Initiative drive promised if lawmakers don’t act

San Francisco Chronicle

Sacramento — If the Legislature fails to take action this year, consumer advocates say they will begin researching and writing a statewide ballot initiative to protect financial privacy.

A hard-fought financial privacy measure loathed by the banking and insurance industry is faltering in the Assembly. It may get another vote today in the same Assembly committee that rejected it by a single vote earlier this week, the committee’s chairman said yesterday.

The measure, by state Sen. Jackie Speier, D-Hillsborough, would prohibit financial institutions from selling private information, such as bank balances, spending habits, addresses and phone numbers, without first getting their customers’ permission.

Consumer advocates have become increasingly upset with the Legislature’s inability to pass privacy legislation, although a Republican version is advancing. They think the banking and insurance industry is lobbying the bill to death as they make substantial donations to politicians voting on the measure.

“We’re not only considering an initiative on this, we’re considering rolling in a bribery statute,” said Jaime Court with the Foundation for Taxpayer and Consumer Rights, which pushed for a successful insurance-industry reform initiative in 1988.

“It is fair to say we are getting very frustrated with the fact that these bills are getting stymied,” said Dan Jacobson with the California Public Interest Research Group. “This is certainly high on the list of ones we can do. ”

The Speier measure appeared dead earlier this week after heavy lobbying by the banking and insurance industry, but Assemblyman Lou Papan, D-Millbrae, chairman of the Banking and Finance Committee, agreed yesterday to grant the measure a second try today. Speier said a revote could be taken in early July. Since the vote failed 5 to 3 on Monday, she needs one more vote. “I’m feeling optimistic, and this is a good-faith effort on Papan’s part,” she said.

As financial firms merge and expand their reach into a variety of ventures, they are trading their customers’ private information in huge databanks, mostly among affiliated companies but often to telemarketing firms. The information is used to target mail hawking credit cards, loans and insurance.

Speier’s bill would allow banks and insurance companies to share customers’ financial information with affiliated firms without asking permission. It would prohibit the sharing of that information if a customer actively forbade it.

Conversely, the sale of client data to outside telemarketers and other companies would be barred under Speier’s bill unless a customer gave explicit permission.

Papan has received intense pressure for his earlier opposition to the measure. But after Speier added a series of amendments, significantly weakening the bill but still offering more protection than the banking industry wanted, Papan agreed to support the measure and loaned Speier his chief consultant to help out.

The bill nevertheless died Monday because three other Democrats declined to vote. About two-dozen financial lobbyists spoke against the bill, arguing their companies would be hamstrung if they couldn’t share information. The focus is now on Assemblyman Carl Washington, D-Paramount, who abstained from voting even though he was an original co-author on a much stricter version in the Assembly.

The Assembly bill died because Washington was in Los Angeles campaigning for City Council, and his replacement abstained from voting. Washington said yesterday that Speier offered too many amendments Monday that he hadn’t reviewed, and that he felt uncomfortable voting on the spot. As of yesterday, Washington still hadn’t decided on whether to vote for the measure. “It had nothing to do with not wanting to vote for the bill,” Washington said. “It was just too much chaos.”

The same complaint came from Assemblywoman Patricia Wiggins, D-Santa Rosa, who said she was concerned about whether community banks that don’t have vast numbers of affiliates would be unfairly singled out and prohibited from marketing through outside firms.

The third Democrat who abstained, Assemblyman Ed Chavez of La Puente, could not be reached for comment. He’s been absent whenever the privacy bills come up for a vote.