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A Split Decision On Privacy
by Chloe Albanesius
A federal appeals court on Tuesday blocked a portion of a 2003 California privacy law, ruling that banks can share customer information with affiliates without getting permission.
Under the statute, financial institutions were ordered to get permission from consumers before giving any personal information to affiliates. The law prompted a 2004 lawsuit from the American Bankers Association (ABA), the Financial Services Roundtable and the Consumer Bankers Association, which claimed that the federal Fair Credit Reporting Act (FCRA) pre-empts the California law and allows the information sharing.
A district court upheld the California act, but in an opinion issued Tuesday by Circuit Judge William Fletcher, the court held that the federal law pre-empts at least some part of the California code's affiliate-sharing provisions. Fletcher, however, sent the case back to the district court "because there is a possibility that some part of these provisions may survive pre-emption."
The court upheld a provision requiring financial institutions to get permission before sharing information with non-affiliated companies, and another that allows customers to opt out of having their data shared with or sold to companies that have marketing agreements with their banks.
ABA said in a statement that it is pleased with the court's decision in that it allows for consumer information to be "shared among affiliates for purposes of credit or insurance eligibility, employment or other authorized purposes."
Democratic state Sen. Jackie Speier, who authored the law, told AP that she was glad the court upheld at least two-thirds of the bill. "What this means to Joe and Jill Six-pack is that their financial information is theirs and they retain control over it," she said.
Also in California, a state Assembly committee on Tuesday approved three bills that would create civil and criminal penalties for people who send unsolicited commercial e-mails or fraudulent "phishing" e-mails, or who surreptitiously install "spyware" on computers.
The Business, Professions and Economic Development Committee unanimously approved a measure, S.B. 355, that would punish phishing, which involves sending phony but official-looking e-mails to request personal data for fraudulent purposes. The measure would allow for civil remedies and penalties.
The committee also approved a bill, S.B. 92, that would amend an existing anti-spyware law to let consumers or Internet service providers recover $1,000 per violation.
"The scary part is that this is all done without the consumer's knowledge or consent," state Sen. Kevin Murray, the bill's sponsor and author of the current statute, said in a statement. "And adding insult to injury, much of this software is designed to be nearly impossible to uninstall."
The panel also addressed the continuing problem of spam, approving a measure S.B. 97, that makes it a misdemeanor for someone to send spam messages with false or misleading information. Violators could receive $2,500 fines or jail sentences of up to one year. The bills now head to the Judiciary Committee.
The committee failed on Tuesday to pass a bill, S.B. 440, that would make it illegal for companies to deny a product or service or charge a higher fee to someone who does not wish to provide certain personal information. But the measure could be reconsidered.
Illinois Governor Signs Bills On ID Theft
Illinois last week became the second state in the nation to require companies to notify customers if their information is accessed during a security breach.
Gov. Rod Blagojevich, a Democrat, signed six pieces of legislation intended to protect residents against identity theft. The main bill, H.B. 1633, is modeled after a California notification law that has inspired other state-level measures in the wake of recent company security lapses.
"These new laws will provide consumers with some peace of mind and protection from the fastest-growing crime in the country: identity theft," the governor said in a statement. "One of the best ways we can protect consumers is to require companies to notify customers quickly when their records have been compromised."
The law, which takes effect Jan. 1, was crafted by the governor, Attorney General Lisa Madigan and the Illinois Public Interest Research Group. The legislation will "give consumers the power to protect themselves," Madigan said.
The governor also signed:
S.B. 1799, which would require the Revenue Department to notify residents if they think their Social Security numbers are being used in an unauthorized manner;
S.B. 123, which would phase out the use of Social Security numbers on hunting and fishing applications;
H.B. 2696, which would ban businesses from denying credit based solely on the fact that applicants have been victims of ID theft;
H.B. 2697, which would make it a misdemeanor to use credit or debit cards without permission;
And H.B. 2699, which would increase penalties for ID theft by one felony class.
All of those bills except S.B. 123 which takes effect Jan. 1, are effective immediately.
Blagojevich also announced that he would sign an additional bill, H.B. 1058, when it reaches his desk. It would allow victims of ID theft to freeze their credit reports.
On Tuesday, meanwhile, the California Assembly's Judiciary Committee approved a measure, S.B. 13, that would amend that state's notification law to include all breaches, not just computer-based security lapses.
New Jersey Bill Would Tax E-Commerce
State senators in New Jersey are looking for a $175 million expansion of the state's 6-percent sales tax that would include things like Internet downloads. Today's Sunbeam, a newspaper in Salem, N.J., reports that the Senate Budget Committee approved the measure on a 9-6 vote Monday.
Business groups were not pleased. "It definitely needs more thought," said Arthur Maurice, executive vice president of the New Jersey Business and Industry Association. "This tax on computer downloads could have phenomenal implications."
The Internet provision would allow online sales to be taxed in the same manner as mail transactions. That would cover things like Apple Computer's iTunes music-downloading service. Fees per song would jump from 99 cents to $1.05 per song.
Supporters claim that the goal is to modernize the state's tax laws in the Internet age.
Qwest To Pay Oregon Over Contracts Dispute
Qwest Communications International agreed to pay a $1.05 million fine to the Oregon Public Utility Commission (PUC), the commission announced Monday. The penalty is for the failure to file 29 contracts regarding billing arrangements for leasing network space.
By paying the fine, Qwest does not admit wrongdoing. The PUC said it believes Qwest entered into the contracts in order to gain approval for its merger with US West and to avoid opposition to FCC filings to enter the intrastate long-distance telephone market.
"We expect regulated companies to follow the rules" commission Chairman Lee Beyer said in a statement. "While this is a reasonable resolution in the new competitive telecommunications market ... we need to see these kinds of agreements to ensure that all competitors are offered the same deal and one is not favored over another for whatever reason."
Also in telecom, Colorado Gov. Bill Owens earlier this month signed legislation, S.B. 152, that bans cities from setting up telecommunications networks in areas that are already served by a telecom provider.
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