BILL ANALYSIS Ó
AB 1580
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CONCURRENCE IN SENATE AMENDMENTS
AB
1580 (Gatto and Irwin)
As Amended June 21, 2016
Majority vote
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|ASSEMBLY: |78-0 |(May 12, 2016) |SENATE: |38-0 |(August 18, |
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Original Committee Reference: B. & F.
SUMMARY: Permits a parent or other legal representative to
freeze a child's credit records with the three major consumer
credit reporting agencies (CCRAs), and requires a CCRA to create
a record for the protected consumer and impose a security freeze
within 30 days of receiving a request if a file for that person
does not already exist. Specifically, this bill:
1)Requires a CCRA to disclose the process for placing and
removing a security freeze, and to place a security freeze on
an account if the protected consumer's representative:
a) Submits a request to the CCRA at the address or other
point of contact and in the manner specified by the CCRA;
b) Provides sufficient proof of identification;
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c) Provides sufficient proof of authority to act on behalf
of the protected consumer; and
d) Pays the CCRA the requisite fee.
2)Requires a CCRA, if it does not have a file on the protected
consumer, to create a record for the protected consumer and to
place the security freeze within 30 days of receiving a
request and to send written confirmation of freeze to within
10 days of placing the freeze.
3)Prohibits the CCRA from releasing information from a protected
consumer's frozen report or record until the protected
consumer (or representative) either removes the freeze or the
CCRA removes the freeze because of a material
misrepresentation of fact.
4)Requires that in order to remove a freeze, the protected
consumer (or representative) must submit a request for removal
to the CCRA, as specified by the CCRA and meet the same
requirements specified above for placing a freeze and allows a
consumer to act for him- or herself upon presenting proof of
emancipation or that he or she is at least 16 years old.
5)Allows CCRAs to charge a $10 fee for placing or removing a
security freeze, unless the protected consumer is a documented
identity theft victim, the protected consumer is under 16 and
the CCRA has an existing record on the protected consumer at
the time of the request, or the request is for a foster child.
6)Allows a CCRA to develop procedures for submitting requests
for placement or removal of a freeze by phone, mail, fax, the
Internet or other electronic media.
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7)Exempts from the security freeze (i.e., permits access to
"frozen" records for) the following:
a) Banks and other lenders who access a consumer's credit
report only for the purpose of reviewing existing accounts
the consumer has with the bank or lender.
b) Resellers of credit report information.
c) Check services or fraud prevention services that issue
check fraud and exchange traded fund (ETF) fraud reports;
and deposit account information services that issue reports
on account closures due to fraud, substantial overdrafts,
automated teller machine (ATM) abuse, or similar negative
information for use by banks who are reviewing existing
consumer accounts.
d) Credit monitoring services when the protected consumer
(or the representatives) has subscribed to the services.
e) The protected consumer himself or herself (or the
representative) upon request.
f) Any state or local agency, law enforcement agency, trial
court, or private collection agency acting pursuant to a
court order, warrant, or subpoena.
g) A child support agency acting under state or federal law
to collect child support.
h) The Department of Health Care Services acting to
investigate Medi-Cal fraud.
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i) The Franchise Tax Board acting to investigate or collect
delinquent taxes, unpaid court orders, or to fulfill its
other statutory responsibilities.
8)Defines the following terms:
a) "Protected consumer" means an individual who is under
16, incapacitated, or under a county welfare or county
probation department's jurisdiction;
b) "Record" means information that identifies a protected
consumer and that is created by a CCRA for this bill and
not for credit decision-making;
c) "Representative" means a person who provides sufficient
proof of authority to act for a protected person, as
specified, and would include a county welfare or probation
department for a child in foster care, but would not
include a foster parent;
d) "Security freeze" means a restriction that a CCRA places
on a protected consumer's record or file that prohibits the
CCRA from releasing a any report or information about a
protected consumer, except as authorized by the bill.
e) "Sufficient proof of authority" means documentation that
shows a representative has authority to act for a protected
consumer, including: a court order, a valid power of
attorney, a written, notarized statement, or in the case of
a foster child a written communication from a county
welfare or probation department specifying that the
protected consumer is under the department's jurisdiction;
f) "Sufficient proof of identification" means documentation
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that identifies a protected consumer or a representative,
including: a social security number or card; a certified
or official copy of a birth certificate; a copy of a
California driver's license or identification card or other
government-issued identification; a copy of a utility bill
that shows name and address, or in the case of a foster
child a written communication from a county welfare or
probation department certifying that the protected consumer
is under the department's jurisdiction.
The Senate amendments make technical and clarifying changes.
EXISTING LAW:
1)Regulates CCRAs via the Consumer Credit Reporting Agencies
Act. [Civil Code, Section 1785.1 et seq. All further
references are to the Civil Code]
2)Allows a CCRA to charge a consumer who is 65 years of age or
older and who has provided identification confirming his or
her age a fee not to exceed $5 for placement of each freeze,
the removal of the freeze, the temporary lift of the freeze
for a period of time, or the temporary lift of the freeze for
a specific party. [Section 1785.11.2 (m)]
3)Allows a consumer to place a security freeze on his or her
credit report by making a written request by mail to a CCRA.
[Section 1785.11.2(a)]
4)Defines "security freeze" as a notice placed in a consumer's
credit report at the consumer's request and, subject to
certain exceptions, prohibits the credit reporting agency from
releasing the credit report or any information from it without
the consumer's express authorization. [Section 1785.11.2]
5)Requires the CCRA to place a security freeze on the consumer's
credit report no later than 3 days after receiving a request,
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and within 10 business days must send the consumer written
confirmation of the freeze along with a unique personal
identification or password to be used by the consumer when
authorizing the release of his or her credit for a specific
party or period of time. [Section 1785.11.2(b) (c)].
6)Allows a consumer to request a temporary lift of a security
freeze, if certain conditions are met. A CCRA that receives a
request for a temporary lift of a security freeze is required
to do so within three business days of receiving the request.
[Section 1785.11.2(d) (e) (g)]
7)Provides that a CCRA may develop procedures involving the use
of telephone, fax, the internet, or other electronic media to
receive and process a consumer request to temporarily lift a
security freeze in an expedited manner. [Section
1785.11.2(f)]
8)Requires that, if a consumer requests a security freeze, the
CCRA must inform the consumer of the process for placing and
temporarily lifting a freeze, and the process for allowing
access to information from the consumer's credit report for a
specific party or period of time while a freeze is in place.
[Section 1785.11.2(i)]
9)Allows, except as specified, a CCRA to charge a fee of no more
than $10 to a consumer for each freeze, removal of the freeze,
or temporary lift of the freeze for a period of time.
[Section 1785.11.2(m)]
10)Prohibits a fee from being charged to place a security freeze
for a victim of identity theft who presents a valid police
report or valid Department of Motor Vehicles (DMV)
investigative report [Section 1785.11.2(m)]
11)Requires that whenever a CCRA provides a written disclosure
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to a consumer that it must also include a notice to a consumer
of their rights to receive and correct errors on their credit
report, as well as, information on placing a security freeze
and credit alert on their credit file. [Section 1785.15]
EXISTING FEDERAL LAW requires every credit reporting agency to
disclose to a consumer, upon request, specific information
related to that consumer's credit report, as well as, directions
on how to contest information contained within the report.
[Fair Credit Reporting Act 15 United States Code (U.S.C.) 1681et
seq.]
FISCAL EFFECT: None.
COMMENTS: Need for the bill:
According to the Authors:
"Most children get a Social Security Number early in their
lives. Identity thieves recognize this and recognize that
parents are not monitoring their child's credit. For that
reason, thieves are targeting children, stealing their
identity, and opening credit lines with their Social
Security Numbers. AB 1580 is a common-sense proposal that
provides parents the tools to proactively protect their
child's financial future. It is time for California to
step up and join the many states that have passed similar
legislation. Parents will be able to sleep better at
night knowing their child's identity is protected."
A study conducted by Carnegie Mellon CyLab found that "It is not
simply enough to guard your own identity in the 21st Century you
must also guard your child's." This statement highlights the
intent of this bill. Currently, California lacks statutory
provisions specific to protected consumers. Twenty-three other
states have a security freeze process in place for protected
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consumers, where as in most cases a protected consumer is
considered to be 16 years of age or younger. The concept of a
protected consumer is fairly new due to the fact protected
consumers do not have access to credit therefore should not have
a credit file. If a protected consumer becomes a victim of
identity theft they unfortunately do not become aware of this
fact until he or she applies for credit as an adult.
This bill creates a process where a protected consumer's
representative, most likely a parent, has the option to place
and remove a security freeze on a protected consumer. To place
the freeze, a parent or representative would directly contact a
CCRA and submit the request for a credit freeze by mail.
Parents would then authenticate their identity and prove they
are legally able to act on behalf of the child. After the
request is filed, a record will be created for the child, and
the credit record would be frozen within 30 days. Under the
bill, a CCRA would then be prohibited from releasing credit
information or customer records for that protected consumer.
If a child does not have an existing credit file, this
legislation mandates a consumer credit reporting agency to
create a credit "record" of the child's personal information for
the sole purpose of implementing a credit freeze. A credit file
in nature is directly related to credit worthiness, credit
standing, and credit capacity, which are used to determine
credit eligibility. Unlike a credit file, a credit record is
created for identity theft prevention purposes. Therefore,
creating and freezing a credit record does not impact a child's
eligibility for credit in the future. Out of the 23 states that
allow child credit freezing, a majority use the credit record
method of implementation.
This bill does not allow a security freeze to be temporarily
lifted, nor does it supply a Personal Identification Number for
the purpose of lifting the freeze. Research has shown that it
is not uncommon for parents or relatives of a child to commit
"friendly fraud" and borrow the child's Social Security Number
to apply for credit if they do not qualify based on their own
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credit score.
Child Identity Theft:
According to the Attorney General's Office, child identity theft
happens when someone uses a minor child's personal information,
such as name and Social Security number, usually to obtain
credit or employment. Identity thieves may target children
because the crime can go undetected for years, often until the
child applies for his or her first loan or credit card.
Since children have perfectly clean backgrounds, no real credit
score to speak of, and their parents do not think to monitor the
status of their identity, they make easy targets for identity
theft. Identity theft can have negative effects on a child's
credit down the line, and they could have trouble securing
student loans, getting a decent job, or even purchasing a
cellphone. The study conducted by Carnegie Melon's CyLab, found
that 10.2% of the children reported that someone else had used
their Social Security number fraudulently. The worst of these
accounts was toward a 16-year-old girl who had reported
fraudulent charges of $725,000 under her name.
Among the 13 million consumers whose identities were stolen in
2013, a growing number includes children. One in 40 families
with children under 18 had at least one child whose personal
information was compromised, according to a 2012 survey by the
Identity Theft Assistance Center and the Javelin Strategy &
Research group. The survey revealed that identity thieves most
often steal children's Social Security numbers, since young
children seldom have the credit histories acquired by adults,
such as credit cards, bank accounts, licenses and financial
statements. The same survey also found 17% of children were
victimized for a year or longer.
Background:
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In California, consumers have the right to put a "security
freeze" on their credit file which can help prevent identity
theft. A security freeze means that the consumer's file cannot
be shared with potential creditors. Most businesses will not
open credit accounts without first checking a consumer's credit
history. If credit files are frozen, even someone who has the
consumer's name and Social Security number would most likely not
be able to get credit in the consumer's name.
Security freezes are designed to prevent a CCRA from releasing a
credit report without the consumer's consent. Using a security
freeze to take control over who is allowed access to the
personal and financial information in a file may delay,
interfere with or prohibit the timely approval of any subsequent
request or application the consumer makes regarding a new loan,
credit, mortgage, insurance, government services or payments,
rental housing, employment, investment, license, cellular
telephone, utilities, digital signature, Internet credit card
transaction or other services, including an extension of credit
at point of sale.
When a consumer places a security freeze on their file, the
consumer will be provided a personal identification number or
password to use if the consumer chooses to remove the security
freeze from their file or authorize the temporary release of
their credit report for a specific person or period after the
security freeze is in place. To provide that authorization, the
consumer must contact the CCRA and provide all the following:
Sufficient identification to verify identity, personal
identification number or password provided by the CCRA, a
statement that the consumer chooses to remove the security
freeze from their file or that the consumer authorizes the CCRA
to temporarily release the consumer report.
Analysis Prepared by: Kathleen OMalley /
B. & F. / (916) 319-3081 FN: 0003603
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