NCUA Joins Other Federal Agencies in Filing Amicus Brief on California Privacy Law

WASHINGTON – NCUA is one of six federal agencies that jointly filed an amicus brief Aug. 13 in support of an appeal of a June 30, 2004 California Federal District Court decision upholding provisions of a California law that restrict the sharing of a consumer’s information between a financial institution and its affiliates. The other agencies joining NCUA in the filing were the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Board of Governors of the Federal Reserve System, and the Federal Trade Commission. The appeal filed on June 30 by the American Bankers Association, the Consumers Bankers Association, and the Financial Services Roundtable, asserts that the California Financial Information Privacy Act (SB1) is contrary to applicable federal law, specifically the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions (FACT) Act of 2003. “In FCRA, the FACT Act, and Title V of GLBA, Congress carefully crafted a national system to govern the accumulation, dissemination and use of a consumers’ personal financial information. In 1995, Congress recognized the need for this national system, noting that “credit reporting and credit granting are, in many aspects, national in scope, and that a single set of Federal rules promotes operational efficiency for industry, and competitive prices for consumers.” In these three statutes, Congress struck an appropriate balance to ensure that personal financial information may be used to promote affordable financial services while protecting against unwanted invasions of privacy and the misuse of this private personal information,” the amicus brief states. It continues to read that:”Within this federal system, Congress has specified the areas in which states may enact laws with different requirements. Information sharing among affiliates of financial institutions is not one of those areas. In fact, Congress has expressly denied states the authority to impose restrictions on the sharing of information among affiliated companies. The decision of the district court below fundamentally misunderstood this statutory framework in which federal law clearly preempts state laws imposing requirements or prohibitions on information sharing among affiliates.” In its conclusion, the amicus brief stated that “this Court must reverse the erroneous decision of the district court and find that Federal law preempts SB1 insofar as SB1 purports to impose restrictions on information sharing among affiliates.” SB1, introduced by state Sen. Jackie Speier, went into effect July 1. The measure was supported by the California Credit Union League, but it was strongly opposed by banks, insurance companies and brokerages. On June 30, one day before the measure went into effect, U.S. District Court Judge Morrison England dismissed the suit filed by the American Bankers Association, the Financial Services Roundtable, and the Consumers Bankers Association. In his ruling, England stated that Gramm-Leach-Bliley allows states to enact tougher financial privacy rules than the federal law. -