WASHINGTON - California state Sen. Jackie Speier has a message for bankers who have worked for four years to stop her bill to strengthen financial privacy standards: It's time to quit fighting.
The San Francisco Democrat used her first sit-down interview with American Banker to warn opponents that if the bill fails - this is likely its last opportunity for passage - they will face an even harsher ballot initiative in California next year.
"Ideally, this issue is best dealt with in the Legislature," Sen. Speier said Wednesday. "The industry has the opportunity to negotiate amendments to make sure it's going to be workable. But if … they continue to oppose it, then we will have no choice but to go to an initiative. And that initiative is going to be far more onerous" than her bill, she said.
On Wednesday a coalition of consumer groups, Californians for Privacy Now, unveiled the wording of an initiative they want to put on the ballot in the March 2004 primary. The initiative would force banks to get their customers permission, or "opt-in," before sharing any confidential information with third parties or affiliates.
Sen. Speier described her bill as a "fair and reasonable" middle ground. It would require that financial institutions get customers' permission before sharing their information with third parties but would let them share data with affiliates, provided that customers are notified of their right to block, or "opt-out" of, such transfers.
If the bill does not pass this year, "I will become a strong advocate to pass the initiative," Sen. Speier said, noting that she had met with Christian A. Larsen, the chief executive of E-Loan Inc. and co-founder of Californians for Privacy Now.
"When you try year after year in the Legislature to get something through and it doesn't succeed, you go to the initiative. … If the Legislature doesn't listen on the privacy issue, then the people will get what they demand, and it will be far more burdensome on business," she said.
Sen. Speier cited consistently high poll numbers supporting the initiative and called it a "slam dunk" if it reaches the ballot - "I don't care how much money you throw at it."
But her bill faces a mounting federal challenge this year, which was part of the reason for her trip to Washington this week.
Lawmakers are deciding whether to renew the preemption provision of the Fair Credit Reporting Act, which prevents states from enacting legislation that restricts how institutions share credit histories, as well as share data with affiliates. The industry has argued that the provision must be renewed before it expires at yearend to avoid disrupting the credit system.
Many observers expect that in order to get the renewal the industry will have to accept a stiffer national privacy standard. (The Gramm-Leach-Bliley Act of 1999 lets customers opt out of sharing with most third parties; it does not limit sharing among affiliates.)
Sen. Speier wants to make sure that Congress uses a tough standard if it trumps bills like hers. "Don't preempt the states unless you are going to pass a law that is equal to or better than the one California is contemplating" on privacy, she said.
Any federal legislation should at least require opt-in for third parties and opt-out for affiliates, like her bill, and make banks provide better privacy disclosures, she said. She dismissed the privacy notices banks sent to comply with Gramm-Leach-Bliley as written for an "18th-grade" reading level, too difficult for most consumers to understand.
Sen. Speier is no stranger to Capitol Hill. Between 1976 and 1978 she served as legal counsel to California Rep. Leo J. Ryan, who was shot to death in Guyana by followers of suicidal cult leader Jim Jones. (Sen. Speier was shot five times during the attack.)
To make her case the senator had scheduled meetings with federal lawmakers, including Senate Banking Committee Chairman Richard Shelby, R-Ala, and Sen. Paul Sarbanes, D-Md., the panel's ranking Democrat. She said she would also meet with other California Democrats: Sens. Dianne Feinstein and Barbara Boxer, and House Minority Leader Nancy Pelosi.
The main fight will be back home, though, against a broad group of financial services lobbyists.
Since Sen. Speier first introduced a full opt-in bill four years ago, the industry has been mobilized, convinced that if privacy standards are altered in California the rest of the country will eventually follow. But the bill has come very close to being enacted, passing the Senate several times and failing in the Assembly last year by only three votes.
In addition to blaming big spending by industry for the failures, Sen. Speier accused the banking lobby of spreading misinformation.
"I've been in the legislative arena for 15 years," she said. "I can say this without fear of being contradicted. In that term I have never seen a bill so fervently fought by a phalanx of Brooks Brothers-suited opponents, with such intensity and with so much money being thrown around. It's been estimated by independent sources that over $20 million was spent killing that bill last session."
She said she is "optimistic" that the bill, which has already passed the Senate, could finally triumph in the Assembly this year. "There are a number of members who were term-limited out or who sought other offices, who have been replaced by members that are more supportive of privacy."
She is unconvinced by the claims of some larger institutions, including Bank of America Corp., that they no longer share consumers' personal data with third parties, and she said the law needs to set strict standards.
"We don't have privacy cops out there," Sen. Speier said. "Since it's not illegal, they can say anything they want. And they will say anything they want because they know, from a public relations point of view, it's very destructive. I don't have the time to go out there and verify the statements they make publicly."
On this issue bankers have become their own worst enemies, she said, eroding public confidence by fighting a measure that most consumers say is needed.
"The industry should be scared by the fact that they are losing the trust of their customers," Sen. Speier said. "It is important for them to have a longer-term perspective on what this really means. … Not that people will start stuffing their mattresses with money, but they are going to look for alternatives.
"Because it is such a threshold - such a fundamental - personal property right: that my financial information belongs to me, and nobody else. And the audacity of any company to think that they can sell my financial information, and make a profit of it without my approval or without a quid pro quo to me, is more than offensive."
