California’s Landmark Financial Privacy Law Upheld

State's Consumers Gain New Privacy Rights Protections

A U.S. District Court today upheld a landmark California privacy law that gives the state's consumers new rights to limit how widely their personal financial information is shared among banks, insurance companies and other financial institutions.

Wednesday, June 30, 2004 - A U.S. District Court today upheld a landmark California privacy law that gives the state's consumers new rights to limit how widely their personal financial information is shared among banks, insurance companies and other financial institutions. The new law is the strongest financial privacy statute in the country and will go into effect on July 1.

"California consumers made it clear that they want greater control over who has access to their personal financial information," said Cher McIntyre, Consumer Action's director of advocacy. "This ruling recognizes that they have a right to that control."

The lawsuit filed by the American Bankers Association, Financial Services Roundtable, and Consumer Bankers Association in the U.S. District Court in Sacramento challenged a provision of the California's law that restricts the sharing of customer information between financial institutions and their affiliates. Today, the court ruled in favor of the state's argument that the federal Fair Credit and Reporting Act does not preempt states like California from enacting laws that give consumers the right to restrict affiliate information sharing. 

Current federal law gives consumers very little control over how their personal information is used among financial institutions and their affiliates and leaves consumers vulnerable to identity theft, aggressive marketing practices and fraud. Some financial institutions have thousands of "affiliates" and routinely share with them such information as customers' Social Security numbers, account balances, and spending habits without any restriction.  

Under the California law, consumers will have the right to stop the sharing of their personal information by financial institutions with affiliates unless they meet very strict criteria. Consumers who object to such affiliate information sharing are given the right to "opt-out" under the California law. 

 
 

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