Some Privacy Is Better Than None

With all the recent tribulations in the wacky world of California – skyrocketing fuel costs, high unemployment, and the budget crisis from hell – it’s easy to forget some of the trendsetting legislation that has emerged from the Golden State. After four years of attempting to get a wide-ranging consumer privacy bill passed, the legislature in Sacramento rose to the fore a few years ago.

The conflict hinged on so-called "opt-in" and "opt-out" issues. Most consumers have received notices from financial institutions with which we do business, giving us the option to opt out of permitting these businesses to share our personal information. These options are required by the federal Fair Credit Reporting Act (FCRA). 

In essence, FCRA provisions permit customers to opt out of allowing their banks, insurance companies, credit card issuers, mortgage lenders and the like to notify the respective companies that their customers don’t want their information shared with other companies. The idea behind the legislation is that our private information is among our most precious possessions. When it proliferates, our liabilities increase.

Recent statistics indicate that more than one out of every ten Americans have been the victims of identity theft. It is now the most common form of felony theft in America. When our Social Security, driver license and credit card numbers, along with our birth dates, spread from data base to data base, we open ourselves to unwanted solicitations from businesses and unfettered access from all types of nefarious individuals.

The problem with the FCRA is that, while it requires businesses to send their customers notices of their right to privacy along with opt-out forms, it requires each individual to opt out of information sharing. In other words, it requires the individual to take action. What members of the California legislature – led by Senator Jackie Speier – attempted with the California privacy legislation, was to shut down unrestricted information sharing by forbidding it outright. In other words, businesses would have to get specific permission from consumers in order to share credit information.

Financial institutions in California, just as in Washington, hold considerable sway (read, "money talks when it comes to lawmaking"). For four years big business was able to stymie any efforts to get real reform passed. But once it looked as though a referendum threatened for March of 2004 would lead to the toughest privacy legislation in the history of the universe, things began to change. The proposed California initiative would make financial institutions wish they didn’t have to get out of their greenback-stuffed mattresses in the morning. Suddenly the financial guys decided to reach a compromise in Sacramento.

Under the terms of the legislation businesses may share credit information with their affiliated companies that do the same type of business (e.g. an auto insurance company can share info with its home insurance business) without requesting their customers to opt-in. In order for businesses to share information with affiliated, but unlike, organizations they must send their customers a simple opt-out form with a prepaid return envelope. To share data with an outside company, they must request their customers to opt-in. The latter means non-sharing is the default status.

The Con$umer Guy’s tip:


There’s very little consumers gain from being barraged with mail and phone calls. There’s even less we gain from having our personal information accessed by who-knows-whom. Opt out whenever you can unless there’s a particular company from whose affiliates you really want to hear. Guard your personal information. Tell your legislative representatives –both state and federal – that you want your personal information protected. You don’t want unknown employees at businesses that have your credit information sharing those data with other parties unknown. Never share your social security number, driver license number or date of birth unless you absolutely must. Just because an application or information form requests particular information, doesn’t mean you must provide it.


Ellis Levinson has made a career of helping consumers with their complaints against businesses that don't meet customers' expectations. Your business might be employing money-saving strategies in the short run
while alienating customers day after day.