Law & Society Blog

The district court for the Eastern District of California granted summary judgment for defendants in an important challenge to the California Financial Information Privacy Act, commonly known as “SB1″ (Senate Bill 1). The SB1 protections go far beyond those of the Gramm-Leach-Bliley Act, requiring opt-out provisions for information sharing among affiliates (for example, banks and their mortgage divisions) and opt-in consent for third party information sharing (for example, brokers and insurance companies). The plaintiffs argued that SB1, a state law, was pre-empted by the federal Fair Credit Reporting Act (FCRA), and that consequently SB1 violated the Supremacy Clause of the Constitution. Judge England disagreed:

It makes no sense to exempt such information sharing [of consumer reports among affiliates] in one part of the statute [the FCRA], then argue through a later preemption provision that the FCRA, though not governing such exchange, nonetheless prevents states from doing so. Instead, the only reasonable reading of the FCRA preemption provision is that it prevents states from enacting laws that prohibit or restrict the sharing of consumer reports among affiliates.

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