Database sale raises privacy concerns

The Associated Press

LOS ANGELES -- California will join a growing number of states that sell confidential information about their residents' income to banks, mortgage brokers and car dealers, making millions of dollars but raising fears that privacy will suffer.

The programs are designed to greatly speed up processing of loan applications and reduce fraud by allowing lenders to quickly verify information. Although the states aren't supposed to release the data unless the consumer gives written consent, privacy advocates are worried private information could fall into the wrong hands. "I'm skeptical this is a good idea," said Solveig Singleton at the Cato Institute, a Washington think tank. "Having information that is not a part of the public record being sold by the government makes me uncomfortable." California is expected to make $15 million during the next 10 years by giving financial companies access to private income data the state collects on nearly 14 million employed people. The information is normally used to calculate worker compensation and unemployment insurance payments employers make to the state. Programs already are operating in Iowa, Minnesota, North Carolina and Texas and one is being implemented in Pennsylvania. Legislatures in Florida, Indiana, Oregon and Colorado authorized such systems in recent weeks. "It appears that our lawmakers are acting in a policy vacuum," said Beth Givens, director of the San Diego-based Privacy Rights Clearinghouse. "They don't appear to be looking at the long-term implications and the unintended consequences of allowing private companies to be vendors of this personal data." In California, the state will release data through a private company called Verification of Income and Employment. Verification is a joint venture of Norwest Mortgage and First American Financial Corp., a company that provides mortgage-related services such as title searches to lenders. Verification will take requests from lenders and relay them electronically to the state, which will retain control of the database. The state will send the requested information to Verification, which will release it to the lender, said William Skowronnek, president of Verification. The company, under contract to operate nearly identical systems in Iowa, Minnesota, North Carolina and Texas, never will have the state database in its possession. "It's one of our greatest safeguards, the fact that we don't store the information," he said. Before requesting information, the lender must get the written consent of the consumer.

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