Insurers Still Mull Action On Info Block Ruling
NU Online News Service, July 9, 4:01 p.m. EDT?Banks and insurance industry groups were due to continue discussions Monday about seeking an injunction to halt a California federal court ruling giving consumers a chance to tell companies they deal with not to swap their personal data with affiliates for marketing purposes.[@@]
The groups, including insurer organizations, were meeting following a decision from U.S. District Court in Sacramento that found the federal Fair Credit Reporting Act does not preempt California's "affiliate-sharing" restrictions.
The strictures are contained in California State Senate Bill 1, which requires insurance companies to give California consumers notice and an opportunity to "opt-out" of financial information disclosures between affiliates for marketing purposes. The decision does not impact affiliate information sharing for other purposes, which are excepted from the "opt-out" standard by SB 1.
The California law also generally provides that financial institutions may not disclose a consumer's nonpublic personal information to any nonaffiliated third party without the consumer's consent. The federal court decision is limited to a discussion of the preemptive effect of federal law on state "affiliate exchange" restrictions.
Banks and banking industry trade groups met Friday without a decision on seeking injunction against the decision, giving the financial institutions time to adjust their activities where necessary. An expedited appeal to the 9th Circuit Court of Appeals in San Francisco is also expected.
"The court finds that the provisions of S.B. 1 are not preempted by the Fair Credit Reporting Act, whose overriding purpose is to regulate the use and dissemination of consumer reports," the decision by Judge Morrison C. England Jr. concludes.
"Instead, limitations on the sharing of personal financial information between financial institutions in non-credit reporting situations are specifically contemplated by the provisions of the Gramm-Leach-Bliley Act, which allows states to enact more stringent privacy regulations in that regard, therefore permitting state laws like S.B. 1," the decision stated.
Stephen Zielezienski, vice president and associate general counsel with the American Insurance Association, said, "The AIA has not yet decided how to respond to the court's decision or whether it would become involved in any appeal, but the decision is wrong and misreads the clear preemptive scope of federal law in this area. It takes a tortured path to reach a result that does not square with a reasonable reading of the law."
Requests for comment from the American Council of Life Insurers drew no response. Zielezienski added that the decision impacts all financial institutions because of the scope of SB1 and that insurance companies "need to continue to evaluate their information-sharing policies in that context."
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