Assigned to CED                                                                                                                              FOR COMMITTEE

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

FACT SHEET FOR S.B. 1347

freezing consumer reports; identity theft

Purpose

            Allows a consumer to place a security freeze on the consumer’s consumer report. 

Background

            According to the Federal Trade Commission (FTC), the major metropolitan areas with the highest per capita rates of identity theft in 2005 were: 1) Phoenix/Mesa/Scottsdale, AZ; 2) Las Vegas/Paradise, NV; and 3) Riverside/San Bernardino/Ontario, CA.   In 2005, the most common identity theft complaints related to credit card fraud, followed by phone or utility fraud, bank fraud and employment-related fraud.   The Identity Theft Data Clearinghouse administered by the FTC and shared through the Consumer Sentinel reports that, in 2005, 9,320 identity theft complaints were filed from Arizona victims.

The growing concern of identity theft has induced states to look at ways to provide possible protection from identity theft.  California was the first state to enact legislation allowing residents to place a security freeze on their consumer credit report. If a freeze is in place, a consumer reporting agency is prohibited from releasing the consumer’s credit report or any information from the report without the consumer’s express authorization.  As of December 2005, at least 11 states had security freeze laws.

            There is no anticipated fiscal impact to the state General Fund associated with this measure.

Provisions

1. Allows a consumer to request in writing, by certified mail, that a consumer reporting agency (CRA) place a security freeze on the consumer’s consumer report.  The security freeze remains in effect until the consumer requests that the freeze be removed.

2. Defines “security freeze” as a notice that is placed in a consumer’s consumer report that prohibits the CRA from releasing the consumer’s consumer report or any information derived from it without the consumer’s express authorization.

3. Prohibits a CRA from releasing information from a consumer’s consumer report to a third party if a security freeze is in place.

4. Requires a CRA to place a security freeze no later than ten business days after receiving a written request.

5. Requires a CRA to send a written confirmation of the security freeze and provide the consumer with a unique personal identification number or password, other than the consumer’s social security number.

6. Allows a consumer report that is frozen to be accessed for a specific period of time, not to exceed 30 calendar days, if the consumer requests that the security freeze be temporarily lifted and provides the CRA proper identification, the unique personal identification number or password, and the proper information regarding the time period the report will be available to users.

7. Requires a CRA to comply with a request to temporarily lift a security freeze within three days business days of receiving the request.

8. Allows a CRA to develop procedures to receive and process in an expedited manner a request from a consumer to temporarily lift a security freeze.

9. Requires a CRA to remove a security freeze if a consumer report was frozen due to a material misrepresentation of fact by the consumer and if the CRA notifies the consumer in writing before removing the freeze on the consumer report.

10. Allows a CRA to advise a third party that a security freeze is in effect.

11. Allows a third party to treat an application for credit or any other use as incomplete if the third party requests access to a consumer report that is frozen.

12. Requires a consumer to provide proper identification and the unique personal identification number or password to remove a security freeze.

13. Requires a CRA to remove a security freeze within three business days of receiving a consumer’s request for removal.

14. Allows a CRA to charge a fee of not more than $15 for each security freeze, removal of a security freeze or temporary lift of a freeze for a period of time. 

15. Allows the $15 fee to be increased annually by an amount not to exceed the retail consumer price index published by the United States Bureau of Labor Statistics in the preceding year.

16. Prohibits a CRA, if a security freeze is in place, from changing a consumer’s name, date of birth , social security number, or address in the consumer’s consumer report without sending a written conformation of the change within 30 days after the change is posted.

17. Requires a CRA to send written confirmation of an address change in a consumer report to both the new and former address.

18. Allows a CRA to make technical modifications of information in a frozen consumer report without written confirmation.

19. Exempts the following from the security freeze provisions:

1. a CRA acting as a reseller of credit information by merging information contained in databases of other CRAs and that does not maintain a permanent database of credit information from which new consumer reports are produced.
2. a person or person’s subsidiary, affiliate or agent with whom the consumer has or had an account, contract or debtor creditor relationship for the purposes of reviewing the account or collecting the financial obligation owing for the account, contract or debt.
3. a subsidiary, affiliate or assignee of a person to whom access has been granted under the temporary lift of a security freeze for a specific period of time.
4. a person acting pursuant to a court order, warrant or subpoena.
5. a state or local agency administering a program for child support obligations.
6. the Department of Health Services to investigate fraud.
7. the Department of Revenue to investigate or collect delinquent taxes or unpaid court orders or to fulfill any of its statutory responsibilities.
8. a person for the purposes of prescreening under the Federal Fair Credit Reporting Act of 1970.
9. a person administering a credit file monitoring subscription service to which the consumer has subscribed.
10. a person providing a consumer with a copy of the consumer’s credit report on the consumer’s request.
11. a person setting or adjusting a rate or claim or underwriting for insurance purposes.

20. States the following are not required to place a security freeze:

• a check services or fraud prevention services company that issues reports on incidents of fraud for the purpose of approving negotiable instruments, electronic funds transfers or similar methods of payments.
• a deposit account information service company that issues reports regarding account closures to inquiring financial institutions for use only in reviewing a consumer request for a deposit account at the inquiring financial institution.

21. Defines “proper identification.”

22. Becomes effective on the general effective date.

Prepared by Senate Research

February 13, 2006

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