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SACRAMENTO — Lawyers for the banking industry are hoping to derail the state’s tough new financial privacy act by relying in part on a ruling issued last year by U.S. District Judge Claudia Wilken. In a suit filed this week in Sacramento federal court, the industry seeks to demonstrate how the extension of the federal Fair Credit Reporting Act trumps the California Financial Information Privacy Act, signed in August as SB 1 and slated to go into effect July 1. Last year, Wilken had ruled that Daly City, as well as San Mateo and Contra Costa counties, could regulate some aspects of consumer privacy, but must cede control over the sharing of information among banking affiliates to federal law. “We think [attorneys] will probably rely on that,” said Michael Crotty, deputy general counsel for the American Bankers Association, an association whose member banks hold approximately 95 percent of the nation’s domestic assets in the banking industry. The Financial Services Roundtable, representing 100 of the nation’s largest integrated financial services companies and the Consumer Bankers Association, leaders in consumer financial services and lending, are co-plaintiffs with the American Bankers Association in the case. The case was filed by attorneys for Covington & Burling, which has offices in San Francisco and Washington, D.C., and represented Bank of America, Wells Fargo and other banking interest in their case against Bay Area municipalities last summer. The federal act was slated to sunset in December of last year, a fact that Crotty said had given California legislators and consumer interest groups an opening to force new rules on banks operating in California. But when that federal law was changed last year, Crotty said, it “changed everything,” including California’s ability to regulate how banks “use, collect or exchange” information about consumer credit-worthiness and exchange that information with affiliates. “There is no question that the new statute clearly applies to California’s SB 1,” said Crotty, who is based in New York. “The difference is SB 1 is still on the books out there and your regulatory authority and your attorney general will attempt to enforce that come the first of July.” “The attorney general is vigorously committed to defending the statute,” agreed Tom Dresslar, a spokesman for AG Bill Lockyer. “More importantly, it’s important to put this lawsuit in context. For the last two or three years, the banks and the Bush administration have been waging a concerted, aggressive campaign to basically kick the states out of the business of protecting the consumers of banking and financial institutes.” Consumer advocates who worked four years to get the California Financial Information Privacy Act passed said this week that they would fight hard to make sure the toughest consumer privacy law in the nation stands. The bill’s co-authors, Sens. John Burton, D-San Francisco, and Jackie Speier, D-Hillsborough, were finally able to broker a deal between consumer and business interests last summer after supporters of privacy reform were able to collect more than 600,000 signatures to put an initiative addressing the issue on the ballot. “The Fair Reporting Act, as I understand it � is for the express purpose of conducting a transaction,” said Speier, who co-authored SB 1 after multiple failed attempts to get similar consumer privacy legislation enacted. “It’s not for banks taking that information and selling it.” “When the financial institutions came to the table � they described SB 1 as fair and reasonable,” said Shelley Curran, spokeswoman for Consumers Union, a San Francisco-based nonprofit. “We are disappointed they are changing their minds about the outcome.”

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