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Senate Panel OKs Identity Theft Bill

Businesses would have to verify who is requesting credit on accounts with fraud alerts attached.

March 19, 2003|Carl Ingram | Times Staff Writer

SACRAMENTO — In a renewed attack against thieves who steal people's identities, a legislative committee approved a bill Tuesday to require businesses to verify the identity of customers who put a fraud alert on their credit reports.

The red flag warns retailers, banks, credit card companies and others that the customer may be a victim of identity theft and extra caution should taken to make sure the credit applicant is who he or she claims to be.

The alert is intended to protect not only the consumer but also the business, the Senate Judiciary Committee was told. But a key witness testified that businesses routinely ignore the alerts and grant the credit, freeing impostors to repeatedly victimize the same person.

"Most credit [extenders] do not bother with credit alerts at all," testified Tracey Thomas, an Oakland computer operator who added fraud alerts to her credit reports after her Social Security number was stolen in 1999. The crook used Thomas' identity to run up $15,000 worth of charges in her name.

Thomas said she had mistakenly believed that the alerts would protect her against further fraudulent charges. But to her "great surprise" new charges were rolling in because businesses continued to grant credit to the thief, she said.

"Most of them told me they are under no legal obligation to honor or even look at fraud alerts and considered them too much of a bother to deal with," she said.

"My impostor would destroy my credit until she couldn't get any more credit. Then, she would wait for me to clean it up. I'd clean it up and she'd destroy it all over again," Thomas testified.

Current law allows the person who posts a fraud alert to list a telephone number a merchant can call to verify the identity of the credit applicant.

Under the bill, SB 25, by Sen. Debra Bowen (D-Marina del Rey), it would be mandatory for a business to verify the identity of the applicant by calling the individual at a specific telephone.

If the call failed, the business would be required to take other undefined "reasonable" steps to verify the applicant's identity.

The bill was approved by the Judiciary Committee on a 5-2 vote and sent to the Appropriations Committee for a hearing before it is expected to reach the full Senate.

A similar Bowen bill was passed by the Senate last year, but its identification verification requirements were removed in the Assembly under pressure from car dealers.

At the hearing Tuesday, an automobile dealer representative said dealers do not oppose Bowen's new bill but suggested that businesses be offered other ways to verify identities if the telephone method should fail.

A car dealer could lose a sale if the dealer first had to call a specific telephone that might be many miles away, say at the customer's home or work, the dealer spokesman said. In such a case, the customer would have to leave to take the call at the specified phone so the sale could go through.

Bowen conceded that verification by phone may be inconvenient.

But she said victims had told her they were willing to accept the extra hassle as the price of securing their identity.

The bill would extend to state and local government agencies and public colleges a prohibition on use of Social Security numbers as a personal identifier, except for certain cases in which the number had been used continuously before Jan. 1, 2004.

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