Unless you've taken measures to prevent it, financial institutions are passing around your Social Security number, financial records and personal information like old photos at a family reunion. The information you've given banks, insurance companies and other financial institutions quietly fuels the modern financial services industry, where credit scores determine creditworthiness and customers are corralled into databases.
"At issue here is who really has control of your personal information," says Tena Friery, research director of the Privacy Rights Clearinghouse, a nonprofit consumer advocacy site. "Once your bank sells your personal information to a third-party marketer or a telemarketer, that bank has lost all control over it, and it can be passed from one source to another." The issue is so hot that California and other states have begun considering legislation to increase privacy protection for consumers. This week, in a pitched battle, California lawmakers nearly passed a landmark consumer-privacy bill from state Sen. Jackie Speier that would have created privacy standards that exceed federal law. But California Assembly Speaker Herb Wesson never put the measure up to a vote, which killed its chances of passage for a second straight year. Of course, just because the bill is gone, that doesn't mean measures to increase privacy protection will be forgotten. If anything, California's failed attempt was the tip of the legislative iceberg -- something that could spell trouble for financial services firms down the road. Last year, Vermont became the first state to pass tougher regulations that supercede federal law. In June, North Dakota voters approved a similar measure by a 3 to 1 margin. And a group of Californians led by E-Loan ( EELN) CEO Chris Larsen, called Californians for Privacy Now, are prepared to put the issue to the test in a March 2004 referendum. "We've set up the committee and I've personally funded it with a million dollars," says Larsen. "Privacy is an issue and will continue to be one. We believe that technology has moved ahead of legal protections and that is why this issue won't go away."