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Comparison of California's Financial Information Privacy Act of 2003 with Federal Privacy Provisions

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Abstract:

The California Financial Information Privacy Act,1 enacted on August 28, 2003, and effective on July 1, 2004, governs the rights of California residents with respect to the dissemination of nonpublic personal information by financial institutions. In some respects, it diverges from two federal laws that impose restrictions on the dissemination of nonpublic personally identifiable customer information by financial information. Its major provisions include a requirement that before sharing nonpublic personal information with nonaffiliated third parties, financial institutions receive an affirmative consent, an opt-in, from their customers. Before such information may be shared with affiliates not in the same line of business and regulated by the same functional regulator, an opt-out notice is required. Wholly-owned subsidiaries and affiliates in the same line of business (securities, banking, or insurance) may share information, except medical information, without an opt-out or opt-in requirement.

California's law was enacted just before Congress enacted the Fair and Accurate Credit Transactions Act (P.L. 108-159), which makes permanent federal statutory preemption of state regulation of information sharing among corporate affiliates that was set to expire on December 31, 2003, and limits the ability of affiliated companies to share consumer information for marketing solicitations. See CRS Report RS21449, Fair Credit Reporting Act: Preemption of State Law; CRS Report RL32121, Fair Credit Reporting Act: A Comparison of House and Senate Legislation; CRS Report RS21449, Fair Credit Reporting Act: Preemption of State Law, CRS Report RL31758, Financial Privacy: The Economics of Opt-In vs Opt-Out; and CRS Report RL31847, The Role of Information in Lending: The Cost of Privacy Restrictions. This report will be updated as warranted.