BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 2374 (Hernández)
As Amended June 18, 2012
Hearing Date: July 3, 2012
Fiscal: No
Urgency: No
SK
SUBJECT
Consumer Credit Reports: Security Freezes
DESCRIPTION
Existing law permits consumers to "freeze" their credit reports
to guard against identity theft. If a consumer freezes his or
her report, information in the report cannot be released by the
credit reporting agency without the consumer's permission.
Under existing law, a credit reporting agency may not charge a
consumer who is 65 years of age or older a fee of more than $5
for placing, removing, or temporarily lifting a security freeze.
This bill would prohibit a credit reporting agency from
charging such a consumer any fee for the initial placement of
the freeze. A credit reporting agency could, however, still
charge a fee (capped at $5) for lifting, removing, or replacing
a security freeze.
BACKGROUND
According to the Federal Trade Commission's "Consumer Sentinel
Network Data Book for January - December 2010," California had
more identity theft complaints-38,148-than any other state. For
every 100,000 people in California, there were 102.4 identity
theft complaints, and only Florida and Arizona had more
complaints per capita. Three of the top 10 largest metropolitan
areas with the highest per capita rates of identity theft
complaints were in California: Madera, Merced, and Bakersfield.
(Federal Trade Commission, Consumer Sentinel Network Data Book
for January - December 2010 (Mar. 2011)
Ýas of June 30, 2012].)
(more)
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Identity theft victims' information can be misused in numerous
ways. One of the most common is the creation of new accounts,
including credit card, utility, or wireless telephone accounts.
But, victims' information can also be used in other, equally
nefarious ways. And, the Federal Trade Commission notes that
"Ýo]nce they have your personal information, identity thieves
use it in a variety of ways. . . . They may get a job using
your Social Security number. They may rent a house or get
medical services using your name. . . . You may find out when
you get something in the mail about an apartment you never
rented . . . or a job you never held." (Federal Trade
Commission, Fighting Back Against Identity Theft
Ýas of June 30,
2012].)
A credit report is a consumer's credit history compiled by a
credit reporting agency. The report contains information such
as annual income, outstanding debt, bill-paying history, the
number, types, and age of accounts, current and previous
addresses, and Social Security number. Under federal law, a
credit reporting agency may disclose information contained in a
credit report to current and prospective creditors, insurers,
employers (provided the consumer has authorized the disclosure),
and others who have a "legitimate business need" in connection
with a business transaction initiated by the consumer. (15
U.S.C. Sec. 1681b.) Federal law requires consumer reporting
agencies to give consumers one free credit report each year.
(15 U.S.C. Sec. 1681j.)
In 2001, California became the first state to give consumers the
right to place a freeze on their credit reports, which prohibits
a credit reporting agency from releasing the consumer's credit
report without the express authorization of the consumer. (See
SB 168 (Bowen, Ch. 720, Stats. 2001).) Since that time, 46
other states and the District of Columbia have followed
California's lead and enacted security freeze legislation,
limiting disclosure of consumers' credit reports. In 2008, the
Legislature passed and the Governor signed AB 372 (Salas, Ch.
151, Stats. 2008) which permitted a credit reporting agency to
charge a fee of no more than $5 to a consumer 65 years of age or
older and no more than $10 to other consumers for a request for
a security freeze, removal of the freeze, or temporary lifting
of the freeze for a period of time or for a specific party.
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This bill would prohibit a credit reporting agency from charging
a consumer 65 years of age or older any fee for the initial
placement of the freeze.
CHANGES TO EXISTING LAW
Existing law permits a consumer to place a "security freeze" on
his or her credit report, prohibiting consumer credit reporting
agencies from releasing the consumer's credit report or any
information contained in it unless the consumer expressly
authorizes the release. (Civ. Code Sec. 1785.11.2(a).)
Existing law requires a credit reporting agency to place a
security freeze on a consumer's credit report within three
business days after receiving the consumer's request. (Civ.
Code Sec. 1785.11.2(b).)
Existing law requires a credit reporting agency to send a
written confirmation of the security freeze to the consumer
within 10 business days. The credit reporting agency must also
provide the consumer with a unique personal identification
number or password to be used by the consumer when he or she
authorizes the release of his or her information for a specific
party or period of time. (Civ. Code Sec. 1785.11.2(c).)
Existing law permits a consumer to allow his or her credit
report to be accessed for a specific party or period of time
while a freeze is in place and requires the consumer to provide
specified information to the credit reporting agency so that the
freeze may be temporarily lifted. (Civ. Code Sec.
1785.11.2(d).)
Existing law requires a credit reporting agency that receives a
consumer's request to temporarily lift a freeze to comply with
that request within three business days. (Civ. Code Sec.
1785.11.2(e).)
Existing law provides that a credit reporting agency may remove
or temporarily lift a freeze only upon the consumer's request or
if the consumer's credit report was frozen due to a material
misrepresentation of fact by the consumer, in which case the
credit reporting agency must notify the consumer before removing
the freeze. (Civ. Code Sec. 1785.11.2(g).)
Existing law requires that a security freeze must remain in
place until the consumer requests that it be removed. If a
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consumer requests that the freeze be removed, a credit reporting
agency must comply with that request within three business days
of receiving the request for removal, and the consumer must
provide specified information. (Civ. Code Sec. 1785.11.2(j).)
Existing law provides that a credit reporting agency must
require proper identification, as defined, of a consumer making
a request to place or remove a security freeze. (Civ. Code Sec.
1785.11.2(k).)
Existing law permits a credit reporting agency to charge a fee
of no more than $10 for placing, removing, or temporarily
lifting a freeze. A credit reporting agency may not charge a
fee to an identity theft victim, and may charge a fee of no more
than $5 to a consumer who is 65 years of age and older. (Civ.
Code Sec. 1785.11.2(m).)
This bill would prohibit a credit reporting agency from charging
a consumer 65 years of age or older any fee for the initial
placement of the freeze. A credit reporting agency could charge
a fee (capped at $5) for lifting, removing, or replacing a
security freeze.
COMMENT
1.Stated need for the bill
The author writes:
The purpose of the bill is to protect seniors from identity
theft by prohibiting a consumer credit reporting agency from
charging a person who is 65 years of age or older an initial
fee for placing a security freeze on his or her credit report.
The bill would allow senior consumers to put an initial
security freeze on their credit at no cost to prevent identity
thieves from opening new credit accounts in their names. A
security freeze enables a consumer to prevent anyone from
looking at his or her own credit reporting file for purposes
of granting credit unless the consumer chooses to let that
particular business look at the information. This gives
consumers control over who has access to their information
needed to process a credit application and effectively
prevents others from opening new accounts in their name. . .
.
Identity thieves target seniors as they are less likely to
monitor their credit files and are also less likely to detect
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if a fraudulent account has been opened in their name. This
is because seniors do not typically open new credit accounts
and therefore have little need to check their credit reports.
The California Senior Legislature writes in support of the
measure, "Ýs]enior citizens are a vulnerable group with limited
income. This proposed legislation will lessen the impact on
this population should they have the unfortunate circumstance of
having to place a security freeze on their credit report."
The Older Women's League (OWL) of California writes:
We believe in making it easy for older consumers to "freeze"
or lock access to their credit file against anyone trying to
open up a new account or to get new credit in their name.
Older people are more susceptible to new account identity
theft, but often do not report it because they are ashamed for
being a "victim." At the same time, older people are less
likely to monitor their credit files as closely as younger
people who are in the process of establishing their
creditworthiness. In fact, older women are more likely to be
living off modest Social Security benefits and struggling to
cover costs of daily living on fixed incomes. Even though the
current fee of $5.00 seems small, it adds up when combined
with other financial issues.
2.Prohibiting fee charged to seniors for initial placement of a
security freeze
Under existing law, a consumer may "freeze" his or her credit
report, thus, prohibiting a consumer credit reporting agency
from releasing his or her credit report unless expressly
authorized to do so by the consumer. Once a freeze is in place,
a consumer may request that the freeze be lifted permanently or
for some period of time or for a specific party. This allows
the consumer to permit limited access to his or her credit
report when necessary (for example, if a consumer is applying
for a mortgage loan it will be necessary to permit access to the
consumer's credit report for that application).
A credit reporting agency may charge a consumer a fee for
placing, removing, or temporarily lifting the freeze. This fee
may not be more than $10. If the consumer is 65 years of age or
older or is an identity theft victim, the fee may not be more
than $5. This bill would prohibit a credit reporting agency
from charging a consumer 65 years of age or older any fee for
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the initial placement of the freeze. The bill would not revise
existing law's $5 cap on the fee charged for temporarily lifting
or removing a security freeze. The bill would permit a credit
reporting agency to charge a fee to seniors (still capped at $5)
for replacing the freeze. In contrast, a number of states
prohibit charging seniors for each placement of the security
freeze, not just the initial placement. For example, Georgia,
Illinois, Nevada, North Carolina, Pennsylvania, Rhode Island,
and Washington all prohibit such charges. This bill, thus,
raises the policy question of whether it is appropriate to only
prohibit charging for the initial placement of a security
freeze. It is important to note, however, that under existing
law, seniors may already be charged $5 for the placement of each
freeze. This bill would at least remove a credit reporting
agency's ability to charge a senior for the first, initial
placement. In addition, the change proposed to be added by this
bill is consistent with a number of other states which prohibit
the charging of a fee to seniors for the initial placement of
the freeze only. For example, Arkansas, Florida, Louisiana, and
Oklahoma all prohibit charging a senior for the initial
placement of the security freeze. If a freeze is lifted and
then placed again, however, presumably the senior may be charged
the capped amount.
Support : California Senior Legislature; Consumers Union; Older
Women's League of California; Privacy Rights Clearinghouse
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation : AB 372 (Salas, Ch. 151, Stats. 2008) See
Background.
Prior Votes :
Assembly Floor (Ayes 47, Noes 21)
Assembly Judiciary Committee (Ayes 7, Noes 3)
Assembly Banking and Finance Committee (Ayes 7, Noes 3)
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