ecent legislation passed in the U.S. Senate on Nov. 5, 2003 arms consumers with more weapons to fight identity theft, but threatens California's new financial-privacy law (SB1), which prevents businesses from sharing consumers' financial information.

SB1 was signed into law in California on Aug. 27, 2003, and was scheduled to take effect July 1, 2004. The law intends to help consumers combat identity theft by preventing banks, insurance companies, brokerages and large financial institutions that control many of these lines of business under one roof from sharing customers' personal financial information between themselves and their affiliates, unless they have customer permission.

The legislation in the Senate serves as an amendment to the 1970 Fair Credit Reporting Act (FCRA), which created a national credit-reporting standard. Eight-year-old provisions in the FCRA, due to expire Jan. 1, 2004, prohibit states from passing their own consumer protection laws. The amendment was modeled after the California measure and was sponsored by California Sens. Diane Feinstein and Barbara Boxer (both Democrats).

The Senate voted to provide consumers with more information on understanding their credit scores, reasons for the denial or approval of credit, a free copy of their credit report annually and a one-call-for-all fraud reporting; but voted against states making their own rules on how businesses use, share and report data on their customers. This is bad news for the California law and for other states looking to pass similar measures.

Banking industry officials oppose states passing their own legislation on this issue. They argue that it would complicate the consumer lending business and make it harder for consumers to obtain loans, the New York Times reported.

Consumer advocates believe more needs to be done to protect consumers' privacy rights, especially at a time when corporate conglomerates can control health and life insurance companies, mortgage and automobile lenders and brokerage houses, among others.

The House passed a similar version of legislation in September by a 392-30 vote.