Following a late night debate, the California State Assembly voted to defeat a controversial financial privacy measure that would have given California the most complicated and confusing privacy law in the nation, the American Insurance Association (AIA) said.
“I commend the members of the California Assembly for recognizing the gap between rhetoric about this bill and what the bill would have actually done,” said Bill Gausewitz, AIA assistant vice president, western region. “This bill would have been unworkable for the industry and would have caused a host of unintended consequences for consumers.”
The measure, SB 773, sponsored by Senator Jackie Speier (D-Hillsborough), would have created an opt-out system for information sharing among affiliated companies and an opt-in system between non-affiliated companies.
“SB 773 was drastically amended this week. But the amendments did not solve the fundamental problems with this bill,” Gausewitz said. “This bill would have disrupted e-commerce, given an unfair competitive advantage to some businesses, and imposed extraordinary new costs on the financial services industry. Despite the defeat of SB 773, the issue of information sharing by the financial services industry will continue to be under debate in California.”
Financial institutions are now implementing new systems to comply with the privacy protections of the federal Gramm-Leach-Bliley Act (GLBA). The law took effect on July 1, 2001 and established federal guidelines for the sharing of financial information.
“Senator Speier’s measure would have created different rules for different types of companies based on their corporate structure instead of on the privacy needs of their customers,” said Gausewitz. “Contracts are allowed under federal law so that all financial companies can compete equally. SB 773 would have created different sets of information sharing rules for companies competing in the same market.”
“Under Senator Speier’s measure, businesses that rely on contracts would be treated as non-affiliated businesses and would be unable to share information unless their customers return opt-in notices,” said Gausewitz. “Businesses organized by affiliates would be allowed to share information much more freely.”
The State Assembly voted 32 to 26 to defeat SB 773. The measure needed 41 votes to pass.
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