Boxer and Feinstein Announce Plans to Offer Amendment to Stop Roll Back of
California's Strong Privacy Law
September 23, 2003

Washington, DC -To fight efforts to gut key portions of California's strong new privacy law, the State's two Senators, Dianne Feinstein and Barbara Boxer, today announced plans to offer an amendment that would set a strong national standard for the protection of Americans' personal information. The Feinstein-Boxer amendment would be offered when the Fair Credit Reporting Act reauthorization comes before the full Senate later this year.

Last week, Boxer and Feinstein called on the Senate Banking Committee to protect Americans' privacy as it considered legislation to reauthorize the Fair Credit Reporting Act. However, the committee failed to provide consumers with the option of protecting their data from being shared.

"California's financial privacy law was the product of four years of legislative efforts, and it enjoys overwhelming public support," Senator Boxer said. "The Senate Banking Committee has shown little respect for the efforts of states to provide consumers with greater protections by offering this sub-par national standard for consumer privacy."

"The bill approved by the committee would gut a key piece of California's landmark privacy law and deprive millions of Americans basic protections for their personal information," Senator Feinstein said. "I am deeply disappointed by this action and will fight this effort when the bill comes to the Senate floor."

Under current federal law, financial institutions are allowed to share "transaction and experience" information with affiliates without restrictions, and states are prohibited from enacting greater privacy protections on affiliate sharing.

The bill passed by the committee allows companies, with only limited restrictions on marketing, to freely share vast quantities of personal customer information with their affiliated partners. This information could include the most intimate details of a customer's life such as: checks written to political or social organizations, bank balances and stock purchases, and comprehensive profiles of spending habits. Additionally, the bill preempts States from taking stronger measures to protect personal information.

"I believe that consumers should have the right to decide when, how, and to whom their personal information is shared," Senator Feinstein said. "This is why Senator Boxer and I will offer an amendment that gives consumers' greater control over their personal information when the Fair Credit Reporting Act is considered by the full Senate. This amendment will protect Americans' privacy, consistent with California's law."

A summary of the Feinstein-Boxer amendment follows:

Summary of Feinstein-Boxer Amendment on Affiliate Sharing

The Feinstein-Boxer amendment is a substitute to the affiliate sharing language in the Fair Credit Reporting Act bill that came out of the Banking Committee. Affiliate sharing refers to the sharing of information between subsidiaries owned by the same company.

The amendment reflects the terms of California's privacy law that the California Banker's Association called "reasonable and workable."

• Opt-out for Affiliate Sharing: Under the amendment, companies would be required to give consumers notice of their intent to share "transaction and experience" and other information with their affiliates. Consumers would be given the option of instructing the company not to share their information. This is called opt-out.



• Exceptions: The amendment would allow closely related affiliates in the same line of business to share information with each other. These are the same exceptions included in the California law. Specifically, a company would not have to obtain consumer consent if the affiliate:

(1) is regulated by the same functional regulator; (eg. institutions that regulate financial service institutions such as the Office of Thrift Supervision and Office of the Comptroller of the Currency would be considered the same functional regulator).

(2) engages in the same line of business (eg., securities firms, insurance services, and banking services would be considered in independent lines of business);

(3) shares a common brand identification; and

(4) is a wholly owned subsidiary of the same company;

• Rule-Making for Other Exceptions: The Federal Banking Agencies would conduct a rule-making to establish whether the exceptions for sharing personal information to third parties in Gramm-Leach-Bliley should be applied to affiliate sharing.



• Study of Affiliate Sharing Practices: The amendment keeps the study of affiliate sharing practices created by the Banking Committee bill

Affiliate sharing has led to abuse of consumers' privacy. Here are two examples:

• Nationsbank provided sales representatives of its affiliate securities brokerage a list of bank patrons with expiring certificates of deposit(CDs). The sales reps then called the customers and recommended they buy high-risk investments, mischaracterizing them as straightforward government bonds. Investors, 65 percent of whom where over 60 years old, lost millions from this scheme. While Nationsbank paid a $7 million fine to the Securities Exchange Commission for its false and misleading sales practices, its sharing of customer information was perfectly legal under existing law.



• Citibank representative, Martin Wong, recently testified at a Senate Banking Committee hearing that Citibank uses "credit information and transaction histories that we collect from affiliates to create an internal credit score and models that help determine a customer's eligibility for credit." In other words, Citibank is creating internal credit reports with none of the protections of the FCRA. As a consequence, if Citibank makes an error on an account, this error could be shared with affiliates and a consumer would have no right to correct the error.

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