BILL ANALYSIS Ó AB 2307 Page 1 Date of Hearing: April 5, 2016 ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION Ed Chau, Chair AB 2307 (Chau) - As Introduced February 18, 2016 SUBJECT: Weights and measures: service agencies and service agents: reporting fraud SUMMARY: Protects consumers from credit card fraud and identity theft at gas stations by requiring service agents who repair gasoline pumps to report to the county sealer any credit card skimming devices found in the course of their repair work. Specifically, this bill: 1)Requires a service agency or service agent to report to the county sealer if a measuring device has been altered in such a way as to facilitate fraud. 2)Requires that if a service agency or service agent has possession of the device used to alter the measuring device, then the service agency or service agent must surrender the device to the county sealer or local law enforcement within 24 hours of discovering that the measuring device has been altered. AB 2307 Page 2 EXISTING LAW: 1)Establishes the office of the county sealer in the 58 counties and authorizes the sealer to prosecute violations of laws relating to weights and measures. (Business and Professions Code (BPC) Section 12013, 12015, and 12200, et seq.) 2)Specifies that service agents, who act as agents of county sealers, must be registered by the Secretary of Food and Agriculture. (BPC 12532(a)) 3)Specifies that a device may only be placed into service by a county sealer or a service agent. (BPC 12532(d)) 4)Specifies that a person who repairs a device is not required to be registered with the Secretary of Food and Agriculture as long as the device is placed into service following a repair by a sealer or registered service agent or registered service agency. (BPC 12532(e)) FISCAL EFFECT: Unknown COMMENTS: 1)Purpose of this bill . This bill is intended to help prevent AB 2307 Page 3 credit card fraud and identity theft by requiring service agents who repair gas pumps to report and turn over credit card skimming devices within 24 hours to their county sealer, or law enforcement. This measure is sponsored by the California Agricultural Commissioners and Sealers Association. 2)Author's statement . According to the author's office, "Across the country, criminal organizations are using skimmer devices to steal money from unsuspecting victims using gas pumps, ATMs, or other credit card vending machines. In 2015, there was an inspection conducted at 33 gas stations in Los Angeles and Ventura Counties, by personnel from the Los Angeles County Agricultural Commissioner's office, numerous federal and local law enforcement agencies, an energy corporation, and a financial services corporation, which found ten credit card skimmers located at eight gas stations. "Unfortunately, there is no uniform process for dealing with these devices when they are discovered by a service agent in California. Reports from county sealers throughout California indicate that service agents often dispose skimmers into the garbage or hand them over to gas station attendants instead of reporting the problem." 3)The prevalence of credit card skimmers. Organized crime rings have begun using credit card skimmers to steal money from unsuspecting victims at gas pumps, ATMs, and credit card vending machines. In 2015, the Los Angeles County Agricultural Commissioner's office, along with federal and local law enforcement agencies, conducted inspections of 33 AB 2307 Page 4 gas stations in Los Angeles and Ventura Counties and found ten credit card skimmers located at eight different gas stations. Modern credit card skimmers are outfitted with Bluetooth devices that can instantly transmit credit card data, including PIN numbers and security codes, to a nearby mobile device or laptop. Once thieves receive the credit card data they can immediately begin making fraudulent charges using the card. Most people do not discover the fraud until their next bank or credit card statement, which makes it difficult, if not impossible, to narrow down where and when the credit card data was stolen. Other states hit hard by this growing criminal activity include Illinois, Indiana, Kentucky, Ohio, Michigan, and Wisconsin. 4)Self-service gas pumps using non-chip credit card technology are particularly risky. Unlike retails stores which typically have cashiers at point-of-sale who can readily monitor the security of the cash registers and credit card swiping machines, gas stations typically have self-service pumps. The cashiers who work inside of gas station convenience stores simply cannot easily monitor gas pumps throughout the day to prevent tampering by criminals. Gas pumps are also an easy target for criminals because the oil industry received a two-year extension to October 2017 to comply with new federal regulations that began requiring all other retailers to AB 2307 Page 5 install chip enabled credit card machines by October 2015. 5)The role of county sealers and service agents . County sealers of weights and measures are responsible for ensuring all commercial scaling and volumetric measuring devices are providing accurate readings, so customers pay the appropriate amount for the product they are purchasing. One of the most common devices sealers test annually is gas station pumps. If the county sealer determines that a gas pump is not providing an accurate reading, then it is removed from operation until an authorized service agent can repair the pump. According to the California Agricultural Commissioners and Sealers Association, service agents have been encountering a growing number of credit card skimmers in the course of repairing gas pumps. This bill requires all service agents who work on gas pump meters to confiscate and turn in credit card skimmers when they discover them inside gas pumps. Reports from county sealers indicate that some service agents dispose of skimmers or hand them over to gas station attendants instead of reporting the problem. This bill requires all service agents to report potential credit card skimming and turn in all evidence within 24 hours to their county sealer, who can then contact the appropriate law enforcement authorities. 6)Author's amendments. The author has agreed to accept the below amendments to clarify the language of the bill and to require county sealers to coordinate with the appropriate law enforcement authorities as needed in investigating and prosecuting criminal activities. AB 2307 Page 6 On page 2, line 1, after "SECTION 1" add: Section 12215 shall be added to the Business and Professions Code to read: 12215. A sealer who receives information or evidence indicating that any weighing or measuring device, parking meter, or other installation under the jurisdiction of the sealer has been altered in such a way as to facilitate any type of fraud, shall coordinate with the appropriate law enforcement authorities as needed in investigating and prosecuting fraudulent activity. SECTION 2. On page 3, lines 4-9, revise the bill language as follows: (i) If a device has been altered in such a way as to facilitate fraud, a service agency or service agent shall report it to the county sealer within 24 hours of discovering that the device has been altered . If the service agency or service agent has possession of the device or any mechanism, component, software or device found attached thereto or used in conjunction with the device that serves to facilitate fraud , the service agency or service agent shall surrender the device or any such AB 2307 Page 7 mechanism, component, software or attachment to the county sealer or local law enforcement within 24 hours of discovering that the device has been altered. 7)Arguments in support . According to the California Agricultural Commissioners and Sealers Association, "Skimming technology is always improving and may be difficult to detect to the untrained eye. Skimmers are sometimes installed outside an ATM or pump and frequently hidden within the machine. Often times, the devices are discovered by registered service agents during the course of responding to calls for repair. AB 2307 will establish a uniform reporting protocol for service agents alerted to the presence of a credit card skimming device or who discover a suspicious device during the course of a repair of a weighing and measuring device." REGISTERED SUPPORT / OPPOSITION: Support California Agricultural Commissioners and Sealers Association (sponsor) Opposition None on file. AB 2307 Page 8 Analysis Prepared by:Jennie Bretschneider / P. & C.P. / (916) 319-2200