s new lobbying group, the Financial Services Coordinating Council.

Fred Main, senior vice president of the California Chamber of Commerce, warned that AB 1707 would dampen the state’s economic growth by placing burdensome new requirements on financial companies that do business in the state.