Following up on last week’s Obama financial privacy recommendation to the Supreme Court, some consumer groups were disappointed that the brief did not include stronger support for States’ rights versus Federal preemption.

While we understand the concern that strong Federal preemption could weaken some State consumer protections, we actually see the Obama view as very positive. We founded “Californians For Privacy Now” to address a lack of Federal will to act on financial privacy rights following the 9/11 attacks. Just before the attacks, a Federal financial privacy law looked very promising with several Senators and Representatives interested in backing Federal legislation. In fact, on the morning of September 11th, 2001 we were just entering a meeting with nine Senators to discuss our views on privacy when the horrible news hit. The meeting was cancelled and Federal Privacy legislation went into a deep freeze.

The only option left was to seek a bill or ballot initiative in California that would set a strong example and convince the banks that they couldn’t use 9/11 to dodge consumer privacy rights. Fast forward eight years and that is basically exactly what we have - a strong California bill that the Administration believes is workable and an apparent strategy to work on a national version to ensure all Americans are equally protected. It seems likely that the administration is also signaling to the banks that if they support a national standard, there is a way out of their worst nightmare, which is facing 50 different versions of data privacy rules. Preemption is a problem when good state ideas are preempted by weak or non-existent Federal rules, as we’ve had up to now. The hope from the Obama administration is that you can get both strong consumer protection and an efficient unified national market.