by Leah Nicholls
Yesterday, a divided Ninth Circuit panel held that the preempted portions of California's Financial Information Act were severable from those that were not preempted by the federal Fair Credit Reporting Act (FCRA). The California law sought to protect consumers' nonpublic personal information by requiring financial institutions to conspicuously notify consumers that their information may be shared with affiliates and to provide the opportunity for consumers to direct that the information not be disclosed. The FCRA explicitly prohibits state restrictions on affiliates sharing information.
Previously, the Ninth Circuit had held that the FCRA preempted the information-sharing restriction in the California law as to information considered to be "consumer report" information under the FCRA. On remand, the district court found that no portion of the California statute survived preemption, and even if it did, was not severable. A majority of the Ninth Circuit reversed, noting first that the parties had conceded on appeal that not all the nonpublic personal information covered by the California statute was "consumer report" information as defined by the FCRA. The court then reasoned that California law would permit severing the application to "consumer report" information from the statute, thereby upholding the application of the statute to non-consumer report nonpublic personal information. The dissenting judge disagreed only with the majority's severability analysis.
The case is American Bankers Ass'n v. Lockyer, No. 05-17163 (9th Cir. Sept. 4, 2008).
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