A financial privacy bill that would increase costs and reduce choice for consumers is finally getting some sober second thought from Gov. Gray Davis.

The bill, SB 773 by Sen. Jackie Speier, D–Hillsborough, has already cleared the state Senate and appears set to sail through the Assembly this month.

Opt-in privacy laws force companies to contact their customers before they share customer information, whereas opt-out laws require the customer to communicate his or her privacy preferences to the company. The key difference is in who takes the initiative.

What advocates of opt-in legislation usually fail to tell the public is that opt-in laws will have one of two effects. They will either cause customers to be pursued by businesses more frequently in order to get their permission to send them an offer or, if those costs are too onerous, consumers will lose out on deals that could have been offered.

In the case of SB 773, it is rather unlikely that financial institutions will spend significant amounts of time and money contacting all their customers each time they want to share information with a third party, so the ultimate result of the opt-in legislation is to halt the free flow of information.

Opt-in laws might sound like a good way to “control our information,” but most consumers don’t want to be consulted that much. Proposals such as SB 773 are attempts by a minority of privacy extremists to impose their preferences, and the costs that those preferences entail, on the majority of the population.

Sonia Arrison is director of the Center for Freedom and Technology at the California-based Pacific Research Institute. She can be reached via email at sarrison@pacificresearch.org.