BILL ANALYSIS Ó
AB 2374
Page 1
Date of Hearing: May 8, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2374 (Hernandez) - As Amended: March 29, 2012
As Proposed to Be Amended
SUBJECT : CONSUMER CREDIT REPORTS: SECURITY FREEZES
KEY ISSUE : IN ORDER TO ASSIST SENIORS TO PROTECT THEMSELVES
FROM IDENTITY THEFT, SHOULD CREDIT REPORTING AGENCIES BE
PROHIBITED FROM CHARGING A FEE TO A CONSUMER AGE 65 OR OLDER FOR
PLACING A SECURITY FREEZE ON THAT CONSUMER'S CREDIT REPORT?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
According to the author, this bill is needed to help protect
California seniors, many of whom live on a fixed income, from
identity thieves who are thought to target seniors because they
do not typically open new credit accounts and therefore are much
less likely to monitor their credit files or be able to detect
if a fraudulent account has been opened in their name. The
proponents report 2011 data indicating that the rate of identity
theft complaints among California seniors has increased 3% from
last year, and that seniors should be assisted in their efforts
to combat potential identity theft. As proposed to be amended,
this bill prohibits a consumer credit reporting agency from
charging any fee to a consumer age 65 or older for placing a
security freeze on that consumer's credit report, but leaves in
place current authority to charge a fee of up to $5 for removing
or temporarily lifting a freeze. The proposed amendments have
removed opposition to this bill by the three major credit
reporting agencies, and as a result the bill now has no known
opposition.
SUMMARY : Prohibits a consumer credit reporting agency (CRA)
from charging any fee to a consumer age 65 or older for placing
a security freeze on that consumer's credit report.
EXISTING LAW :
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1)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. (Civil Code Section
1785.11.2. All further references are to this code unless
otherwise stated.)
2)Allows a consumer to place a security freeze on his or her
credit report by making a written request by mail to a CRA.
(Section 1785.11.2(a).)
3)Allows a consumer to request a temporary lift of a security
freeze in order to allow his or her credit report to be
accessed for a specific party or period of time while the
freeze is in place, upon provision of proper identification
and other information. Further requires a CRA that receives a
request for a temporary lift of a security freeze to do so
within three business days of receiving the request. (Section
1785.11.2, subd.(d) and (e).)
4)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.
(Section 1785.11.2(i).)
5)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,
or temporary lift of the freeze for a period of time, except
that a consumer who is 65 years of age or older and who has
provided identification confirming his or her age may not be
charged a fee exceeding $5 for the same services. (Section
1785.11.2 (m).)
6)Requires that whenever a CRA provides a written disclosure to
a consumer, it must also include a written summary of rights
informing the consumer of his or her 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, and specifies the language of the written summary of
rights that is sufficient to meet this requirement. (Section
1785.15.)
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COMMENTS : This bill seeks to help protect California seniors,
many of whom live on a fixed income, from the threat of identity
theft. According to the author, identity thieves target seniors
because they do not typically open new credit accounts and
therefore are much less likely to monitor their credit files or
to detect if a fraudulent account has been opened in their name.
Background on security freezes. Under existing state law, a
consumer may place a security freeze on his or her credit
report. This means that, at the request of the consumer and
subject to certain exceptions, the credit reporting agency shall
not release the credit report without the prior express
authorization of the consumer. Typically, consumers request a
freeze if they believe that their personal information has been
compromised in some manner. For example, if an identity thief
were to obtain another person's social security number and
address, then the thief could attempt to obtain a line of credit
(e.g. apply for a credit card) in that person's name. Placing a
freeze on a credit report would prevent the identity thief from
opening that line of credit.
When a consumer places a security freeze on their file, they are
provided a personal identification number or password to use to
authorize the temporary release (also known as a "lift") of
their credit report for a specific person or period, or to
authorize the permanent removal of the security freeze on their
file. To lift or remove the security freeze, the consumer must
contact the CRA and provide verification of his or her identity,
the personal identification number or password provided by the
CRA, and a statement of authorization.
Recent statistics indicate California seniors may be at
increased risk of identity theft. According to an annual report
for 2011 by the Consumer Sentinel Network, California ranks
third in the nation, only behind Florida and Georgia, for the
number of identity theft complaints per capita (103.6 complaints
per 100,000 residents). Overall, there were a total of 38,607
identity theft complaints made by Californians in 2011. Among
these complaints, 15% were made by consumers age 60 or over-a
three percent increase from 2010 for the same age category (data
was not categorized to allow reporting for those age 65 or
over). In addition, according to a recent study by the Insight
Center for Community Economic Development, nearly 1.76 million
(47%) of seniors in California are struggling to make ends meet,
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have incomes averaging below $21,763 per year, and have limited
access to public assistance programs. For these reasons, the
author contends that seniors should be assisted in their efforts
to combat potential identity theft that may be on the rise.
Current fees charged for placing a security freeze. Existing
law prohibits charging a fee to any person who has been a victim
(or potential victim) of identity theft and can document that
with a police report or a DMV investigative report. In all
other cases, a consumer under 65 years of age may be charged up
to $10 to place a freeze, while consumers age 65 or older may be
charged a fee of up to $5. Because it is recommended practice
to contact all three of the major credit reporting agencies
(Experian, Trans Union, and Equifax) when monitoring one's
credit report, the consumer may spend up to $30 (or $15 if a
senior) to place a freeze with each of the three agencies.
According to a national 2011 survey of statutes regarding
security freezes by the National Conference of State
Legislatures (NCSL), other states allow fees ranging from $3 to
$20 to place a security freeze. However, twelve states do not
allow consumers 65 or older to be charged fees for security
freezes: Illinois, Georgia, Florida, Indiana, Louisiana, North
Carolina, New Mexico, Oklahoma, Pennsylvania, Washington, South
Carolina, and Rhode Island. The author notes that both Florida
and Georgia, the only two states that have a higher per capita
rate of identity theft complaints than California, are among the
twelve that do not allow seniors to be charged a fee for placing
a security freeze.
Author's amendments. As proposed to be amended, this bill
prohibits a consumer credit reporting agency from charging any
fee to a consumer age 65 or older for placing a security freeze
on that consumer's credit report, but leaves in place current
authority to charge a fee of up to $5 for removing or
temporarily lifting a freeze. The proposed amendments have
removed opposition to this bill by the three major credit
reporting agencies, and as a result the bill now has no known
opposition.
Previous related legislation: AB 372 (Salas) Chapter 151,
Statutes of 2008, authorizes a consumer credit reporting agency,
except as specified, 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 placing a security freeze, removing the freeze,
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or lifting the freeze for a period of time or a specific party.
REGISTERED SUPPORT / OPPOSITION :
Support
Consumers Union
Senior Legislature
Opposition
None on file
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334