BILL ANALYSIS Ó
AB 2374
Page 1
Date of Hearing: April 16, 2012
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
AB 2374 (Hernandez) - As Amended: March 29, 2012
SUBJECT : Consumer credit reports: security freezes.
SUMMARY : Prohibits a consumer credit reporting agency from
charging any fee upon a consumer 65 years of age or older for
placing, lifting, or removing security freezes.
EXISTING FEDERAL LAW
1)Requires every credit reporting agency to disclose to a
consumer, upon request, specific information related to that
consumers credit report, as well as, directions on how to
contest information contained within the report. ÝFair Credit
Reporting Act US Code, Title 15, 1681et seq.]
EXISTING STATE LAW
1)Establishes the California Office of Privacy Protection in
2001, which provides individuals and businesses with
information and assistance on ever evolving privacy topics
such as identity theft, online child safety, financial
privacy, cyber security and mobile device privacy. The role of
this office is to receive complaints from individuals
concerning a person obtaining, compiling, maintaining, using,
disclosing, or disposing of personal information in a manner
that may be potentially unlawful or violate a stated privacy
policy relating to that individual, and provide advice,
information, and referral, where available. The office also
needs to provide information to consumers on effective ways of
handling complaints that involve violations of privacy-related
laws, including identity theft and identity fraud. If
appropriate local, state, or federal agencies are available to
assist consumers with those complaints, the office shall refer
those complaints to those agencies. ÝGovernment Code, Section
11549.5-11549.10]
2)Allows a consumer reporting agency (CRA) 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,
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the temporary list of the freeze for a period of time, or the
temporary lift of the freeze for a specific party. ÝCivil
Code, 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
consumer CRA. ÝCivil Code, 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. ÝCivil Code, Section
1785.11.2.]
5)Requires the CRA to place a security freeze on the consumer's
credit report no later than three days after receiving a
request, 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. ÝCivil Code, 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 CRA 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.
ÝCivil Code, Section 1785.11.2(d) (e) (g).]
7)Provides that a CRA 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. ÝCivil Code, Section
1785.11.2(f).]
8)Requires that, if a consumer requests a security freeze, the
CRA 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.
ÝCivil Code, Section 1785.11.2(i).]
9)Allows, except as specified, a CRA to charge a fee of no more
than $10 to a consumer for each freeze, removal of the freeze,
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or temporary lift of the freeze for a period of time. ÝCivil
Code, 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 DMV investigative report ÝCivil Code, Section
1785.11.2(m)].
11)Requires that whenever a CRA provide a written disclosure 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. ÝCivil Code, Section
1785.15].
FISCAL EFFECT : None.
COMMENTS :
The following states do not charge fees for security freezes to
those 65 or older: Illinois, Georgia, Florida, Indiana,
Louisiana, North Carolina, New Mexico, Oklahoma, Pennsylvania,
Washington, South Carolina, and Rhode Island.
Other states have fees ranging from $3 to $20 to place security
freezes. Currently, California charges those 65 or older a fee
of $5 to place, lift or remove a security freeze. All others
are charged a fee of $10.
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.
Current law provides that a security freeze is free to identity
theft victims who have a police report of identity theft. For
those not an identity theft victim and under 65 years of age, it
will costs $10 to place a freeze with each of the three credit
bureaus. That's a total of $30 to freeze files. For those not
an identity theft victim and 65 years of age or older, it will
costs $5 to place a freeze with each of the three credit
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bureaus. That's a total of $15 to freeze files.
Security freezes are designed to prevent a CRA from releasing ac
credit report without the consumers 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, they
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 CRA and provide all the following: Sufficient
identification to verify identity, personal identification
number or password provided by the CRA, a statement that the
consumer chooses to remove the security freeze from their file
or that the consumer authorizes the CRA to temporarily release
the consumer report.
BACKGROUND :
In 2008, the Assembly Banking and Finance Committee analyzed AB
372 (Salas). The January 7, 2008 version of the bill provided
that no one 65 or older could be charged a fee for placing,
lifting or removing a security freeze. In regards to this fee,
the analysis stated:
"A major point of contention between the author of this bill and
opposition is the reduction and in one case elimination of the
fees associated with placing a security freeze. This bill
eliminates the fee for anyone 65 and older to place a freeze, or
a consumer who is placing a freeze for the first time.
Additionally, the fee for placing or lifting the freeze is
reduced by this bill to $5. The author and supporters contend
that the current fee is an obstacle for consumers to use this
vital service, while the opposition argues that the fees are
reasonable and necessary to maintain the credit freeze system.
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It is unclear that the current cost of placing a freeze is
prohibiting consumers away from this option. The author's
office has provided the committee with information regarding
other states that have eliminated their fees or reduced them.
However, the committee does not have information on the number
of security freeze request in those states versus California.
For example, does California have more requests for this service
that makes it more costly for CRAs? The bulk of the data
available points out a total lack of awareness on the part of
consumers that this service exist to protect their credit data.
On the other hand, relative little is available that reveals the
real cost to credit reporting agencies for maintaining the
credit freeze system."
The compromise between the Committee, Author, and opposition was
to place a fee of $5 to those 65 and older who wish to place,
remove or lift a security freeze rather than eliminate the fee
or leave it at $10.
While a number of states do not charge any fee for those 65 and
older to place, remove or lift a security freeze, the statistics
below do not show that those actually 65 and older are in the
most danger of identity theft. As discussed below, several
sources found that the age group between 20-34 was most in
danger of identity theft.
IDENTITY THEFT :
Identity theft is taking someone else's personal information and
using it for an unlawful purpose. According to a report called
the "2011 Identity Fraud Survey Report" by Javelin Strategy and
Research, "there were 8.1 million U.S. adults who were victims
of identity theft in 2010. That represents 3.5% of adults,
including about a million Californians. The total cost of
identity theft in 2010 was $37 billion. The average victim spent
$631 and 33 hours to resolve the problem and clear up records.
Victims come in all ages. In 2010, the 25-34 year old group
experienced the highest rate of identity theft and spent the
most to clear it up, averaging $1,471. Those over 65 years old
had the lowest rate and spent the least, $137."
Identity thieves do many things in a victim's name, from using a
credit card account to opening new accounts, taking out an auto
loan, getting medical services, or even committing a crime and
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creating a criminal record.
According to the Consumer Sentinel Network, the largest number
of identity theft complaints in 2011, in the United States, came
from the ages 20-29 with 23%. The two ages with the least
amount of fraud complaints came from those 19 and younger with
8% and 70 and over with 6%.
In 2011, California ranked 3rd behind Florida and Georgia, for
the amount of identity theft complaints received from consumers.
California received 38, 607 identity theft complaints in 2011.
NEED FOR THE BILL:
According to the Author, identity thieves target seniors as they
are much less likely to monitor their credit files and are also
less likely to detect 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.
PREVIOUS LEGISLATION :
AB 372 ((Salas) Chapter 151, Statutes of 2008) This bill
amended the Consumer Credit Reporting Agencies Act to provides
that a consumer credit reporting agency may, except as
specified, 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 each security freeze request, removal of the freeze,
temporary lift of the freeze for a period of time, or temporary
lift of a freeze for a specific party; required a consumer
credit reporting agency to place a security freeze on a
consumer's credit report no later than three business days after
receiving a request; allows a consumer to place a security
freeze on his or her credit report by making a written request
by regular mail to a consumer credit reporting agency. Earlier
versions of this measure eliminated the fee to those over the
age of 65.
REGISTERED SUPPORT / OPPOSITION :
Support
Consumers Union
Opposition
AB 2374
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Equifax, Inc.
TransUnion LLC
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081