Amended in Assembly April 1, 2013

Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1169

Introduced by Assembly Member Daly

February 22, 2013

An act to amend Section 1785.3 of the Civil Code, relating to consumer credit reports.

LEGISLATIVE COUNSEL’S DIGEST

AB 1169, as amended, Daly. Consumer credit reports: escrow agents: real estate.

Existing law defines and regulates consumer credit reporting agencies and investigative consumer reporting agencies. Existing law defines a consumer credit report as a written, oral, or other communication of any information by a consumer credit reporting agency bearing on a consumer’s credit worthiness, credit standing, or credit capacity, which is used or is expected to be used, or collected in whole or in part, for the purpose of serving as a factor in establishing the consumer’s eligibility for certain purposes, as specified.

This bill would revise the definition of a consumer credit report to include a communication of information by a consumer credit reporting agency used for the purpose of serving as a factor in establishing the consumer’s eligibility for a proprietary database and rating evaluation. This bill would define a proprietary database and rating evaluation as a report prepared for a fee and provided to a furnisher of credit, for the purpose of evaluating a begin delete consumer, for use or retention in the furnisher’s capacity as an escrow agent in the business of title insurance or in business regulated under the provisions of the Real Estate Law end delete begin insert consumer in the consumer’s capacity as a person performing specified services within real estate transactions end insert .

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1785.3 of the Civil Code is amended to
read:

1785.3.  

The following terms as used in this title have the
meaning expressed in this section:

(a) “Adverse action” means a denial or revocation of credit, a
change in the terms of an existing credit arrangement which is
adverse to the interests of the consumer, or a refusal to grant credit
in substantially the amount or on substantially the terms requested.
“Adverse action” includes all of the following:

(1) Any denial of, increase in any charge for, or reduction in
the amount of, insurance for personal, family, or household
purposes made in connection with the underwriting of insurance.

(2) Any denial of employment or any other decision made for
employment purposes which adversely affects any current or
prospective employee.

(3) Any action taken, or determination made, with respect to a
consumer (A) for an application for an extension of credit, or an
application for the hiring of a dwelling unit, and (B) that is adverse
to the interests of the consumer.

“Adverse action” does not include (A) a refusal to extend
additional credit to a consumer under an existing credit
arrangement if (i) the applicant is delinquent or otherwise in default
under that credit arrangement or (ii) the additional credit would
exceed a credit limit previously established for the consumer or
(B) a refusal or failure to authorize an account transaction at a
point of sale.

(b) “Consumer” means a natural individual.

(c) “Consumer credit report” means any written, oral, or other
communication of any information by a consumer credit reporting
agency bearing on a consumer’s credit worthiness, credit standing,
or credit capacity, which is used or is expected to be used, or
collected in whole or in part, for the purpose of serving as a factor
in establishing the consumer’s eligibility for: (1) credit to be used
primarily for personal, family, or household purposes, or (2)
employment purposes, or (3) hiring of a dwelling unit, as defined
in subdivision (c) of Section 1940, (4) a proprietary database and
rating evaluation, or (5) other purposes authorized in Section
1785.11.

The term does not include (1) any report containing information
solely as to transactions or experiences between the consumer and
the person making the report, (2) any communication of that
information or information from a credit application by a consumer
that is internal within the organization that is the person making
the report or that is made to an entity owned by, or affiliated by
corporate control with, that person; provided that the consumer is
informed by means of a clear and conspicuous written disclosure
that information contained in the credit application may be
provided to these persons; however, where a credit application is
taken by telephone, disclosure shall initially be given orally at the
time the application is taken, and a clear and conspicuous written
disclosure shall be made to the consumer in the first written
communication to that consumer after the application is taken, (3)
any authorization or approval of a specific extension of credit
directly or indirectly by the issuer of a credit card or similar device,
(4) any report by a person conveying a decision whether to make
a specific extension of credit directly or indirectly to a consumer
in response to a request by a third party, if the third party advises
the consumer of the name and address of the person to whom the
request was made and the person makes the disclosures to the
consumer required under Section 1785.20, (5) any report containing
information solely on a consumer’s character, general reputation,
personal characteristics, or mode of living which is obtained
through personal interviews with neighbors, friends, or associates
of the consumer reported on, or others with whom he is acquainted
or who may have knowledge concerning those items of
information, (6) any communication about a consumer in
connection with a credit transaction which is not initiated by the
consumer, between persons who are affiliated (as defined in Section
150 of the Corporations Code) by common ownership or common
corporate control (as defined by Section 160 of the Corporations
Code), if either of those persons has complied with paragraph (2)
of subdivision (b) of Section 1785.20.1 with respect to a
prequalifying report from which the information communicated
is taken and provided the consumer has consented to the provision
and use of the prequalifying report in writing, or (7) any consumer
credit report furnished for use in connection with a transaction
which consists of an extension of credit to be used solely for a
commercial purpose.

(d) “Consumer credit reporting agency” means any person who,
for monetary fees, dues, or on a cooperative nonprofit basis,
regularly engages in whole or in part in the business of assembling
or evaluating consumer credit information or other information on
consumers for the purpose of furnishing consumer credit reports
to third parties, but does not include any governmental agency
whose records are maintained primarily for traffic safety, law
enforcement, or licensing purposes.

(e) “Credit transaction that is not initiated by the consumer”
does not include the use of a consumer credit report by an assignee
for collection or by a person with which the consumer has an
account for purposes of (1) reviewing the account or (2) collecting
the account. For purposes of this subdivision, “reviewing the
account” includes activities related to account maintenance and
monitoring, credit line increases, and account upgrades and
enhancements.

(f) “Employment purposes,” when used in connection with a
consumer credit report, means a report used for the purpose of
evaluating a consumer for employment, promotion, reassignment,
or retention as an employee.

(g) “File,” when used in connection with information on any
consumer, means all of the information on that consumer recorded
and retained by a consumer credit reporting agency, regardless of
how the information is stored.

(h) “Firm offer of credit” means any offer of credit to a
consumer that will be honored if, based on information in a
consumer credit report on the consumer and other information
bearing on the creditworthiness of the consumer, the consumer is
determined to meet the criteria used to select the consumer for the
offer and the consumer is able to provide any real property
collateral specified in the offer. For purposes of this subdivision,
the phrase “other information bearing on the creditworthiness of
the consumer” means information that the person making the offer
is permitted to consider pursuant to any rule, regulation, or formal
written policy statement relating to the federal Fair Credit
Reporting Act, as amended (15 U.S.C. Sec. 1681 et seq.),
promulgated by the Federal Trade Commission or any federal bank
regulatory agency.

(i) “Item of information” means any of one or more informative
entries in a credit report which causes a creditor to deny credit to
an applicant or increase the cost of credit to an applicant or deny
an applicant a checking account with a bank or other financial
institution.

(j) “Person” means any individual, partnership, corporation,
trust, estate, cooperative, association, government or governmental
subdivision or agency, or other entity.

(k) “Prequalifying report” means a report containing the limited
information permitted under paragraph (2) of subdivision (b) of
Section 1785.11.

(l) The term “proprietary database and rating evaluation” means
a report prepared for a fee and provided to a furnisher of credit for
the purpose of evaluating a begin delete consumer, for use or retention in the
furnisher’s end delete begin insert consumer in the consumer’s end insert capacity as an “escrow
agent,” as that term is defined in Section 17004 of the Financial
Code, begin delete in the “business of title insurance,” as that term is used in
Section 12340.3 of the Insurance Code, or in a business regulated
under the Real Estate Law (Part 1 (commencing with Section
10000) of Division 4 of the Business and Professions Code) end delete begin insert or as
a person performing the services authorized pursuant to
subdivision (c) of Section 12340.3 of the Insurance Code, or as a
real estate broker, or his or her employee, performing the services
described in subdivision (e) of Section 10131 of the Business and
Professions Code. Information stored or retained by a person, or
a person’s agent, used to prepare a proprietary database and
rating evaluation constitutes a file, as defined in subdivision (g) end insert .

(m) “State or local child support enforcement agency” means
the Department of Child Support Services or local child support
agency acting pursuant to Division 17 (commencing with Section
17000) of the Family Code to establish, enforce or modify child
support obligations, and any state or local agency or official that
succeeds to these responsibilities under a successor statute.