Federal Court Ruling – California Can Enforce Privacy Law

Sacramento – US District Court Judge Morrison C. England, Jr. ruled against banks and credit grantors today, in what may become a landmark decision, dismissing a law suit that was brought against the State of California’s new privacy law. The law, which provides consumers the strongest privacy protection in the country, is set to go into effect on July 1, 2004.

Among other things, California’s new privacy law regulates how financial institutions can use consumer data. This legislation was signed into effect late in 2003 but it has been widely speculated that it would have little effect on financial institutions and credit grantors. The reason for this is that in December, 2003 Congress passed the Fair and Accurate Credit Transactions Act, or FACTA.

FACTA amended the Fair Credit Reporting Act (FCRA) and placed a permanent moratorium on the states from passing stronger privacy legislation than the Federal Government.

The law suit that England ruled upon was brought by the Consumer Bankers Association, the Financial Services Roundtable and the American Bankers Association. They had argued that the FACTA amendments to the FCRA forbid states from imposing regulations on financial institutions that regulate the sharing of consumer data with their “affiliate” companies. They argued that FACTA allowed them to share customer information that includes “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living." Judge England disagreed.

Ruling that the FCRA covered only credit reporting and not financial privacy, and further stating that financial privacy matters were governed by the Gramm-Leach Bliley Act, which specifically allows the States to pass stronger privacy laws than the Federal Government, he dismissed the trade groups’ law suit.

The new California law requires financial institutions to provide California consumers with a means to opt-out of affiliate information sharing when the affiliate companies are not in the same line of business. This includes the sharing of information by banks with insurance companies, even if the same parent company owns both of them.

This ruling should give privacy activists hope that the States do have power to regulate privacy matters.

by Jim Malmberg
mailto:jmalmber@pacbell.net

How the November Elections Could Impact Your Ability To Purchase a Home

It’s a fact; Presidential elections impact the economy. That is not what this article is about however.

Depending upon where you live in the United States, there is a very good possibility that you will be voting on property tax and bond issues in the November election. The way that you vote on these issues could very well impact your ability to purchase a home.

Politicians will never tell you that when applying for a mortgage, lenders look at your income, as well as the total cost of the home. Included in that total cost are your property taxes, and any encumbrances from bonds. There are other things that may also come into play. While the fact that property taxes are looked at by lenders probably doesn’t surprise you, many people are surprised that bond encumbrances are included in the review process.

California offers an easy example. Since the tax revolt of the 1980’s and the passage of Proposition 13, property taxes are limited to 1% of the total purchase price of a home with a maximum increase of 1% per year. California, whose politicians are as resourceful as anywhere, was forced to get a little creative in its funding.

Unfortunately, that creativity came in the form of a loophole in the law which allows voters to pass bond measures that must be paid for by property owners. These do not show up as increases in property taxes but as special assessments. Since purchasing my home in 1995, bond payments have effectively increased my monthly mortgage payment by nearly $300 per month.

And there is always a worthy cause for these bond measures. They include everything from providing for parks and open space to providing for education. Unfortunately, there seems to be very little in the way of accountability for the way that money is spent once it is approved by the voters.

Let’s look at education in the Los Angeles area.

The Los Angeles Unified School District is responsible for the education of 746,000 students in grades K-12.

2001 is the last full year for which the LAUSD’s budget is available. At that time, the district was responsible for around 700,000 students and their budget was $8.875 Billion. This amounts to roughly $12,600 per student. This is nearly double the cost of tuition in K-12 private schools which average $6,700 per student for tuition.

Average student teacher rations in private schools are approximately 15:1 as opposed to student teacher ratios in the LAUSD that will go as high as 40:1 next year.
Furthermore, in the LAUSD, there are many schools with leaky roofs, no air conditioning even though temperatures often soar to 100 degrees or more, and not enough text books to go around. All of this even though voters have given the district $9.4 billion in additional monies since 1997 through bond measures.

And where has that money gone? Well close to half a billion dollars of it went for two things. $272 Million for the Belmont Learning Project, a high school that was built on a toxic waste dump and is now abandoned. More than $200 Million for the LAUSD’s purchase of a downtown high rise as its new headquarters. As an item of interest, $100,000 of it went to expand the bathroom in the private office of the President of the School Board.

And that $9.4 billion has added close to $700 per year to my cost of home ownership. There have been a variety of other bond measures that have passed as well and which now account for the overall increase in my payments.

The point here has nothing to do with the cause. Nobody can argue that we shouldn’t spend money on our schools. The problem is that that too much money is spent without oversight, and that property owners are left to pay the bill.

If you currently rent, you are also paying these bills in the form of higher rent costs. Even if you are under rent control, there is a very good chance that your landlord is aloud to pass these costs on to you. This means that you have less money to save for that house that you want and, if you ever do have the ability to purchase a home, you may have to settle for something less than you want.

So the next time you go to the ballot box, think about what you are doing. If you really want to purchase a home, you need to think long and hard about voting for any increase in property taxes, or for any bond measures. Just ask yourself the following question: If you don’t think that the politicians in your area are spending your money wisely now, why would you vote to give them more money to waste?