By submitting your personal information, you agree that TechTarget and its partners may contact you regarding relevant content, products and special offers.
The new law, SB1, spearheaded by State Senator Jackie Speier (D-San Francisco), prevents financial services firms from sharing customer personal information with third-party partners without customers' permission. This includes information such as name, address and phone number, as well as account-related data such as balances and transaction histories. The law goes into effect on July 1, 2004.
For larger financial services firms that own complementary services such as brokerage and insurance, there will not be a significant effect, says Howard Herman, co-chair of the Corporate and Finance Practice Group and a member of the Privacy Practice Group at New York-based law firm Moses & Singer LLP. Community banks without these affiliate relationships will have a tougher time marketing to customers, however."[Larger banks] are interested in protecting their proprietary customer information and they're not very willing to share it with other people," said Herman. "In that sense, it's not much of a give for the large banks. [Community banks] are the ones who need to be able to share [information]. They have co-marketing arrangements. [The new law] favors the one-stop shop as opposed to the bank that wants to work with a separate brokerage firm and a separate insurance firm."
More mailings instead of less?
Organizations such as the American Council of Life Insurers (ACLI) feel that limits on the sharing of personal information will not cut down on marketing efforts geared toward bank customers. "We believe in responsible information sharing," said Jack Dolan, spokesman for the ACLI. "When there are restrictions that are placed on that process, [a company] is not going to have the ability to provide the products the consumer wants and needs." Dolan adds that when companies can't target market their products and services to customers, the option is to inundate customers with literature and hope someone responds. "That's part of the problem for the consumer in what California did," Dolan continued. "In their effort to think they're going to be stopping what they perceive to be invasions of privacy, instead there will be a lot more mailings going to people."
Will it move beyond California?
Prior to this new law, California's privacy rules were disjointed. "In California, you had municipalities with their own privacy statutes," said Herman. "So forget about the difficulties of a national financial services organization trying to conduct business with different rules on a state to state basis, just imagine what it's like if in each city, you had different rules."
While the new law may lend order to California's privacy rules, it may further complicate how companies market to customers in different states. "It comes down to the simple issue of raising the possibility of there being a patchwork system of privacy," said Dolan. "When you've got states that are not promoting uniformity, it makes it more difficult for us to reach our customers and give them the products and services they need. When you're dealing with different laws from state to state, that always raises the cost because there's a lot of labor that goes into ensuring you're on the right page in each different state."
Almost immediately, the law's future has been questioned because the Fair Credit Reporting Act, reauthorized by the U.S. House of Representatives in September, could preempt state privacy laws. On a broader scale, last week's recall election, in which Davis was voted out in favor of Arnold Schwarzenegger, may jeopardize legislation Davis passed. Only time will tell.
To read more articles like this one, visit Peppers and Rogers Group's Web site at www.1to1.com.
Copyright © 2003 Carlson Marketing Group, Inc. All rights reserved. Peppers & Rogers Group is a Carlson Marketing Group Company.