consumers,’ and the resulting increases in economic activity.'* In the end,
Congress acted “to ensure the operational efficiency of [the] national credit
system by creating a number of preemptive national standards,” H.R. Conf.
Rep. No. 108-396, at 66 (2003), including the preemptive national standard
for information sharing among affiliates found in 15 U.S.C. § 1681t(b)(2),
the provision at issue here. See H.R. Conf. Rep. No. 108-396, at 66 (2003)
(referring to 15 U.S.C. § 1681t(b)(2)).

The district court’s decision defeats Congress’ objective, and could
encourage other states to enact laws that impose unique notice requirements
or other limitations on the sharing of information among affiliates, further
frustrating Congress’ objective. As a result, institutions could face
inconsistent or conflicting requirements, which could cause confusion

among institutions and consumers alike. And institutions could confront the

3 See, e.g., H.R. Hrg. 108-47, at 9, Statement of Hon. John W. Snow (noting
estimates that “without the national standards, 280,000 home mortgage
applications that are now approved each year would be denied”).

4 See, e.g., H.R. Hrg. 108-33, at 13-14, Statement of Joseph Smith, North
Carolina Commissioner of Banks on behalf of the Conference of State Bank
Supervisors (recognizing that the “technology-based credit system has
benefited consumers and our economy, and that it depends on reliable
information and a consistent environment, CSBS adopted a policy * * * to
support the permanent extension of the 1996 FCRA preemptions” noting
that “the benefits of uniformity to our credit granting system and the value of
this system to consumers and our economy outweigh” CSBS’s general
objections to preemption of state laws).

14



CERTIFICATE OF SERVICE

I hereby certify that I have served the foregoing Amicus Curiae Brief this

[ (HA day of August, 2004, by causing two copies to be sent by express service to

the following counsel of record:

E. EDWARD BRUCE

STUART C. STOCK

KEITH A. NOREIKA

Covington & Burling

1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Telephone: (202) 662-6000

Fax: (202) 662-6291

SUSAN HENRICHSEN
CATHERINE YSREAL
Department of Justice

110 West A Street

Suite 1100

San Diego, CA 92101
Telephone: (619) 645-2080
Fax: (619) 645-2062

KIMBERLY GAUTHIER
JUDITH A. CARLSON
Department of Corporations
1515 K Street, Suite 200
Sacramento, CA 95814-4052
Telephone: (916) 327-1626
Fax: (916) 445-6985

HOWARD N. CAYNE
NANCY L. PERKINS

Amold & Porter

555 Twelfth Street, N.W.
Washington, D.C. 20004-1206
Telephone: (202) 942-5000
Fax: (202) 942-5999

L. RICHARD FISCHER.
OLIVER I. IRELAND
NATHAN D. TAYLOR
Morrison & Foerster, LLP

2000 Pennsylvania Avenue, N.W
Washington, D.C. 20006
Telephone: (202) 887-1500

Fax: (202) 887-0763

WILLIAM H. JORDAN
MATTHEW D. RICHARDSON
Alston & Bird LLP

1201 W. Peachtree Street
Atlanta, GA 30309

Telephone: (404) 881-7000

Fax: (404) 881-7777

BRUCE E. CLARK
Sullivan & Cromwell, LLP
125 Broad Street

New York, New York 10004
Telephone: (212) 558-4000

Day flul

Horace G. Sneed



Thus, in FCRA and as reaffirmed by the FACT Act, Congress
deliberately and expressly preempted state law in order to establish a scheme
of uniform requirements regulating the sharing and use of consumer
information among affiliates, including information sharing specifically
excluded from the definition of “consumer report.”

2. GLBA

Title V of GLBA, 15 U.S.C. §§ 6801-6809, also applies to the
disclosure of information about consumers. Specifically, it requires
institutions to give notice of the manner in which nonpublic personal
information is disclosed to affiliates and nonaffiliates.° It also establishes
standards under which financial institutions may disclose a consumer’s
nonpublic personal information to nonaffiliated third parties, and it directs

the Agencies to issue regulations implementing these provisions (GLBA

° Section 6809 provides: “The term ‘nonpublic personal information’
means personally identifiable financial information — (i) provided by a
consumer to a financial institution; (ii) resulting from any transaction with
the consumer or any service performed for the consumer; or (iii) otherwise
obtained by the financial institution * * * [and includes] any list, description,
or other grouping of consumers (and publicly available information
pertaining to them) that is derived using any nonpublic personal information
other than publicly available information.” 15 U.S.C. § 6809(4).



provided that affiliate sharing of non-transaction and experience information
would not trigger the definition of “consumer report,” provided consumers
were given notice and an opportunity to prohibit such information sharing.
15 U.S.C. § 1681a(d)(2)(A)(iii). Thus, in both of these changes, Congress
accomplished its regulatory purpose by excluding information from the
definition of “consumer report” when shared among affiliates.

Second, new Section 624 of FCRA (added by the FACT Act)
expressly imposes specific procedures that must be followed before an
affiliate may use for marketing purposes certain shared information—
including information that is not a “consumer report” under FCRA. 15
USS.C. § 1681s-3 (applying marketing restrictions to information that
“would be a consumer report” but for the exclusions in section
1681a(d)(2)(A)).'° Thus, FCRA, as amended, indisputably establishes
requirements for the sharing and use of information among affiliates that

Congress has explicitly excluded from the definition of a “consumer report.”

'S Yet another example that demonstrates that FCRA applies to information
that is not a “consumer report” is section 604(g)(2) (added by section 411 of
the FACT Act), which applies to “medical information” derived from a
health care provider or consumer, regardless of whether the information also
constitutes a consumer report. This information may not be shared among
affiliates except as authorized under the FACT Act. See 15 U.S.C.

§ 1681a(d)(3).

18



15 U.S.C. § 1681t(b)(1)(A), (B), (D), (E), (B), ard (1) cesssssesesseseneseseseees 19

15 U.S.C. § 1681t(b)(2) ...

1S US.C. § 1681t(d) ce eeeseescssseecssssessesneceesnecessnesessssscssssesssssesssueessseeessaeeeess 7

15 U.S.C. § 16811(d)(2) ....

Gramm-Leach-Bliley Act, Title V, Subtitle A, 15 U.S.C. §§ 6801-6809 .......... 1,8

15 U.S.C. § 6805. ...

1S U.S.C. § 6806 o..eeeeccseccssecssescsessesecsnsessnscsaseessecssecssseessesesesessecssseeraee 9, 22

15 U.S.C. § 6807 ....

15 U.S.C. § 6807(a)

15 U.S.C. § 6809(4)

FEDERAL REGULATIONS

12 CF.R. Part 40

12 CER, Part 2160 cceccscsssssssessssssecsssseeessnssessssssssssnccesssecsssssessssseesssusesssuesssuvesteeseeeee 9

12 C.F.R. Part 332

12 CF.R. Part 573

12 C.F.R. Part 716

16 C.F.R. Part 313

65 Fed. Reg. 33,677 (May 24, 2000)

65 Fed. Reg. 35,162 (June 1, 2000)

65 Fed. Reg. 36,782 (June 12, 2000) |

69 Fed. Reg. 33,324 (June 15, 2004)

69 Fed Reg. 42,302 (July 14, 2004) oesecsssseessssssseesscssssssesssssssssetessssssesessssnetesesssee 7

iii



Counsel for Amicus Curiae
Federal Trade Commission

William E. Kovacic,
General Counsel

Qian

. Daly,
be General corset for Litigation
C. Lee Peeler

Deputy Director, Bureau of Consumer Protection

Federal Trade Commission
Washington, D.C. 20580

29



prospect of civil liability under state laws that Congress specifically sought
to preempt.

Further, state-by-state regulation of affiliate information sharing and
use could create inefficiencies and increase regulatory burdens on
institutions, driving up the cost of financial services and harming both
financial institutions and consumers. The Agencies are well aware of this
prospect, and Congress was alerted to this risk. During the congressional
hearings on the FACT Act’s preemption provision, a senior FRB official
testified that “{t]he FCRA’s affiliate-information sharing provisions enable
bank holding companies and other large financial enterprises to efficiently
manage and use consumer information across multiple account
relationships.”"*

Because the amici include federal agencies with responsibility for the
examination, supervision and regulation of federally-insured institutions and
their affiliates, and all the Agencies are responsible for the implementation
of FCRA, Title V of GLBA and the FACT Act for these institutions and

other entities, the Agencies are appropriately concerned about the emergence

of incorrect judicial precedent that could increase costs for institutions and

'S HR. Hrg. 108-33 at 9, Testimony of Dolores S. Smith, Director, Division
of Consumer and Community Affairs, Board of Governors of the Federal
Reserve System.

15



in the House.'* The defeat of these proposed amendments in the Senate and
the House clearly demonstrates that Congress rejected the standard in SB1 as
the national standard, and the debates show that Congress fully understood
that FCRA preempted SB1.

Finally, the district court reached its erroneous conclusion by relying
on GLBA’s anti-preemption clause. Its reliance was misplaced for two
reasons. First, the anti-preemption clause simply saves state laws from
being preempted by specific provisions of GLBA (the provisions of Title V,
Subtitle A of GLBA). 15 U.S.C. § 6807(a). It says nothing about
preemption by other federal statutes, such as FCRA. Since the GLBA anti-
preemption clause is silent about FCRA, it cannot save state law from
preemption by FCRA. This Court has applied this same reasoning with
respect to a similar anti-preemption clause in the Electronic Fund Transfer

Act (EFTA), and there is no basis on which to distinguish the logic of that

(Statement of Sen. Shelby) (“With respect to the part of SB-1 [i.e., the
affiliate-sharing requirements] that conflicts with the [FCRA], the California
law was preempted, making it unenforceable when it was enacted.”).

'8 See 149 Cong. Rec. H8145-8146 (Sept. 10, 2003) (statements of Rep.
Oxley, opposing a similar amendment introduced in the House, observing
that “grandfathering California law and future laws in other States guts our
national uniform standards and harms consumers across the country, could
cause an increase in interest rates, inability to get credit, precisely the
opposite of what we are trying to do in this legislation.”).

21



concluded that FCRA and the FACT Act amendments to FCRA apply only
to information constituting “consumer reports.” Based on this faulty
understanding, the court limited the scope of the FCRA preemption
provision to state laws that prohibit or restrict the sharing of “consumer
reports.” Since SB1 regulates information sharing activities that are
excluded from the definition of “consumer report,” the court found that the
FCRA preemption provision is inapplicable to SB1. In so finding, the court
improperly disregarded the plain meaning of the preemption provision,
which makes no reference to “consumer report.”

A brief review of the pertinent provisions of the 1996 FCRA
amendments and the recent FACT Act amendments to FCRA shows that the
court’s reasoning was simply wrong. Contrary to the district court’s
conclusion, the scope of FCRA’s substantive provisions is not restricted to
communications that constitute “consumer reports.” First, as noted above,
the 1996 FCRA amendments substantially expanded the scope of the
exclusion from the definition of “consumer report” for transaction and
experience information when shared among affiliates. This allowed
affiliates greater freedom to share transaction and experience information
among themselves without becoming “consumer reporting agencies.” See

15 U.S.C. § 1681a(d)(2)(A)(ii). The 1996 amendments also explicitly

17



CERTIFICATE OF COMPLIANCE
Pursuant to Federal Rule of Appellate Procedure 32(a)(7)(B) and Ninth
Circuit Rule 32-1, I certify that this brief is proportionally spaced, has a typeface of

14 points, and contains 5,603 words.

Horace G. Sneed



consumers by financial institutions, demonstrates that it, and not the FCRA,
encompasses the kind of information sharing at issue in this case.” Slip op.
at 11. Looking to GLBA, the court based its decision on a provision that
preserved certain state laws from preemption by Title V of GLBA, 15
U.S.C. § 6807. It concluded that this anti-preemption provision explicitly
preserves the ability of the states to give consumers more protection than
GLBA provides. It found that in this case, SB1 offers more rigorous
consumer protection, and therefore, SB1 is not preempted. This conclusion
both misreads the section of GLBA on which it relies and ignores other key
provisions of that statute.
D. Interest of the Agencies

The Agencies have an interest in this case because they administer
FCRA, GLBA and the FACT Act with respect to the financial institutions
and other entities under their respective jurisdictions, which comprise all
creditors covered by FCRA. It is, therefore, important to the Agencies that
the statutes be interpreted in a manner consistent with Congressional intent
to eliminate the regulatory burden and confusion caused by multiple state
laws in this area while protecting consumer privacy interests. In this case,
the district court’s ruling is contrary to the Agencies’ interpretation, based

on the plain meaning of the statute’s text, that FCRA preempts SB1.

12



reports only for certain permissible purposes, and must maintain high

standards for ensuring the accuracy of information in consumer reports and
resolving customer complaints. 15 U.S.C. §§ 1681e, 1681i.

Initially, when it enacted FCRA in 1970, Congress included only
limited exclusions from the definition of “consumer report.” As relevant in
this case, FCRA permitted a person (including a financial institution) to
share with any other person (including an affiliate) information about its
own dealings with its customers. This information, which is referred to as
“transaction and experience information,” could be freely exchanged without
triggering the statutory definition of “consumer report” (and the extensive
requirements associated with consumer reports). Thus, the exclusion
allowed lenders to provide this information to credit bureaus and others.
However, an affiliate that received transaction and experience information
from another affiliate could fall within the definition of a “consumer
reporting agency” if it, in turn, shared that information with a third affiliate,
and that information was used to make eligibility decisions about consumers.

In view of the narrowness of this exclusion from the definition of
“consumer report,” information sharing among affiliates was quite limited
after FCRA was enacted. Predictably, to avoid the obligations that FCRA

imposes on consumer reporting agencies, many institutions avoided making



Counsel for Amicus Curiae
Board of Governors of the Federal Reserve System

Scott G. Alvarez,
General Counsel

ecto Ceiba.

Richard M. Ashton
Associate General Counsel
Katherine H. Wheatley
Assistant General Counsel

Board of Governors of the
Federal Reserve System
Washington, D.C. 20551

Telephone: (202) 452-3750
Facsimile: (202) 452-3101

Email: rich.ashton@frb.gov

27



Counsel for Amicus Curiae
Office of Thrift Supervision

John E. Bowman,
Chief Counsel

Tham WA 4

Thomas J. Segal
Deputy Chief Counsel

Office of Thrift Supervision
1700 G Street, N.W.
Washington, DC 20552

Telephone: (202) 906-7230

Fax: (202) 906-6353
Email: tom.segal@ots.treas.gov

24



I. INTRODUCTION AND STATEMENT OF INTEREST

This amicus curiae brief, in support of Appellants American Bankers
Association, et al., is submitted on behalf of the Office of Thrift Supervision
(OTS), the Office of the Comptroller of the Currency (OCC), the Federal
Deposit Insurance Corporation (FDIC), the Board of Governors of the
Federal Reserve System (FRB), the National Credit Union Administration
(NCUA), and the Federal Trade Commission (FTC) (the Agencies).
Collectively, the Agencies have regulatory responsibility with respect to a
wide range of financial institutions and their affiliates. Of particular note for
this case, Congress has entrusted the Agencies with authority to interpret and
apply the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681x (FCRA),' the
Fair and Accurate Credit Transactions Act of 2003, 117 Stat. 1952 (FACT
Act), which amended FCRA, and Title V of the Gramm Leach Bliley Act
(concerning protection of consumers’ nonpublic personal information), 15
U.S.C. §§ 6801-6809 (Title V of GLBA),’ with respect to the institutions
within their jurisdiction.

In FCRA, the FACT Act, and Title V of GLBA, Congress carefully

crafted a national system to govern the accumulation, dissemination and use

| 15US.C. § 1681s.
2 15 US.C. § 6805.



69 Fed. Reg. 42,502 (July 15, 2004) vce eeeeeceeseeeeeseeeeeeesseseseeneeseeeaneeaeeeeaee 7
STATE STATUTE

California Financial Information Privacy Act
Cal. Fin. Code Div. 1.2. ..cesecsssssssesssssesssssesssesneseeneeseseenseesserseeseeees 9, passim

MISCELLANEOUS

149 Cong.Rec. § 13873 (Nov. 4, 2003)
(Statement of Sen. Shelby) o......esceceseesessesssseesesesseseeseseeeeseeesecseenesesecseeseeesees 20

149 Cong.Rec. H8145-8146 (Sept. 10, 2003)
(Statements of Rep. Oxley) 0... sececsecessececseseeseseeseseesesecseeecaeeeesesneeeseeseneeaes 21

149 Cong.Rec. S$13860 (Nov. 4, 2003)
(Floor statements of Sen. Feinstein) ....

149 Cong. Rec. $13874 (Nov. 4, 2003)

(Floor statement of Sen. Boxer) ... .. 20

Fair Credit Reporting Act: How It Functions for Consumers and the Economy:
Hearing Before the Subcomm. on Financial Institutions and Consumer Credit of
the House Comm. on Financial Services,

108" Cong. (2003), H.R. Hrg. 108-33 oeseeeessccssssecceseseseeseeeneeeesneees 13, 14, 15

Fair and Accurate Credit Transactions Act of 2003, Hearing Before the House
Comm. on Financial Services,

108" Cong. (2003), H.R. Hrg. 108-47 cessecsssssssssssesssesssssssesessssesensen 13, 14

H.R. Conf. Rep. No. 108-396, at 66 (2003) ...

S. Rep. 104-185 (Dec. 14, 1995) o.eecicesseseessessssessesessssessessseesscasestsseesseseeseestenees 2

iv



The issue is of enormous practical significance to the financial
institutions that certain of the Agencies supervise and could materially affect
the way they do business. Thus, the Agencies also have a regulatory and
supervisory interest in the outcome of this case.

The legislative hearings on the FACT Act — in 2003 — clearly
evidence the consequences of retaining FCRA’s express preemption of state
laws that would impose any “requirement or prohibition * * * with respect to
the exchange of information among persons affiliated by common ownership
or common corporate control.” 15 U.S.C. § 1681t(b)(2).!" Among the
benefits of a uniform national standard that hearing witnesses identified

were reduced costs of credit,” greater credit availability to underserved

"| See, e.g., Fair Credit Reporting Act: How It Functions for Consumers
and the Economy: Hearing Before the Subcomm. on Financial Institutions
and Consumer Credit of the House Comm. on Financial Services, 108"
Cong. (2003) (“H.R. Hrg. 108-33”); H.R. 2622—Fair and Accurate
Credit Transactions Act of 2003, Hearing Before the House Comm. on
Financial Services, 108" Cong. (2003) (“H.R. Hrg. 108-47”).

2 See, e.g., H.R. Hrg. 108-47, at 9, Statement of Hon. John W. Snow,
Secretary, Department of the Treasury (“FCRA * * * makes possible the
most extensive and widely available credit at the best rates anywhere in the
world. And it simply wouldn’t be possible without that broad sharing of
information.”).

13



A. The Federal Statutes At Issue

1. FCRA and The FACT Act

FCRA establishes standards for the collection, communication, and
use of information for business purposes such as determining a consumer’s
eligibility for credit, employment, insurance, or a license. These standards
have broad scope, applying to information that bears on a consumer’s credit
worthiness, credit standing, credit capacity, character, general reputation,
personal characteristics or mode of living. 15 U.S.C. §§ 1681-1681x.
Unless otherwise specified by FCRA, a communication of such information
constitutes a “consumer report,” and any person that regularly collects and
communicates this information to third parties may become a “consumer
reporting agency.” 15 U.S.C. § 1681a(d), (£).

FCRA creates substantial obligations for a “consumer reporting

agency.” For example, a consumer reporting agency may furnish consumer

> “Consumer report” and “consumer reporting agency” are statutorily
defined terms that are broader than the day-to-day meaning of “credit report”
as a report prepared by credit bureaus. See 15 U.S.C. § 1681a(4d), (f).
Whether a communication is a “consumer report” depends not only on the
nature of the information provided, but factors such as the identity of the
parties to the communication and the purposes for which the information
was collected or communicated. Accordingly, the statute uses the terms
“consumer report” and “consumer reporting agency” to regulate a far wider
range of communications containing information about consumers than
credit reports of credit bureaus.



Nothing in the text of the FCRA preemption provision at issue even
hints that its scope is limited only to state laws regulating consumer reports.
By its terms, that provision expressly preempts any “requirement or
prohibition [that] may be imposed under the laws of any State * * * with
respect to the exchange of information among persons affiliated by common
ownership or common corporate control * * *.” Section 625(b)(2) of FCRA;
15 U.S.C. § 1681t(b)(2). Indeed, the term “consumer reports” does not even
appear in this provision.

This is in sharp contrast to other preemption provisions found in
FCRA. In particular, Congress limited the scope of preemption of state laws
elsewhere in Section 625 to state laws affecting consumer reports or
consumer reporting agencies. See, e.g., 15 U.S.C. § 1681t(b)(1)(A), (B),
(D), (E), (F), and (1). Clearly, Congress knew how to draft a preemption
provision with limited scope; clearly, too, that is not what it did here. In
short, the language of this preemption clause is plain and unambiguous, and
applies to SB1: it specifically encompasses state laws limiting the
“exchange of information” among affiliates, not merely state laws limiting
the exchange of “consumer reports.”

In addition to making § 1681t(b)(2) permanent, the FACT Act

explicitly regulates the use of information obtained from an affiliate that

19



No. 04-16334

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

AMERICAN BANKERS ASSOCIATION, et al.,
Plaintiffs and Appellants,

v.

BILL LOCKYER, et al.
Defendants and Appellees.

On Appeal from the United States District Court
‘or the Eastern District of California,
Case No. Civ S 04-0778 MCE
The Honorable Morrison C. England, Jr., U.S. District Judge

AMICUS CURIAE BRIEF
OF THE OFFICE OF THRIFT SUPERVISION, THE OFFICE OF
THE COMPTROLLER OF THE CURRENCY, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM, THE
NATIONAL CREDIT UNION ADMINISTRATION, AND THE
FEDERAL TRADE COMMISSION
IN SUPPORT OF APPELLANTS
AMERICAN BANKERS ASSOCIATION, et al.

John E. Bowman

Chief Counsel
Thomas J. Segal

Deputy Chief Counsel
Office of Thrift Supervision
1700 G Street, N.W.
Washington, DC 20552
Telephone: (202) 906-7230
Facsimile: (202) 906-6353

Email: tom.segal@ots.treas.gov
August 11, 2004

Additional Counsel Listed on the Next Page



At the same time that it established the federal criteria that enabled
affiliates to share a broad range of consumer information without becoming
consumer reporting agencies, the 1996 legislation also expressly preempted
state laws that impose requirements or prohibitions “with respect to the
exchange of information among persons affiliated by common ownership or
common corporate control.” 15 U.S.C. § 1681t(b)(2). The type of
information covered by this preemption was not limited to “consumer
report” information.. The combined effect of these provisions was to set
national, uniform requirements for the sharing of consumer information
among affiliates. The 1996 legislation effectively imposed an expiration
date of December 31, 2003 on this preemption provision by specifically
providing that it would not preempt state laws enacted after January 1, 2004
that express an intent to supplant FCRA and that give greater protections to
consumers. 15 U.S.C. § 1681t(d)(2) (repealed by Section 711(3) of the
FACT Act, 117 Stat. 2011).

Significantly, in the recently enacted FACT Act, Congress once again
addressed the issue of uniform national rules concerning information sharing
among affiliates and expressly prohibited states from enacting laws that
would interfere with the federal regulatory scheme for this activity. First,

the FACT Act made permanent the preemption provision in Section



any communications to affiliated companies that could constitute consumer
reports.

The restrictions on affiliate information sharing were eased in 1996
when Congress amended FCRA and substantially expanded the
circumstances in which an institution may share information with affiliates
without becoming a “consumer reporting agency.” Under the 1996
amendments, Congress permitted affiliated companies (including financial
institutions) to share among themselves the “transaction and experience”
information of all affiliates that would otherwise constitute “consumer
reports.” 15 U.S.C. § 1681a(d)(2)(A)(ii). Equally important, in the 1996
amendments, Congress also permitted an institution to share “other
information” among its affiliates without the information being deemed a
“consumer report” — and thus triggering “consumer reporting agency” status
for the transferring institution — if the institution gave the consumer
appropriate notice and an opportunity to prohibit the information sharing,
and the consumer did not prohibit the sharing. 15 U.S.C.

§ 1681a(d)(2)(A)(iii). The term “other information” includes information,
other than transaction and experience information, that could otherwise
constitute a consumer report if shared (e.g., credit bureau reports and

information from consumer applications).



Counsel for Amicus Curiae
Federal Deposit Insurance Corporation

William F. Kroener, III,
General Counsel

Jack D. Smith,

Deputy General Counsel

Kathryn R. Norcross
Counsel

Federal Deposit Insurance Corporation
550 17" St. N.W.

Room H-2044

Washington, D.C. 20429

Telephone: (202) 736-0124

Facsimile: (202) 736-0821
Email: knorcross@fdic.gov

26



Counsel for Amicus Curiae
Office of the Comptroller of the Currency

Julie L. Williams, First Senior Deputy
Comptroller and Chief Counsel

Horace G. Sneed, Director
Douglas B. Jordan, Senior Counsel
Litigation Division

Office of the Comptroller
of the Currency

250 E Street, SW
Washington, D.C. 20219

Telephone: (202) 874-5280

‘Facsimile: (202) 874-5279
Email: Douglas. Jordan@OCC.Treas.gov

25



of a consumer’s personal financial information. In 1995, Congress
recognized the need for this national system, noting that “credit reporting
and credit granting are, in many aspects, national in scope, and that a single
set of Federal rules promotes operational efficiency for industry, and
competitive prices for consumers.” S. Rep. 104-185, at 55 (Dec. 14, 1995).
In these three statutes, Congress struck an appropriate balance to ensure that
personal financial information may be used to promote affordable financial
services while protecting against unwanted invasions of privacy and the
misuse of this private personal information.

Within this federal system, Congress has specified the areas in which
states may enact laws with different requirements. Information sharing
among affiliates of financial institutions is not one of those areas. In fact,

Congress has expressly denied states the authority to impose restrictions on

the sharing of information among affiliated companies. The decision of the
district court below fundamentally misunderstood this statutory framework
in which federal law clearly preempts state laws imposing requirements or

prohibitions on information sharing among affiliates.



consumers, promote inefficiency, expose institutions to uncertain civil
liabilities, and undermine Congress’ objective of achieving uniformity.

For these reasons, the Agencies believe that it is in the public interest
to file this amicus curiae brief supporting the ABA’s argument that FCRA,
as amended by the FACT Act, preempts pertinent provisions of SBI.
Although the ABA has submitted a comprehensive brief addressing this
issue, the Agencies offer this amicus brief to assist the Court in
understanding the important Federal policy and legal interests at stake in this
case.

Il. ARGUMENT

In FCRA, Congress prohibited states from affecting information
sharing among affiliates by providing: “No requirement or prohibition may
be imposed under the laws of any State * * * with respect to the exchange of
information among persons affiliated by common ownership or common
corporate control.” 15 U.S.C. § 1681t(b)(2) (emphasis supplied). The court
below erred by failing to give effect to the plain meaning of this statutory
language preempting state laws, such as SB1, that impose requirements on
the exchange of information among affiliates.

The district court rested its erroneous decision on a fundamental

misperception of the framework and scope of FCRA. The court incorrectly

16



tuling from this case. Bank of America v. City and County of San Francisco,
309 F.3d 551, 565 9" Cir. 2002) (“Because the EFTA’s anti-preemption
provision is limited to the EFTA, it does not save the Ordinances against
preemption by the HOLA and the National Bank Act.”).

Second, if there were any question of whether the anti-preemption
clause, 15 U.S.C. § 6807, found in Title V of GLBA overrode FCRA,
Congress explicitly laid that issue to rest when it provided that nothing in
Title V of GLBA “shall be construed to modify, limit, or supersede the
operation of the Fair Credit Reporting Act.” 15 U.S.C. § 6806. This
categorical directive protects the FCRA preemption provisions to the same
extent that it applies to other provisions of the FCRA.

The plain language of FCRA prohibits states from enacting
requirements on information sharing among affiliates. Application of the
statutory language results in the preemption of SB1. This result is fully
consonant with the overall statutory framework and federal scheme by
which Congress has regulated inter-affiliate information sharing. Through
legislation, Congress excluded from the definition of consumer report (and
the regulatory regime for consumer reports) broad categories of information
shared among affiliates and mandated federal standards to govern these

information sharing activities. At the same time that it imposed federal

22



TABLE OF AUTHORITIES

FEDERAL CASES
Bank of Am. y. City and County of San Francisco,
309 F.3d 551, 565 (9 Cir, 2002) .oeeeecsesscssssesssssesesstetecsesecsnsceesneeeesneesneneees 22
FEDERAL STATUTES
Fair and Accurate Credit Transactions Act of 2003,
117 Stat. 1952 (Dec. 4, 2003) oeseeseceesssssecsessessenseetssessesssssesesesseesssesseesessness 1
Section 214, 117 Stat. 1980 es essessessseenseeseesneeseesseesesseesesesnsesssanense 7
Section 711(3), 117 Stat. 2011 ..seeeeeseesesssceesseseseeseeseeseesessessesseeseeeesneses 6,7
Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681x oo essesseseeeteeees 1, passim
15 U.S.C. § 1681a(d) w.oeeeeceeccesecesesecseseeseneeseeneesesaesatesessssssessesssssesateneeseees 3
15 U.S.C. § 1681a(d)(2)(A) seseeceeseeceeseeseescesesessessesseeseeseesseneesesseassesseeseses 18
15 U.S.C. § 1681a(d)(2)(A)Gi) eee ecesseeseeseeseesesseesessessceeessesessnesessees 5,17
15 U.S.C. § 1681a(d)(2)(A)GII) eee ccc essessessessessesscsnesesseeseeseesenseees 5, 18
15 U.S.C. § 1681a(d)(3) esses eesseessesseessecstecseesseeseesssessessessnesseesssssseeseeseeeneenee 18

15 U.S.C. §§ 1681e

15 U.S.C. § 1681a (f)
15 U.S.C. § LOL cesesssscsssscnsssessessnsessanssennsessnsessasesesnnsesansesnnesseasesnets 4

15 U.S.C. §1681s

15 U.S.C. § LO818-3 oeeeececssessesseesssssesssessessessssesessneeseennecneceneesneesse

15 U.S.C. § 1681s-3(c)

15 U.S.C. §16815-3 MOte oeceeeeeceeeesesesessseeeeteseeeseseseneeeseeuesesesesesesesesssesseesnteess 7

ii



Privacy Regulations). Title V of GLBA, however, does not impose any
restrictions on information sharing among affiliates.

This statutory overlap, of course, raised the prospect that both GLBA
and FCRA might apply to an institution’s disclosure of information about a
consumer. Congress specifically addressed this by explicitly stating that the
requirements of Title V of GLBA shall not “modify, limit, or supersede the
operation of the Fair Credit Reporting Act.” 15 U.S.C. § 6806.°
B. The California Statute At Issue

In 2003, prior to passage of the FACT Act, the California legislature
enacted the California Financial Information Privacy Act, Cal. Fin. Code
Div. 1.2, commonly referred to as “SB1.” This statute prohibits a financial

institution from sharing a consumer’s nonpublic personal information with

7 See 65 Fed. Reg. 35,162 (June 1, 2000) adding regulations concerning
privacy of nonpublic consumer financial information issued by the OCC, 12
C.F.R. Part 40, FRB, 12 C.F.R. Part 216, FDIC, 12 C.F.R. Part 332, and
OTS, 12 C.F.R. Part 573; 65 Fed. Reg. 36,782 (June 12, 2000) NCUA
consumer privacy regulation, 12 C.F.R. Part 716; and 65 Fed. Reg. 33,677
(May 24, 2000), FTC privacy regulation, 16 C.F.R. Part 313.

5 Sec. 6806 provides: “Except for the amendments made of subsections (a)
and (b), nothing in this chapter shall be construed to modify, limit, or
supersede the operation of the Fair Credit Reporting Act, and no inference
shall be drawn on the basis of the provisions of this chapter regarding
whether information is transaction or experience information under section
603 of such Act.” (The amendments to subsections (a) and (b) authorize the
Agencies to issue regulations to carry out the provisions of FCRA.)



§ 1681t(b)(2), preempts the inter-affiliate sharing provisions of SB1. On
June 30, 2004, the district court rejected the ABA’s analysis, ruling that
FCRA, as amended, does not preempt SB1.’°

In reaching this result, the court reasoned as follows. First, it
concluded that since Congress had excluded certain communications among
affiliates from the definition of “consumer report,” Congress intended that
such information not be subject to FCRA’s standards at all. Slip op. at 9.
The court went on to conclude: “it makes no sense to exempt such
information sharing in one part of the statute, then argue through a later
preemption provision that the FCRA, though not governing such exchange,
nonetheless prevents states from doing so.” Id. at 11. For this reason, the
Court concluded that “the only reasonable reading of the FCRA preemption
provision is that it prevents states from enacting laws that prohibit or restrict
the sharing of consumer reports among affiliates.” Id. (footnote omitted;
emphasis in original). This perception of the framework established by
FCRA was flatly wrong.

The court then turned its attention to GLBA. It found that GLBA,

“which sets forth basic privacy protections that must be provided to

'0 The court issued an Amended Memorandum and Order on July 9, 2004
that contains minor modifications of the June 30 decision. All references in
this brief to the court’s ruling are to the July 9 Memorandum and Order.

11



TABLE OF CONTENTS

TABLE OF AUTHORITIES 0... cessecccessessessesessessessesesesstssesssssesessesseeseeaeseseeneeses ii
I. INTRODUCTION AND STATEMENT OF INTEREST ......ssessessessesseeseesseees 1
A. The Federal Statutes At Issue 3

1, FCRA and The FACT Act oc. ececessesssseesseseesesssssssesesssssesseeseessees 3

2. GLBA ceecsssssessesssseeseesnesscsscsnssscssessessssesneseesssassscsessesnesesesssessessaesnes 8

B. The California Statute At Issue oo... eeeceesecesseseescneeeeseeeeeestesesesseseaseeneaee 9

C. The District Court Decision... csessessessecsesesasssessesssssessesseeseensesees 10

" D. Interest of the ABONCICS oe eceeeeeececesecsseeeseeeseeececececscecseseacseecstensncarseaseees 12

TI. ARGUMENT ou.sceccceesessesessesesseseesestssesnsasseeasencaeseeseeeneassisssensseseensenessenessenteeses 16

III. CONCLUSION ...



would otherwise be a “consumer report” but for an exclusion under FCRA.
15 U.S.C. § 1681s-3(c). Again, Section 624 shows that there is no reason to
limit the scope of preemption to information that constitutes a “consumer
report,” nor is the FCRA preemption provision so limited.

Moreover, the legislative history of the FACT Act unambiguously
supports the conclusion that the FCRA preemption provision, as amended by
the FACT Act, is intended to preempt state laws limiting the sharing and use
of information among affiliates, not just state laws dealing with “consumer
reports.” As the ABA brief explains, ABA Brief at 34-35, during the
debates over the FACT Act, U.S. Senators Boxer and Feinstein both
recognized that renewal of the preemption clause would result in preempting
SB1. For this reason, these Senators proposed an amendment that would
have extended SB1’s requirements nationwide, but that amendment was

rejected by the Senate.'” A similar amendment was proposed and defeated

"7 See 149 Cong. Rec. $13860 (Nov. 4, 2003) (Floor statements of Sen.
Feinstein, reading letter from state sponsor of SB1 that renewal of FCRA
preemption clause at issue here would “preempt California’s standard on
affiliate sharing with a weaker one”); id. at S13874 (floor statement of Sen.
Boxer, stating that “California finds itself left out” if FCRA preemption
renewal adopted).

The Senate manager of the 2003 FCRA Amendments also opined on
the Senate floor that Congress was relying on the fact that SB1 was
preempted by § 1681t(b)(2) when it enacted the new affiliate-sharing
restrictions of § 1681s-3. See 149 Cong. Rec. § 13873 (Nov. 4, 2003)

20



Julie L. Williams,

First Senior Deputy Comptroller
and Chief Counsel

Office of the Comptroller

of the Currency

Douglas B. Jordan, Senior Counsel
Horace G. Sneed, Director
Litigation Division

250 E Street, SW

Washington, D.C. 20219
Telephone: (202) 874-5280
Facsimile: (202) 874-5279
Email:

Douglas. Jordan@OCC.Treas.gov

William F. Kroener, III
General Counsel

Jack D. Smith,

Deputy General Counsel
Kathryn R. Norcross
Counsel

Federal Deposit Insurance
Corporation

550 17" St. N.W.

Room H-2044
Washington, D.C. 20429
Telephone: (202) 736-0124
Facsimile: (202) 736-0821

Email: knorcross@fdic.gov

Scott G. Alvarez,

General Counsel

Richard M. Ashton,
Associate General Counsel
Katherine H. Wheatley,
Assistant General Counsel
Board of Governors of the
Federal Reserve System
Washington, D.C. 20551
Telephone: (202) 452-3750
Facsimile: (202) 452-3101

Email: rich.ashton@frb.gov

Robert M. Fenner,

General Counsel

Hattie M. Ulan,

Deputy General Counsel
National Credit Union
Administration

1775 Duke Street
Alexandria, VA 22314-3428
Telephone: (703) 518-6540
Facsimile: (703) 518 6569

William E. Kovacic,
General Counsel

John F. Daly,

Deputy General Counsel for
Litigation

C. Lee Peeler

Deputy Director, Bureau of
Consumer Protection
Federal Trade Commission
Washington, D.C. 20580



Counsel for Amicus Curiae
National Credit Union Administration

Robert M. Fenner,
General Counsel

Hattie M. Ulan
Deputy General Counsel

National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Telephone: (703) 518-6540
Facsimile: (703) 518-6569

28



notice and opt-out requirements for the sharing of certain consumer
information among affiliates and the use of that information for marketing
by affiliates, Congress ensured that those federal standards remained
uniform nationwide by barring states from imposing their own requirements
or prohibitions on the sharing and use of consumer information among
affiliates. Thus, the decision of the district court must be reversed to give
effect to the plain language of the statute, and to preserve the uniform
nationwide standards Congress created for information sharing among
affiliates through the preemption provision in § 1681t(b)(2).
Ill. CONCLUSION

For the foregoing reasons, to give effect to the plain language of 15
U.S.C. § 1681t(b)(2), and to preserve the uniform nationwide standards
Congress created for information sharing among affiliates effected by that
provision, this Court must reverse the erroneous decision of the district court
and find that Federal law preempts SB1 insofar as SB1 purports to impose

restrictions on information sharing among affiliates.

August 11, 2004 Respectfully submitted by:

23



1681t(b)(2), ie., the prohibition against state laws that impose requirements
or prohibitions on information sharing among affiliates. * Second, the FACT
Act amended FCRA by adding a new Section 624 that restricts the use for
marketing of information that affiliates share. 15 U.S.C. § 1681s-3,
codifying Section 624 of FCRA as added by Section 214 of the FACT Act,
117 Stat. 1980. The new provision specifically applies to information shared
among affiliates that would be a “consumer report” except for the statutory
exclusions in FCRA. Under the amendment, an institution cannot use this
information for marketing purposes unless the consumer is given notice of
the intended use of the information for that purpose and the consumer is
given the right to prevent the use of the information for making solicitations

to that consumer.’

4 15 U.S.C. § 1681t(d), as amended by Section 711 of the FACT Act, 117
Stat. 2011, repealed a prior provision of FCRA (15 U.S.C. 1681t(@)(2)) that
limited the preemption provision to laws passed before January 1, 2004.

5 Congress has instructed the Agencies, in consultation and coordination
with each other, to issue regulations implementing this new notice and opt-
out provision. 15 U.S.C. §1681s-3 note. In accordance with the statutory
directive, the OCC, FRB, FDIC, NCUA and OTS have issued proposed
regulations. 69 Fed. Reg. 42,502 (July 15, 2004). The FTC published its
proposed rule on June 15, 2004 (69 Fed. Reg. 33,324). The Securities and
Exchange Commission (SEC) is also required to issue regulations under
new section 624 in consultation and coordination with the Agencies and
published its proposal on July 14, 2004 (69 Fed. Reg. 42,302).



an affiliate unless the financial institution (1) has properly notified the
consumer that it may so disclose the consumer’s information and (2) has
given the consumer an opportunity to direct that such information not be
disclosed and the consumer has not so directed.” FCRA allows financial
institutions to share this information subject only to the requirements
specified by FCRA rather than the separate notice and opt-out requirements
of SB1.

While SB1’s scope is broad, it does not encompass all information
sharing among affiliates. In particular, it does not purport to regulate
“consumer reports” as defined in FCRA and it provides certain exceptions to
its requirements, such as exempting information sharing among affiliates
engaged in the same line of business (e.g., banking, insurance or securities).
C. The District Court Decision

The ABA argued before the district court that the FCRA/FACT Act

preemption provision in section 625 of FCRA, codified at 15 U.S.C.

° SB1 thus treats a financial institution’s inter-affiliate transfers of all
information, including transaction and experience information, the way the
FCRA treats inter-affiliate transfers of non-experience information, such as
credit reports. Moreover, SB1 requires notice and a 45-day opt-out period
on an annual basis. In addition, SB1 requires a financial institution to
obtain express permission from a consumer before it can disseminate the
consumer’s nonpublic personal financial information to a non-affiliated third
party. That latter requirement is not at issue in this case.

10