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House OKs Bill to Help Protect Identity

September 11, 2003|Richard Simon | Times Staff Writer

WASHINGTON — The House on Wednesday approved legislation designed to help protect consumers from the growing crime of identity theft, but critics complained it would thwart efforts in California and other states to enforce tougher financial privacy laws.

The measure was approved 392-30 over objections from consumer groups. They and others said it would preempt state financial privacy laws, including one recently passed in California and touted as the nation's hardest hitting.

"Leave California alone," pleaded Rep. Maxine Waters (D-Los Angeles).

But she and other California Democrats backed down -- at least temporarily -- from pressing for a roll-call vote on whether to carve out an exemption for the state.

By all accounts, they faced insurmountable opposition from the chamber's Republican majority, as well as from banks and other business interests, which contended that a patchwork of state laws could undermine the national credit reporting system. California, because of its sheer size, would probably set the national standard, usurping Congress' authority, argued Rep. Michael G. Oxley (R-Ohio), chairman of the House Financial Services Committee.

"While I have a great deal of respect for my colleagues from California, I don't think it's a responsible position for the Congress to abdicate that responsibility to the Golden State," he said.

The House bill was spurred by growing concern about an epidemic of identity theft that last year victimized 10 million Americans and cost consumers and businesses more than $50 billion.

Under the bill, financial institutions would still be able to share a client's private data with an affiliate -- the brokerage arm of a bank sharing the information with the insurance arm of a bank, for example -- without the customer's permission.

Under the California law, due to take effect in July, banks and other financial services companies would be barred from sharing customers' personal financial information with affiliates if a consumer objects. The California law would be superseded by the federal law if it passed, according to consumer advocates.

By amending the 33-year-old Fair Credit Reporting Act, the House measure would:

* Allow consumers to request a free copy of their credit report once a year so they could check its accuracy.

* Attempt to increase the effectiveness of "fraud alerts" filed by consumers to credit bureaus.

* Prohibit credit reporting agencies from releasing adverse information if a consumer is a victim of identity theft.

* Forbid businesses to print more than the last five digits of a credit card on a receipt.

The American Bankers Assn. praised the House vote, saying it "strikes the right balance to ensure the availability of credit and fighting identity theft while not undermining the credit reporting system."

But consumer groups said they were hopeful they could persuade the Senate to preserve the rights of states to enact tougher laws. Others that have done so are Connecticut, Illinois, Indiana, Louisiana, Nevada, Texas and Virginia.

Sen. Richard C. Shelby (R-Ala.), who as chairman of the Banking Committee will play a leading role in crafting the Senate bill, is regarded as a supporter of strong privacy protections.

Shelby said the House vote "reflects the importance of preserving the efficiency of our national credit system. This efficiency is fundamental to economic growth."

A coalition of consumer groups said in a letter to lawmakers that the House bill contained "only the bare minimum number of reforms" that lobbyists figured they had to agree to in order to achieve their goal of "permanent preemption" of stronger state laws.

"Congress should be working to strengthen identity theft laws, not standing in the way of states like California who have passed innovative and much-needed consumer safeguards," said Shelley Curran, a policy analyst at Consumers Union in San Francisco.

Gov. Gray Davis, who signed the state's financial privacy law last month, contended in a letter to the California congressional delegation that the House bill would place Californians at "greater risk" of identity theft.

California state Sen. Jackie Speier (D-Hillsborough), who sponsored the state law, said advocates were "relying heavily on the U.S. Senate.... Make no mistake about it: This issue isn't going away. At some point on a national level, they will understand what financial institutions in California took four years to understand, and that is that people are mad as hell about this issue and they don't want their financial information shared, period."

In the end, said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, "this fight will be decided in the Senate and by whether President Bush is forced to live up to his campaign promises on privacy rights."

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