In ABA v. Lockyer, financial services companies are suing to invalidate a California law that provides individuals with strong privacy rights. In 2003, California enacted the California Financial Information Privacy Act, commonly known as "SB1." SB1 provides the strongest financial privacy protection in the nation. It allows customers to "opt-out" of information-sharing practices between affiliated institutions, companies that have common ownership. SB 1 also bars financial institutions from sharing information about consumers with nonaffiliated third parties unless an individual gives his or her express "opt in" consent. However, the legal issue in ABA is limited to the constitutionality of the "opt out" provision for affiliate sharing, and a series of other rights created by SB1 are not being challenged in this case.

In April 2004, the American Bankers Association (ABA), the Financial Services Roundtable and the Consumer Bankers Association filed suit arguing that SB 1 is preempted or superceded by the federal Fair Credit Reporting Act (FCRA). As interpreted by the banking industry, the FCRA imposes a preemptive ceiling on state privacy statutes, thereby preventing any state or local regulation concerning affiliate sharing of consumer information.

However, District Court Judge Morrison C. England, Jr. ruled otherwise, holding that the federal Gramm-Leach-Bliley Financial Services Modernization Act (GLBA) allows states to erect stronger financial privacy protections. Judge England’s Amended Order, issued on July 9, 2004, concludes that (i) the FCRA was not intended to regulate the simple sharing of information between affiliates, (ii) 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, and (iii) the FCRA preemption provision does not broadly preempt all state laws regulating information sharing by affiliates.

On July 28, 2004, the Ninth Circuit Court of Appeals granted Plaintiff ABA's request for an expedited appeal of Judge England's decision. EPIC is preparing an amicus brief against preemption of SB1 to support California's and other states' efforts to regulate affiliate sharing.