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Panel OKs Bill to Protect Consumers' Privacy

Rights: Other measures seek to force solicitors to get permission before billing credit cards after 'free' trials end.


SACRAMENTO — A far-ranging measure to protect consumers' financial privacy that is strongly supported by Gov. Gray Davis--but opposed by consumer groups, banks and almost everyone in between--passed its first test Monday in the California Assembly.

Meanwhile on Monday, California Atty. Gen. Bill Lockyer and two lawmakers unveiled legislation to eliminate a telemarketing sales trick that consumer groups call deceptive.

The measures--by Assembly members Darrell Steinberg (D-Sacramento) and Ellen Corbett (D-San Leandro)--would target direct-mail and telephone solicitors who coax individuals into agreeing to let them receive a trial offer or information on a service without disclosing the strings attached.

Because consumers do not expressly provide their credit card information, they often believe they have not agreed to pay for anything. But in fact, many of the companies already have access to consumers' billing information after purchasing it from banks and others, or teaming up with them--and proceed to charge consumers when the free part of the offer expires.

"The deception is the person wasn't asked to bill the credit card," Lockyer said. "They were never told" they would eventually have to pay.

The larger privacy legislation by Assemblyman Joe Nation (D-San Rafael) cleared the Assembly Banking and Finance Committee. It represents a sweeping effort by the Democratic governor to strengthen privacy laws--a hot issue with voters--this election season. But it would attempt to do so in far less comprehensive fashion than a similar measure backed by liberal Democratic legislators.

Nation's bill, AB 1775, would prevent banks and other financial firms from selling or sharing clients' sensitive information with third parties or affiliates for use in marketing nonfinancial products without first gaining the person's approval. Information considered sensitive includes the client's personal income, Social Security and driver's license numbers and medical bills.

But the legislation also would allow such firms to continue selling or sharing less sensitive nonpublic personal information, including phone numbers, unless consumers chose to opt out of the arrangement.

That is the current disclosure standard under federal law--and the preferred method for banks, which believe the onus for privacy should be placed on the consumer--though the Nation bill would apply it to more information than federal laws.

To better notify the public of its right to privacy, the measure would require financial firms to provide all affected clients with clearly written notices outlining their ability to protect their information from being shared--a major change from banks' current disclosure statements, which have been widely criticized as intentionally incomprehensible.

"If you as a consumer want to restrict all information about you, including your name, address and phone number, you can do that" under the legislation, Nation told the committee on Monday.

A stronger measure by state Sen. Jackie Speier (D-Hillsborough) that would require banks to obtain written permission from consumers before selling or trading any financial information failed to win approval in the Assembly last year.

It fizzled in the final hours of the legislative session largely due to opposition from Davis and a bloc of moderate Democratic lawmakers including Nation, but remains alive.

Nation said he has met twice this year with Davis to draft a more moderate privacy measure, and has come up with a middle-of-the-road approach that he believes is the best balance between consumer groups and business interests.

"I don't think anyone is going to be happy" with the final product, Nation said. "No one is going to say, 'Wow, what a great bill.'"

But the measure is opposed by all consumer groups and all business interests. It is also opposed by Republicans and liberal Democrats, and only has the backing of business-friendly Democratic legislators.

Monday's hearing was packed with leading Sacramento lobbyists for business interests ranging from banks and insurance companies to credit unions and credit card companies.

"All sides are on the same side," James Clark of the California Bankers Assn. told the committee Monday. "They're just not happy."

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