Calif. Assembly Banking Committee Stalls Financial Privacy Measure

Following a late night hearing, the California Assembly Banking Committee voted to kill a bill that would have required financial institutions to gain consent from their customers before sharing information with their affiliated companies and third parties. The bill (AB 203), opposed by the American Insurance Association (AIA), would have created an “opt-in” system in California and would have given customers a right to sue their financial institutions regardless of whether or not the disclosure of information caused harm.

A similar measure, SB 773, sponsored by Senator Jackie Speier, Chair of the Senate Insurance Committee, continues to move through the legislative process and will face a vote by the full state senate next week.

Financial institutions are currently working to comply with the Title V privacy protections of the federal Gramm-Leach-Bliley Act (GLBA). The law takes effect July 1, 2001 and establishes an “opt-out” system, which provides customers an opportunity to prevent disclosure of their information.

AB 203 is a two-year bill and will be eligible to be heard again in January, 2002. SB 773 will be debated by the full senate next week before it moves to the state assembly.