WASHINGTON — Financial services industry lobbyists are trying to water down a privacy bill moving through the California legislature, but even a compromise is expected to exceed federal privacy protections.

“We are trying to make a bad bill a little less bad, but it’s still not going to be a good bill or one we could endorse,” said Jim Pitts, executive director of the Financial Services Coordinating Council’s Privacy Project, who is heading a national lobbying campaign against state efforts to pass stricter privacy laws.

At issue is a bill that passed the state Senate in June and on Aug. 21 will be before the Assembly Judiciary Committee. It would require financial companies in California to get explicit customer permission — an “opt-in” — to transfer confidential information to third parties and give customers an opportunity to block — or “opt out” of — the sharing of that information with affiliates.

Industry executives and their lobbyists are talking with Gov. Gray Davis and his staff about such changes as switching the “opt-in” to an “opt-out” for sharing information with third parties; maintaining the “opt-out” for sharing information among a company’s bank, insurance, or securities affiliates but not requiring customer permission to exchange information with affiliates in the same sector; inserting a provision to prohibit class-action lawsuits; and defining more precisely which violations would trigger fines.

Mr. Pitts and some California lobbyists downplayed news reports Friday that Gov. Davis has accepted these compromises or that the governor is teaming up with the industry to weaken the bill.

“The governor is accepting lots of views and is trying to balance a variety of competing interests,” Mr. Pitts said. “But it is taking a lot of people’s hopes too far to say the governor has accepted” amendments proposed by the industry “as a starting point for negotiation” with the bill’s sponsor, state Sen. Jackie Speier.

Friday’s San Francisco Chronicle published a memo being circulated among financial services lobbyists that said discussions between Gov. Davis’ office and several banking and insurance lobbyists from the Association of Finance & Insurance Professionals “have produced a conceptual framework for an alternative.”

Calls to the governor’s office and the AFIP were not returned.

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