BILL ANALYSIS �
SENATE HUMAN
SERVICES COMMITTEE
Senator Jim Beall, Chair
BILL NO: AB 1658
A
AUTHOR: Jones-Sawyer
B
VERSION: May 23, 2014
HEARING DATE: June 10, 2014
1
FISCAL: Yes
6
5
CONSULTANT: Sara Rogers
8
SUBJECT
Foster care: consumer credit reports: security freeze
SUMMARY
This bill requires a consumer credit reporting agency to
place a security freeze on the credit report of any child
between 10 and 15 years of age who is placed into foster
care, or, if no report exists, to preclude a credit card
from being made in the name of that child. This bill also
requires a county child welfare agency to notify each of
the three major credit reporting agencies that a child 10
and 15 years of age is in foster care, to discover whether
the child has an active credit report, and take specified
actions in response.
ABSTRACT
Existing Law:
1.The federal Child and Family Services Improvement and
Innovation Act of 2011 reauthorized Title IV-B child and
Continued---
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family service programs and renewed Title IV-E state
child welfare waivers. This broad legislation required
states to assist each foster youth who is 16 obtain,
interpret and resolve inconsistencies in a credit report
each year they are in placement to help prevent identity
theft. [PL 112-34 (Section 475(5)(I)]
2.Requires, upon the 16th birthday of a child in foster
care, a county welfare or probation department to request
a free annual credit check available under the Fair
Credit Reporting Act, from each of the three major credit
reporting agencies. (WIC 10618.6(a))
3.Requires a county welfare or probation department to
assist a nonminor dependent annually in requesting
consumer credit disclosures from each of the three major
credit reporting agencies, pursuant to the free annual
disclosure provision of the federal Fair Credit Reporting
Act, while the nonminor dependent is under the
jurisdiction of the juvenile court. (WIC 10618.6 (b))
4.Requires a county social worker or probation officer to
ensure that the dependent child or nonminor dependent
receives assistance with interpreting the consumer credit
disclosure and resolving any inaccuracies. Additionally
provides that the assistance may include, but is not
limited to, referring the youth to a governmental or
nonprofit agency that provides consumer credit services.
(WIC 10618.6 (c))
This bill:
1.Requires a consumer reporting agency, following
notification from a county child welfare or probation
department that a child between the ages of 10 and 15 has
been placed into foster care, to notify the county
whether the child has an active consumer credit record,
and if so, to place a security freeze on the child's
credit report, or if not, to preclude the child's
information from being used to create a credit account.
2.Requires a county child welfare or probation department
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to, upon the entry of a child between the ages of 10 and
15 into foster care, notify each of the three major
credit reporting agencies that the child is in foster
care, to discover whether the child has an active
consumer credit report.
3.Provides that if an active consumer credit report is
discovered, the county child welfare or probation
department shall do both of the following:
Immediately request that the credit reporting
agencies place a freeze on the child's report; and
Work with the California Department of
Justice's Privacy Enforcement and Protection Unit to
resolve any credit irregularities or negative
actions that have been discovered on the foster
child's credit report.
1.Requires that if the child does not have an active
consumer credit report, the county department must
provide the credit reporting agencies with information
necessary to preclude a foster child from having a credit
account created in his or her name.
2.Requires that if a child in foster care, age 16 or over,
is found to have an active consumer credit report, the
county social worker or probation officer must
immediately notify the three major credit reporting
agencies of the child's placement in foster care and to
request a freeze be placed on the report, unless the
child declines.
3.Provides that if a child in foster care, age 16 or over,
is not found to have an active consumer credit report,
the county social worker or probation officer shall
provide the credit reporting agencies with information
necessary to preclude a foster child from having a credit
account created in his or her name, unless the child
STAFF ANALYSIS OF ASSEMBLY BILL 1658 (Jones-Sawyer)
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declines.
4.Requires that if a nonminor is found to have an active
consumer credit report, the county social worker or
probation officer must ensure that the nonminor dependent
receives assistance with the placement of a freeze on his
or her credit report.
5.Requires CDSS, in consultation with specified
stakeholders to issue instructions to counties via an
all-county letter or similar instructions to do all of
the following:
Provide the circumstances by which a credit
report freeze can be lifted;
Provide instruction to counties regarding how
they shall notify the three major credit reporting
agencies that a foster child can reacquire the
ability to develop credit.
FISCAL IMPACT
An Assembly Appropriations analysis states there are
ongoing administrative costs to CDSS of approximately $2.9
million (GF) to handle cases. The affected foster care
caseload is approximately 41,000 in 2014-15. DSS indicates
it takes a social worker about one hour to handle or freeze
an account. Additionally, the analysis states there are
unknown costs to cover fees charged by credit reporting
agencies (capped in statute at $10 per agency) to freeze
credit reports. Assuming that 5% of the reports are frozen,
costs of $30 per child x 2,050 cases would be approximately
$60,000 (GF). The analysis also notes ongoing CDSS costs of
$140,000 associated with unfreezing credit accounts, plus
$60,000 in fees to the credit reporting agencies. The
analysis states it is unclear in the bill who would pay the
fee for unfreezing the reports.
BACKGROUND AND DISCUSSION
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Purpose of the bill:
According to the author, the purpose of the bill is to
protect against identity theft and other errors that can
negatively impact the clean credit of foster youth, given
that their personal information touches many hands
throughout the foster care system prior to reaching
adulthood.
Credit Records of Minors
Minors generally are prohibited from opening credit
accounts on their own. While in some instances a minor may
have a legitimate credit report as a result of
"piggybacking" on the account of a parent or guardian who
has included the minor as a joint account holder or an
authorized user on one of the parent's accounts, it is rare
for a minor to have a legitimate credit report or history.
Increasingly, minors have been targeted for identity theft
which can go undetected for years, until the minor reaches
adulthood and applies for a credit card or loan. A 2011
study conducted by Carnegie Mellon University found
children are far more likely to be targeted for identity
theft for their unused social security numbers. The report
found that of 42,232 children polled, 10 percent, or 4,311
of them, had their identities stolen. When compared to the
rate of identity theft in adults, children in this study
were 51% more likely to experience identity theft.<1>
Establishing credit under a minor's identity often involves
using a minor's personal information, such as name and
Social Security Number, to obtain a credit card, loan or
employment in the child's name. When a parent or guardian
suspects their child's identity has been stolen, the parent
or guardian may request a credit report on the minor's
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<1> Child Identity Theft: New Evidence Indicates Identity
Thieves are Targeting Children for Unused Social Security
Numbers. Richard Power, Distinguished Fellow; Carnegie
Mellon CyLab. April 2011.
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behalf in writing and report any suspected fraud to the
credit agencies who will place a fraud alert on the child's
report.<2> Foster youth have been identified as being
particularly vulnerable to identity theft as a result of
frequent moves between multiple placements.
AB 2985 (Maze), Chapter 387, Statutes of 2006 required
county welfare departments to request the credit histories
of foster youth at the age of 16 and to assist youth in
correcting any inaccuracies or negative findings.
Subsequently, the federal Child and Family Services
Improvement and Innovation Act of 2011 mirrored and
expanded the law, requiring each foster youth age 16 and
older receive an annual consumer credit report until
juvenile court jurisdiction is terminated, and requiring
the youth receive assistance in interpreting and resolving
any inaccuracies in his or her credit report. AB 1521
(Liu), Chapter 847, Statutes of 2012 enacted federal
compliance with this Act.
California's 2006 law was not immediately implemented due
to procedural barriers with the major credit reporting
agencies that did not wish to receive the nearly 5,000
annual individual requests from counties. CDSS developed an
"electronic batch request process" with the credit
reporting agencies which began implementation in 2010.<3>
Under this process, CDSS extracts needed information from
the Child Welfare Services/Case Management System (CWS/CMS)
on all youth in foster care, provides it electronically to
a dedicated website maintained by the credit reporting
agencies that then provide credit reports back to CDSS.
CDSS then produces a list for each participating county
indicating, for each child, whether a credit report was
found. If there is an indication of a credit report, the
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<2> Office of Attorney General. Consumer Information Sheet
3B 2012.
<3> California Office of Privacy Protection. A Better
Start: Clearing Up Credit Records for California Foster
Children . 2011
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county then must make a separate request with the credit
reporting agency and take the statutorily required actions
to protect the youth.<4> In five counties that have not
opted to receive the batch file, counties must adhere to
the differing request procedures established by each of the
three major reporting agencies Equifax and TransUnion
requires counties to open an electronic account and pay a
$500 fee. For Experian, counties must submit a formal
letter requesting the report, which must include a copy of
the court's dependency order with sensitive information
redacted.
A 2010 pilot headed by the California Office of Privacy
Protection, the Los Angeles County Department of Consumer
Affairs and the Los Angeles County Department of Children
and Family Services, with the assistance of the three
national credit reporting agencies, was designed to test
procedures for achieving the law's intent. The pilot and
subsequent report<5> evaluated the effectiveness of the
system in reviewing the credit histories of 2,110 foster
children in Los Angeles County. It found that 5 percent, or
104 foster children, were victims of error or fraud and
that those children had 247 separate accounts reported in
their names. The average account balance was $1,811, with
the largest being a home loan of over $200,000. The
accounts found were two to three years old, opened when the
child was 14 years old on average, and 12% of the children
had records loosely linked to them by Social Security
number only, which while not affecting their credit ratings
could nevertheless pose problems for them in the future.
The project team successfully cleared all negative items
from the credit reports those foster children.
COMMENTS
The County Welfare Directors Association (CWDA) expresses
numerous concerns with the implementation of the bill as
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<4> CDSS ACL No. 14-23
<5> California Office of Privacy Protection. A Better
Start: Clearing Up Credit Records for California Foster
Children . 2011
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drafted, acknowledging that conversations with the author
that are continuing. Specifically, CDWA raises concerns
that County Welfare Agencies are precluded from disclosing
information about children in their care, while this bill
would require these agencies to disclose such information
to three credit reporting agencies. CDWA instead recommends
the bill impose additional requirements on credit agencies
to better ensure credit is not issued to any minors,
whether they are in foster care or not. Additionally, CDWA
states that as written, the obligation to notify credit
reporting agencies could arise each time a child enters
into foster care, or is assigned a new placement resulting
in multiple and duplicative notification requirements.
Further CDWA states that the bill requires the county to
"discover" whether the foster child has an active consumer
credit report, but doesn't clarify how. CDWA recommends the
bill specify the manner in which such discovery is to
occur, from whom this information is supposed to be
garnered and how. Finally, CWDA states that the county
obligation to place a freeze on the child's report is
obligatory, yet the establishment of a process to
"unfreeze" the account is subject to the findings of a
working group established by the bill thus imposing an
obligation on counties, with which they have no actual
ability to comply. CWDA instead recommends the bill be
amended require this of credit reporting agencies.
The author has arranged a diverse stakeholder meeting that
includes representatives from CDWA, credit reporting
agencies and others, to address numerous concerns with the
bill. Of particular concern is the concept of "freezing"
and "unfreezing" a youth's credit report, which may not be
technically feasible. Based on the outcome of the
stakeholder meeting, the bill may be substantially amended,
should it pass this committee and be referred to the Senate
Judiciary Committee.
PRIOR VOTES
Assembly Floor 78 - 0
Assembly Appropriations 17 - 0
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Assembly Banking and Finance11 - 0
Assembly Human Services 7 - 0
POSITIONS
Support: AFSCME
California Reinvestment Coalition
City of Los Angeles
Common Sense Media
Family Online Safety Institute
National Association of Social Workers
Western Center on Law and Poverty
Oppose: None received.
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