DEBRIS.COMgood for a laugh, or possibly an aneurysm

California’s Senate on Tuesday passed the toughest financial privacy bill in the nation by a vote of 31 to 6, a day after it sailed through the state Assembly, 76 to 1.

As early as next week, Gov. Gray Davis is expected to sign the bill, which requires banks and other financial institutions to obtain customers’ permission before they can share or sell information about them to other companies.

This is great news, and there’s a great story behind it too. In brief, state senator Jackie Speier had been working on a financial-privacy bill for four years, but the banking industry managed to beat it every time. Finally, the CEO of E-Loan, a guy named Chris Larson, spent $1M to get the issue on next March’s ballot — to let the voters, not the politicians, decide.

As I understand it, the ballot initiative would have been much more restrictive: it would have required consumers to opt in. If you’ve never dealt with opt-in/opt-out decisions from the business’ side, take my word for it: nobody ever opts in. So an opt-in model would practically kill the banks’ ability to market to their customers.

Speier’s legislation is based on an opt-out. It gives consumers the right to opt out of information sharing, without making that the default choice.

Once the signatures for Larson’s ballot initiative had been gathered, Larson and Californians for Privacy Now were able to threaten the financial industry: come to terms on the legislation, or we’ll let the voters force you to use opt-in.

According to the Chronicle, “Opponents [of the opt-in ballot initiative] had vowed to spend millions to defeat the initiative, which would have almost certainly ended up in court.”

I’m not certain, but I assume Larson’s group will drop the ballot initiative now. That’s disappointing, in a sense, but I can see that having lesser, but uncontested protections in place is a better result than fighting for stronger protections which may not ever be enacted.