Supreme Court Signals Interest in Banking Industry Appeal to Overturn California's Landmark Privacy Law

First, here’s the backdrop on what could be a HUGE blow to personal privacy and the right of states to protect it. For three years the Consumer Federation of California and other privacy advocates worked to enact a law that would give consumers the right to stop banks and other financial institutions from sharing their personal information – including with “affiliates”.

Big banks, “Business Democrats” and Republicans teamed up to kill this legislation from 2000 until 2003. After consumer and privacy advocates collected 600,000 signatures to place a privacy initiative on the ballot, the banks acquiesced to avoid a disaster at the polls. Senate Bill 1 of 2003 (Speier) became law and California established the nation’s strongest financial privacy protections.

Now, the Supreme Court is poised to take the Banking Industry lobby’s appeal and possibly overturn portions of one of the most important victories for privacy advocates in recent memory. Yesterday, the Court asked the Obama Administration’s Solicitor General to give "advice" on the case.

But first, some more of the back story: after SB 1 was signed into law the financial institutions ran to court to overturn it. In 2005 the Court of Appeals for the 9th Circuit ruled that federal law pre-empted portions of SB 1 and remanded the matter to the Federal District Court to determine the extent of the preemption.

Then, on September 2008, five years after our initial “victory” was blocked, the 9th Circuit ruled that the District Court erred in ruling that federal law preempted California from all regulation of personal information sharing within a family of affiliated financial institutions. Instead, the court ruled that California consumers have the right to restrict the sharing of information that is not related to credit reports.

This ruling is significant because some large financial institutions have hundreds or even thousands of affiliates. Californians can now tell their banks not to hand out private information regarding what they earn, buy or borrow to hundreds of strangers who have no right to that information. Companies that don't comply face penalties of $2,500 per violation.

In other words, California consumers won a huge privacy victory last September…and now it’s threatened by the very same interests that are largely responsible for the current economic meltdown and the subprime crisis.

Azcentral.com reports:

The U.S. Supreme Court signaled interest in a banking industry challenge to a California law that restricts the ability of financial institutions to share information about consumers among company units.

The justices today asked the U.S. solicitor general, the Obama administrations top courtroom lawyer, for advice on an appeal by three industry trade groups. A federal appeals court in San Francisco upheld the California law, rejecting arguments that the 2003 consumer-privacy measure was pre-empted by the U.S. Fair Credit Reporting Act.

…

California Attorney General Jerry Brown says that Congress left states latitude to enact stronger privacy protections…The law was designed to prevent unwarranted intrusions into Californians private and personal lives, Brown argued. The Bush administration backed the banking industry at the lower court level.

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We must now convince the Obama administration’s top courtroom lawyer – with the help of California’s two Senators (or whoever your Senate representatives may be) - to let the states set a superior privacy standard. Ultimately, an "ask me first" standard must prevail.

The Consumer Federation of California will work with our allies in the privacy rights movement to ensure that California law should govern privacy for all personal information that is not directly related to determining a consumer's credit worthiness.

Please come back to this site for more information on this topic and specific “action items” you can take.