Gov. Davis too switched sides, and signed SB1 into law in August 2003.

FORBES: Privacy Showdown

The fall 2003 amendments to the FCRA include a provision that broadens the law's preemptive scope--the bankers say this means the FCRA now preempts SB1.

FORBES: Privacy Showdown

With the passage of SB1, the group dropped its initiative drive.

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England Jr. of the U.S. District Court in Sacramento ruled that the FCRA, whose overriding purpose is to regulate the use and dissemination of consumer reports, does not preempt SB1.

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But industry groups apparently had other plans of attack to invalidate the affiliate sharing provisions of SB1: First, lobbying Congress to amend the FCRA, and second, suing in federal court.

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On appeal, the industry groups argue that the district court incorrectly relied on the Gramm-Leach-Bliley Act, and that the FCRA, and 2003 amendments to it, expressly preempt SB1's affiliate sharing requirements.

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Under the California Financial Information Privacy Act, commonly called SB1 after its bill number, they would have to either stop sharing among affiliates that are not in the same line of business (for example, a bank affiliate couldn't share with an insurance affiliate), or submit to the law's opt-out requirement.

FORBES: Privacy Showdown