COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Board of Supervisors

DATE:

September 15, 2003

BOARD MEETING DATE:

September 23, 2003

TO:

Honorable Board of Supervisors

FROM:

Supervisor Mike Nevin

SUBJECT:

Introduction of Ordinance Rescinding Chapter 5.140 of Title 5 of the San Mateo County Ordinance Code Relating to the Disclosure of Confidential Consumer Information by Financial Institutions, in Light of Success in Achieving Passage of State-Wide Consumer Financial Information Privacy Protection

Recommendation

Introduce an Ordinance rescinding Chapter 5.140 of Title 5 of the San Mateo County Ordinance Code relating to the disclosure of confidential consumer information by financial institutions, in light of the success that has been achieved in securing passage of state-wide consumer financial information privacy protection.

Background

Approximately one year ago, this Board, joined by the governing boards of the City of Daly City and Contra Costa County, took the lead in adopting an ordinance, codified at Chapter 5.140 of Title 5 of the County Ordinance Code, to afford privacy protection for consumer financial information . One of the primary reasons for adoption of the ordinance was "the inability of the State Legislature to pass greater protections" for consumer financial information than the minimal ones set forth in the federal Gramm-Leach-Bliley Act. This inability to pass such legislation was, to a great extent, the result of intensive lobbying of state legislators by banking interests. One of the hopes in adopting the privacy ordinances at the local level was that they would create "grass roots" support for state-wide legislation. These hopes have been vindicated.

Almost immediately after the adoption of Chapter 5.140, Bank of America, Wells Fargo Bank, and several of their affiliated entities filed suit in federal court against the County, as well as Contra Costa County and Daly City, seeking a declaratory judgment that these jurisdictions' privacy ordinances are preempted by federal law. The County vigorously and successfully defended itself in the lawsuit, securing a court judgment that the County and other local entities have the power to adopt greater consumer financial information privacy protections than those afforded under federal law.

Subsequent to the entry of the court's decision, the banking interests who had opposed state-wide legislation protecting consumer financial privacy relented, due, in significant part, to the County's success in establishing local entities' right to afford protection to their residents' financial privacy beyond that contained in federal law. Thereafter, the Legislature adopted SB 1, which adds Division 1.2 to the California Financial Code and regulates consumer financial privacy, and which is scheduled to come into effect on July 1, 2004. The Governor signed SB 1 on August 27, 2003.

Discussion

From the outset, one of the primary purposes of the County's privacy ordinance has been to address the Legislature's inability to pass state-wide consumer financial privacy protections. At this point, due in large part to the successful efforts of the County and other local entities that joined it in adopting and defending privacy ordinances, such state-wide protection has been achieved.

Further, the recently-adopted state legislation, by its terms, "preempt[s] and [is] exclusive of all local agency ordinances and regulations relating to the use and sharing of nonpublic personal information by financial institutions." Since the state legislation preempts the County's ordinance, it makes sense to rescind it in favor of the protections afforded under state law, rather than expending time and resources to develop an enforcement mechanism that will be displaced in the near future.

Finally, given the existence of a state law protecting consumer financial privacy, our focus and efforts should be directed at lobbying Congress to maintain and expand the states' authority to protect the financial privacy of their respective residents.

Vision Alignment

The adoption of this recommendation will further the basic health and safety of the County's residents and will support the goal of maintaining and enhancing the public safety of the County's residents and visitors.

Fiscal Impact

Adoption of this recommendation will have no known fiscal impact on the County.