BILL ANALYSIS �
AB 1658
Page 1
Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
AB 1658 (Jones-Sawyer) - As Amended: March 17, 2014
SUBJECT : Foster care: consumer credit reports: security
freeze.
SUMMARY : Specifies the process for placement of a credit
freeze for a child in foster care. Specifically, this bill :
1)Requires that upon entry into foster care of a child under 16
years of age, or for a child in foster care placement on their
16th birthday, a county welfare agency (CWA) or county
probation department (CPD) shall do all of the following:
a) Notify each of the three major credit reporting agencies
(CRAs) that the child is in foster care;
b) Discover whether the child has an active consumer credit
report; and,
c) In the case of a child that does have a report,
immediately request that the CRAs place a freeze on the
child's report and work with the Department of Justice's
Enforcement and Protection Unit to resolve any credit
irregularities or negative actions that have been
discovered on the credit report.
2)Provides that following notification from a CWA or CPD of the
placement of a child into foster care, the CRA shall do the
following:
a) Notify the CWA or CPD of whether the child placed in
foster care has an active consumer credit record;
b) If the child is found to have a report, place a security
freeze on the child's credit report; and,
c) If the child is found not to have an active consumer
credit report, preclude the child's information from being
used to create a credit account in his or her name.
3)Specifies that no later than July 1, 2015, the Department of
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Social Services (DSS) shall, in consultation with the
Administrative Office of the Courts, the Department of
Justice's Privacy Enforcement and Protection Unit, the
California Welfare Directors Association, the County Probation
Officers of California, youth-based organizations made up of
current and former foster children, and consumer, privacy, and
foster children advocacy organizations, issue instructions to
counties via an all-county letter or similar instruction to do
all of the following:
a) Provide the circumstances under which a security freeze
of a foster child's credit report is lifted, including when
the child exits, emancipates, or runs away from foster
care, and by whom the freeze can be lifted;
b) Provide instructions as to how a CWD or CPD shall notify
the three major credit reporting agencies that a foster
child can reacquire the ability to develop credit; and,
c) Identify required processes and best practices in the
identification and resolution of credit irregularities or
negative actions on a foster child's credit report,
including, but not limited to, entering the information
into the foster child's case plan and notification of the
juvenile court, child's counsel, and other adults
responsible for the child's care, as necessary.
EXISTING LAW
1)Requires a CWA to request a consumer credit report from each
of the three major CRAs on behalf of each youth who is under
the jurisdiction of the juvenile court on his or her 16th
birthday. (Welfare & Institutions Code (WIC) Section
10618.6(a))
2)Requires a CWA or CPD to assist any nonminor dependent (NMD)
with requesting a consumer credit report from each of the
three major CRAs. (WIC Section 10618.6(b))
3)Requires county social workers and county probation officers
to ensure that minors in foster care and NMDs receive
assistance with interpreting their credit report and
addressing any inaccuracies with the report. (WIC Section
10618.6(c))
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4)Exempts social workers and probation officers from providing
direct assistance with interpreting or resolving inaccuracies
of a minor in foster care or NMD's consumer credit report.
(WIC Section 10618.6(c))
5)Authorizes CWAs, CPDs and the DSS to release necessary
information to CRAs for the purposes of requesting a consumer
credit report on behalf of minors in foster care. (WIC
Section 10618.6(d))
6)Regulates consumer CRAs via the Consumer Credit Reporting
Agencies Act. (Civil Code, Section 1785.1 et seq. All further
references are to the Civil Code).
7)Defines consumer credit report as any written, oral, or other
communication of any information by a consumer CRA 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,
or (4) other purposes authorized in Section 1785.11. (Section
1785.3).
8)Requires that every CRA shall, upon request and proper
identification of any consumer, allow the consumer to visually
inspect all files maintained regarding that consumer at the
time of the request. (Section 1785.10)
9)Specifies the circumstances under which a CRA shall furnish a
consumer credit report. (Section 1785.11)
10) Requires a user of a consumer credit report to
provide written notice of an adverse action to the consumer.
(Section 1785.20).
FISCAL EFFECT : Unknown
COMMENTS :
According to information provided by the author's office the
bill is needed for the following reasons:
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Identity theft is a perennial crime that has taken on new
dimensions in the Information Age. Children's personal
information, such as a Social Security number, is valued by
identify thieves because there is typically no credit file
associated with the data. This means that thieves can pair
the information with any name and date of birth to create a
false identity, using it to purchase homes and automobiles,
open credit card accounts and obtain driver's licenses.
The damage can go undiscovered for years.
The potential impact of identity theft on a child's future
is profound. It can destroy or severely damage a child's
ability to get approval for student loans, acquire a mobile
phone, obtain a job or secure a place to live.
Foster children may be at a higher risk of falling victim
to identify theft than other children. They suffer the
added vulnerability of having their personal information
pass through the hands of many people as they are moved
around in the foster care system. Without a family safety
net to help them through the laborious process of clearing
up their credit records, the repercussions can hinder their
changes of a successful entry into adult life.
As noted in the statement above this bill is designed to
prevent, and if necessary mitigate the impact of identity theft
of children in the foster care system. AB 1658 would attempt to
prevent the identity theft of minors in the foster care system
by requiring that CWA, or CPD find out if a minor has a credit
record and if so place a freeze on that record. If the child
does not have a record they would request from the CRAs that
they prevent any credit record from being opened for the child,
thereby preventing any authorizations of new credit.
A 2012 Child Identity Fraud Survey, conducted by Javelin
Strategy & Research revealed the following concerning child
identity theft:
1)Social Security numbers (SSN) are the most commonly used piece
of information by identity thieves targeting children. In
fact, 56% of respondents reported theft or misuse of a child's
SSN.
2)The most common way criminals use a child's personal
information is to combine a child's SSN with a different date
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of birth to create a new identity that can be used to commit
fraud. Fraud involving "synthetic identity" is especially
difficult for victims and industry to detect.
3)The study found that 2.5% of U.S. households with children
under age 18 experienced child identity fraud at some point
during their child's lifetime. This equates to one in 40
households with minor children being affected by this crime.
4)Fraud committed by family and friends is to blame in many
child ID theft cases. The data shows that 27% of respondents
reported knowing the individual responsible for the crime.
5)Low-income households are disproportionately affected by child
identity theft. As family income decreases, the risk of child
identity fraud increases. While 50% of households of child
identity theft victims had incomes under $35,000, only 10% of
households of child identity theft victims had incomes of more
than $100,000.
6)Child identity theft is more difficult to detect and resolve
than adult identity theft. The survey showed that these crimes
took 334 days to detect and 44 hours to resolve, and 17% of
children were victimized for a year or longer.
A 2011 study conducted by Carnegie Mellon University, Child
Identity Theft: New Evidence Indicates Identity Thieves are
Targeting Children for Unused Social Security Numbers, found
that children are far more likely to be targeted for identity
theft for their unused SSN. Specifically, the report found that
of 42,232 children polled, over 10%, or 4,311 of them, were
found to have had their identity stolen. When compared to the
rate of identity theft among adults, children in this study were
51% more likely to experience identity theft. Further
exacerbating this finding is the fact that parents and children
often do not find out the youth is a victim of identity theft
until he or she applies for a job, opens a financial account, or
is notified by law enforcement that his or her personal
information has been stolen.
However, children in foster care who rely upon the state's CWS
to provide for their health and safety are at an even greater
risk than their peers to become victims of identity theft. In
2011, the California Office of Privacy Protection (COPP), now
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known as the Department of Justice's Privacy Enforcement and
Protection Unit, released a report of a year-long pilot project
in Los Angeles County. The pilot project conducted credit checks
on 2,110 foster youth between the ages of 16 and 17 years of
age. It was discovered that 104 children were found to have had
247 financial accounts of varying types; credit cards, bank
accounts, utility accounts, cellular phone and cable contracts,
etc., opened in their name. Several children were found to have
auto loans and one was identified as having a $217,000 mortgage
listed in the child's name. Fortunately, the project also worked
to resolve all 247 accounts and cleared the credit of all 104
children who participated in the pilot. The pilot program found
that four percent of the children were possible victims of
identity theft, but even that cannot be a firm determination
because some of the potentially fraudulent accounts could have
resulted from error, not fraud.
Concerns.
The final conclusions from the pilot project are demonstrative
of the potential problems associated with AB 1658. The CRAs
reported that the transmission process provided for in the pilot
project could not be replicated for all counties individually.
COPP also expressed reservations as to the security risks
involving so many entities in transmitting sensitive data.
Conversely, county agencies sending individual written request
to the CRAs would be very labor intensive versus an electronic
process that could handle bulk requests. The pilot project
concluded that a potential alternative to the county-by-county
process would be to centralize the transmission of requests for
credit reports at the state level with DSS. Another option
recommended was that since half the foster children in the state
are in Los Angeles County then the county continue to perform
the task under the pilot and the other 57 counties would submit
data to the state. AB 1658 takes an alternative approach by
requiring a manual process for all counties in California. The
bill specifies that the county social worker or probation
officer shall make various inquires, and requests with the CRAs
concerning the credit reports of foster children. It also
requires that by July 1, 2015 that DSS, in consultation with
other state entities, issue instructions to the counties on how
to organize this process. It is unclear, even with this
directive, whether that process will avoid a different process
for 58 counties. Even if the process is uniform, this does
increase the transmission of sensitive data across multiple
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entities.
The requirement placed upon the CRAs to provide the credit
report, or place a credit freeze is unclear as to how CWAs
should provide "notification" to the CRA regarding a child in
foster care and how the CRA should "notify" the county welfare
office if they find an active consumer credit report.
Furthermore, the placement of a security freeze typically
involves a fee. California law, Civil Code, Section 1785.11.2
caps this fee at $10 per CRA so in order to place a freeze with
all three CRAs it would be $30 per child. It is unclear who
would pay this fee. AB 1658 also does not provide a process for
how a freeze would be lifted once the child becomes an adult.
The problem of child identity theft may impact foster children
at a higher rate, but it makes the overall problem no less of a
concern. Several other states (Delaware, Illinois, Maryland,
Michigan, Oregon, Texas and Wisconsin) have passed laws
providing a process for parents and guardians to request a
credit freeze, or create a protected credit file for minor
children. The protected credit file is created for the child
without a credit report by establishing a file with details of
the minor that would prevent the opening of any credit accounts.
These statutory processes are detailed as to the interaction
and responsibilities of consumers and the CRAs. They
typically also address the amount of fees that may be charged.
AB 1658 requires certain actions on the part of CWA and CRAs
concerning foster child credit reports but does not specify any
of the process details. As mentioned previously, AB 1658
requires that the DSS issue a letter to CWAs that would outline
the process details; however this letter would not create a
specific process for the CRAs to follow as has been done in
other states.
Staff acknowledges the need to protect minors from identity
theft, yet the problems previously outlined with the current
approach in AB 1658 may create more questions than answers. If
it is deemed necessary to move this bill along to allow further
work on this issue, then the following suggestions may serve as
guidance for future changes:
1)The author may want to consider the formation of a working
group made up of the CRAs, county welfare directors, DSS, the
Attorney General's office and others to coordinate how the
credit freeze process should work for foster children.
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2)Responsibility for the fees associated with a credit freeze
should be clarified.
3)The author may want to consider establishing a process for all
minors to protect their credit as several other states have
done.
4)Rather than require the issuance of a letter to specify the
details and instructions on the process, it may be more
appropriate to put the process in statute if a working group
can come up with a uniform process.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State County and Municipal Employees
(AFSCME)
California Reinvestment Coalition
City of Los Angeles
Common Sense Media
National Association of Social Workers, CA Chapter (NASW-CA)
Symantec Corporation
The Family Online Safety Institute (FOIS)
Western Center on Law and Poverty
1 Individual
Opposition
None on file.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081