WASHINGTON - The battle over financial privacy shifts next week to California, where lawmakers will consider legislation clamping down on how customer data may be used.

With three rigorous "opt-in" bills in play, Golden State lawmakers may ban banks from sharing personal financial data without a customer's explicit consent.

That would reach beyond the privacy provisions mandated by the Gramm-Leach-Bliley Act. Under rules expected to take effect in November, firms are only prevented from sharing information with third parties, and customers are only notified of their right to prevent the sharing. The federal law, however, expressly invites states to adopt tougher measures.

Roughly half the states are currently considering privacy bills, and action in California could prove influential. Next Wednesday, the state Senate Finance, Investment and International Trade Committee is to hold a hearing, and probably vote, on two privacy bills. Both put the burden on financial services firms to get a customer's permission before sharing information with affiliates or unaffiliated third parties.

The primary difference between the two is that one, sponsored by committee Chairman Tim Leslie, would allow information sharing for such routine business practices as servicing customer accounts and auditing for fraud and security breaches, according to Terry Miller, the panel's senior consultant.

Those exceptions make it slightly more palatable to the banking industry, though lobbyists are still working vigorously against all opt-in bills.

The state Assembly Banking Committee is scheduled to hold a hearing, and possibly vote, on its principal privacy bill April 24. Written by Democratic Assemblywoman Sheila James Kuehl, the bill would require institutions including banks, credit unions, insurance companies, and brokerages to get explicit customer permission each time they want to sell or share personal information, unless a customer gives blanket approval.

The hearing was originally scheduled for Monday, and California Bankers Association government relations director Gregory O. Wilhelm speculated that it was postponed because of lack of support in the committee. But Assemblywoman Kuehl said, "They must really be desperate if they need to spin it that way. I haven't even talked to people about their votes." She said her staff members simply needed more time to make technical changes in the legislation.

The Kuehl bill has already been approved by the Assembly Judiciary Committee, but it has not gotten the vital endorsement of Assembly Banking Committee Chairman Louis Papan, a senior Democrat who said he is "leaning toward not doing anything until the federal privacy regulations are out and we can see their impact."

But Assemblyman Papan, who would not rule out changing his mind, may have the power to enact opt-in legislation before the state Legislature adjourns late this summer. "I would need two hands to do it, and I've been known to do it in other areas of the law," he said. "But until I have had a chance to hear these bills, I won't formulate any opinions or threats."

Community bankers are concerned about the impact the legislation would have on their reliance on contractors. "Most of our banks do their business through third-party transactions. We aren't going to be able to function without them, and if we have an opt-in provision, it will add to our costs," said Craig Hudson, executive director of California Independent Bankers.

Few - even the lawmakers themselves - are willing to predict what the activist California Legislature will do. But privacy is clearly one of its top priorities.

"Banks assume we will do nothing this year. But I've told them that in my opinion something is going to be voted on this year in the Legislature," said Sen. Leslie, one of the few Republicans to head a committee in the Democratic-controlled Senate. "They can go ahead and try to kill it, or we can work together on a common-sense, workable opt-in measure."

Sen. Leslie is considering introducing a "meaningful opt-out" alternative that would put the onus on customers to block their information from being shared. But it would still go beyond Gramm-Leach-Bliley by applying to affiliates, not just third-party service providers.

California Gov. Gray Davis has formed a panel to review all the proposals before he takes a position.

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