House Renews Fair Credit Reporting Act

Financial services marketers received a break last month when the U.S. House of Representatives renewed the Fair Credit Reporting Act, extending its pre-emption of state laws.

The bill, HR2622, passed by a 392-30 vote. At deadline, it still had to be passed by the Senate.

“We're not through the woods yet,” said Louis Mastria, government affairs spokesman for the Direct Marketing Association. “We're still pushing to make sure pre-emption is extended.”

The House rejected an amendment by Rep. Maxine Waters (D-CA) to exempt from the state pre-emption clause a tough opt-in law recently passed in California.

That bill, SB-1, was authored by California State Sen. Jackie Speier (D-Daly City). Signed into law by Gov. Gray Davis on Aug. 27, it requires that banks obtain a consumer's permission before sharing information with outside companies, “particularly non-financial ones,” according to Robert Herrell, Speier's staff director.

SB-1 would have required that marketers get permission in advance whenever they wanted to share information, Mastria said. This would have driven costs up both for marketers and customers.

Meanwhile, Sen. Richard Shelby (R-AL) drafted a bill that would prevent federal provisions on collecting and using consumer data to be preempted by state laws. But the bill does not preclude setting federal standards that are as stringent as those enacted by states, if not more so.

And SB-1 is not the only privacy bill that California legislators passed this session. The bills, some of the toughest ever seen in the nation, have been sent to Gov. Davis, who is expected to sign them.

• SB-27, sponsored by Sen. Liz Figueroa (D-Fremont). This bill requires direct marketers to tell their customers in writing the names and addresses of third parties with whom it is sharing that customer's information, and what sort of information they shared. If it is not obvious from the third party's name, the direct marketer must also provide an example of what the third party markets. The bill says that if marketers have a privacy policy that explains how consumers can opt out for free, the marketer can instead direct customers to that opt-out provision.

  Violations would cost direct marketers as much as $3,000 in fines as well as recovery of the plaintiffs' legal costs. The bill would take effect in 2005.

• SB-186, sponsored by Sen. Kevin Murray (D-Los Angeles). This bill bans the sending of unsolicited commercial e-mail. Existing California law allows a firm to send UCE if it offers an opt-out mechanism and bears a “ADV” label in the subject line, but this bill goes further and would prohibit the sending of any so-called spam to California residents, or for firms within the state to send it at all.

  Consumers would have the right to take legal action and recover damages of $1,000 per unwanted message, with a cap of $1 million per incident.

  “I would expect that all companies engaged in e-mail marketing will face some level of small claims litigation from zealous anti-spam crusaders,” said Ken Hirschman, vice president and general counsel at e-mail marketing firm Digital Impact in San Mateo, CA.

  In addition, companies will be prohibited from collecting e-mail addresses or registering multiple e-mail addresses for the purpose of sending unsolicited commercial e-mail.

• SB-590, another bill by Speier. Prohibits retailers from demanding personal information from consumers before concluding a sale.

• SB-602, another bill by Figueroa. Bans businesses from swiping a customer's driver's license and retaining the person's age or other information.

“The problem is that legislators are making headlines by promising consumers a new and different system — opt-in,” Mastria said. “But neither legislators nor consumers know how the system will work in practicality. Legislators seem to be offering consumers a gift, but it would likely be a booby prize.”