Legislation giving Arizona residents the right to freeze their consumer credit reports in an effort to combat identity theft has received overwhelming support in the Senate, a clear sign that lawmakers from both sides of the aisle recognize its need.
In fact, no senator opposed the bill, S1345, both in committee and on the floor, although the bill has undergone substantial changes as its sponsor, Sen. Amanda Aguirre, D-24, tries to respond to concerns raised by stakeholders.
But the measure was assigned to three committees in the House, reducing its chances of getting to the floor. And while it received the nod of members of the Judiciary Committee on March 15, Aguirre said her biggest challenge would be to try to convince the chair of the Rules Committee that her measure is important.
“You just have to follow the rules. If I’ll have to do that, I’ll have to do that,” Aguirre said when asked what she thought of her bill getting assigned to three committees in the House.
So far, the wind is blowing in Aguirre’s direction. Two chairs have been cooperative, and Rep. Kirk Adams, R-19, chairman of the Government Committee, has agreed to ask the speaker to pull the bill from his committee, she said.
“My big challenge would be to convince Representative Robson that this is a good bill to move forward in the Rules Committee,” the senator said.
Rep. Rob Robson, R-20, has held a similar measure by Rep. Marian McClure, R-30. Provisions of the two bills vary, but each would allow a person to freeze his or her consumer credit report, thereby prohibiting a consumer-reporting agency from releasing information without the consumer’s permission.
By moving in this direction, Arizona is joining some 26 other states that allow a credit report freeze, giving consumers a better fighting chance against identity theft, a huge problem in the Valley.
Arizona’s ID theft rate
In fact, Arizona is No. 1 when it comes to identity theft.
A Federal Trade Commission report said the areas with the highest per capita rate of this type of crime in 2005 were Phoenix, Mesa and Scottsdale; cities in Nevada and California came next.
The commission reported that in 2005, some 9,000 complaints from Arizona residents were logged. The Public Interest Research Group (PIRG) believes the number is just the tip of the iceberg.
The research group quoted the FTC as estimating that some 10 million people have been victimized by identity thieves every year. A third of these cases involved the use of stolen information to open new credit accounts, the group said.
“If you become a victim of identity theft and a crook opens new accounts in your name, you will spend, on the average, $1,180 and 60 hours cleaning up your credit record,” Diane Brown of PIRG and Michelle Jun of Consumers Union said in statement.
“Until you are able to repair the damage to your credit record, you will probably have a tougher time getting a good interest rate on a car loan, home mortgage or credit card. These days, a damaged credit record can even prevent you from getting a job,” they said.
PIRG said creditors currently are not required to verify the identity of people applying for credit, which means that a thief could walk into a department store and use stolen information to open a credit account.
Aguirre’s bill prevents that by blocking access to your credit files, the research group said.
Other woes for consumers
Yet the same power could also be a problem for consumers, according to a lobbyist of the retail industry.
Michelle Ahlmer of the Arizona Retailers Association said people may sign up to freeze their credit report without realizing that this means they too cannot access it.
“That is what it means. If you freeze your credit, no one else can get it, but you can’t get it either,” she said.
This could be a problem when the consumer is ready to make a purchase.
This is also a problem for the retail industry, where every second counts and where studies have shown that people are most satisfied when they walk out the door with the purchased goods in hand, according to Ahlmer.
Many stores offer instant credit, giving customers substantial discounts if they open an account. It is a strategy to get people to buy, yet it also is a way for people to save, especially when purchasing big items.
The way Ahlmer put it, if a credit report is frozen when one is ready to buy, both the consumer and the industry lose.
Aguirre said she has earlier accommodated the auto industry by giving consumers the ability to temporarily lift the freeze within 15 minutes after making a request to do so.
That works when buying a car, when people generally have to wait in an office. Not so when buying clothes, according to Ahlmer.
“The problem is while that is far better than three days, that 15 minutes in a retail sale is a millennium,” she said.
“If you are going through that process and if you get up there and the sales associate says you can save 10 percent today if you want to open an instant credit, and that instant credit turns into 15 minutes, that is not a satisfactory customer service moment,” she said.
Ahlmer, however, was hard pressed to come up with an alternative.
There is little disagreement from stakeholders on the need to address the booming crime.
Aguirre had a constituent whose identity was stolen and whose Social Security number was still used in another state, despite reporting the matter to authorities and applying for a credit freeze.
Worse, the Internal Revenue Service had also wanted to collect taxes from him, most likely as a result of transactions he never made.
“We need to put all the guards in place (against identity theft),” Aguirre said.
Aguirre’s bill sailed through in the Senate Commerce Committee with a 7-0 vote in the middle of last month. Later on the Senate floor the vote was 30-0, and the House Judiciary Committee on March 15 approved it 7-0.
But the measure had yet to hurdle the Commerce and Government committees at press time.
Then it would have to go through the Rules Committee, where Robson has held a similar measure by McClure.
Robson refused to pass judgment on the Aguirre bill. He said he would look at it when it reaches his committee. But his action on the McClure bill might be a harbinger of what awaits the Senate measure.
He gave two reasons for holding the McClure bill.
“You are able to deal with credit freezes currently,” he said.
It also creates another bureaucratic process when “you can do a lot of these things already,” he added.
“If you are going to have a way where you are going to pay $5 for this to do that, to do this, who are they? Who do you complain to? Who do you report it to? It’s a whole host of issues…,” he said.
Robson raised another point. Stealing a credit card does not automatically amount to stealing an identity.
“Stealing one’s credit card is theft,” he said. “Identity theft is when you live under a person’s identity, when you assume an identity and live under it.”
“I have been very proactive in the area of ID theft, in recognizing that wherever we could improve the process, we should,” Robson said. “It’s just that sometimes we want to make sure that we are not overreaching in what we do that eventually could stifle an individual’s ability to gain access to their own identity and also affect commerce along the way.”
Robson recognizes identity theft as a huge problem for the state, but he thinks a credit freeze does not necessarily work to prevent it.
“We’re gradually wrestling with this as a society,” he said. “We have imposed laws on the private sector now as well as on the public sector in protecting people’s identity information.”
A fact sheet Robson sent to the Arizona Capitol Times states that consumers, if their personal information has been compromised, can ask the fraud departments or any of the three consumer reporting companies to place a “fraud alert” on their report, freezing it.
There are two types of fraud alerts, the fact sheet says. An initial alert stays for at least 90 days. Consumers can ask for it if they suspect they have been or are about to be a victim of identity theft, such as when their wallets have been stolen.
An extended alert, on the other hand, stays for seven years, and may be requested by a victim of identity theft.
Aguirre said her bill allows the freeze to stay as long as the consumer wants it.
Rep. Michelle Reagan, R-8, heard McClure’s bill in her Commerce Committee and supported it. She told the Capitol Times that she also supports some provisions of the Aguirre bill.
But she indicated that Aguirre might have a difficult time convincing Robson to hear her bill.
“I heard (in committee a) similar bill of Representative McClure’s. I voted yes, it passed and it still held in Rules. I have told this to Senator Aguirre. I don’t want to waste her time hearing a bill in committee if it is DOA in Rules,” she said.
“Whether or not this gets to the floor, is up to leadership. But, yes, I support many provisions of this bill,” she added.
Aguirre said efforts are being made to try to make Robson “sympathetic to the issue.”
Senator: Bill is work in progess
The senator called her bill a work in progress and so far, she appeared satisfied with the changes it has undergone.
Another point of contention is the amount of fee to be charged when asking for a freeze or a lifting of the freeze.
Aguirre’s original bill placed the fee at no more than $12. She took out that provision as a result of negotiation with stakeholders. But some lawmakers wanted to specify a fee, she said.
PIRG said the matter should not be left to the credit agencies to decide, and suggested that a $5-fee would be affordable.
The bill sets a mechanism to freeze a credit report through certified mail. The freeze is not lifted until the consumer says so.
Under the measure, a consumer-reporting agency will provide a consumer with a password, with which he or she will use to lift the freeze.
It requires a consumer-reporting agency to temporarily lift the freeze within three business days upon receiving a consumer’s request by mail or 15 minutes after the consumer’s request is received by phone, fax, or Internet during business hours.
It allows an agency to charge a reasonable fee for the process, but prohibits the agency from collecting from an identity theft victim who presents a valid police report.
There are exemptions to the freeze, and changes in the House have expanded that list.
Those exempted now include certain agencies and the courts, enabling a court to conduct an audit, investigate fraud or screen an applicant.
The changes also provide the Attorney General’s Office the tools to enforce the act.
In fact, the Attorney General Office’s has been at the forefront of efforts to combat identity theft, aggressively campaigning against groups that engage in credit card fraud and proactively responding to the problem.
Last year, Attorney General Terry Goddard unveiled a program, called the Fraud Fighter Account, which would allow consumers to protect their bank accounts by notifying a trusted party if suspicious transactions have been made, limiting electronic access to accounts, or delaying suspicious transactions.
As the bill advances, the banking industry has notified Aguirre that it wants to be involved in the process.
“The banking industry is the latest one (to contact me),” the senator said, adding she would also want to address their concerns.
“This has a lot of ramifications and impact so I’m very much aware that,” she said.
Banking industry reaction
An industry lobbyist confirmed this.
“Yes, we are monitoring a bill and we have made requests for some amendments. The amendments that we want to the bill are mostly in line with what other states have done,” said Tanya Wheeless of the Arizona Bankers Association.
“There a number of states that have either already passed this bill or are looking to this session and from my members’ perspective, many of them operate in multiple states and their businesses cross state lines. So we’d like to see the bill as uniform as possible,” she said.
But Wheeless clarified that the exemptions would only apply to certain transactions.
“Some of our thoughts on the bill are that certainly there can be benefit for certain consumers. There are also concerns that it will create barriers for some people as they try and obtain credit,” she said, echoing a point raised by the retail industry.
In an article, moneycentral.com quoted a federal official as saying 80 percent of victims who have called said they do not know how their identities were stolen.
But there are ways to protect one’s self, according to the article. They include shredding credit card statements and other documents that contain private financial information; securing one’s mail; never carrying a Social Security card; never leaving ATM, credit card or gas station receipts behind; never giving out personal information to anyone you don’t trust (and contacting the company yourself if you are sure that the call was legitimate); asking salespeople if divulging a Social Security number is necessary; and, reviewing credit card statements carefully.