Part of state's financial privacy law upheld

Part of state's financial privacy law upheld

Bob Egelko, Chronicle Staff Writer

Friday, September 5, 2008

(09-04) 23:29 PDT San Francisco -- A federal appeals court reinstated part of California's financial privacy law Thursday, allowing consumers to prevent banks from sharing information with affiliated companies about a customer's savings account or buying habits.

Central provisions of the 2004 law, the broadest of its kind in the nation, have been tied up in court for more than three years. Ruling on legal challenges by banks and the Bush administration, the same appeals court and a federal judge found in 2005 that the California statute conflicted with a federal law that set nationwide standards for regulating consumer credit reports.

But in a 2-1 ruling Thursday [PDF], the Ninth U.S. Circuit Court of Appeals in San Francisco said portions of the California law had nothing to do with consumer credit and could be salvaged. Those provisions require banks to give customers a chance to object before sharing with affiliates any information that does not involve a customer's fitness for credit, insurance or employment.

For example, Deputy Attorney General Catherine Ysrael, the state's lawyer in the case, said customers provide personal and financial information to banks that maintain their accounts, and their credit card statements might reveal buying patterns that a bank could turn over to affiliated retailers. The law allows customers to block the sharing of such information.

"The California Legislature intended for consumers to be the final arbiters of how their information is disseminated," Ysrael said. She said the court rightly concluded that the Legislature "would rather have a weakened statute than no statute at all."

[...]