California Bill SB 1384 Would Authorize Consumers to Place Security Freezes on Consumer Reports

While existing law allows California consumers to place security freezes on their credit files maintained by the three major credit reporting agencies Equifax, Experian, and TransUnion, new legislation – Senate Bill 1384 (SB 1384) ‘Consumer Reporting Agencies Act’ – would authorize consumers to place similar security freezes on certain other consumer reports containing private financial information. Introduced by State Senator Joe Simitian (D-Palo Alto), SB 1384 defines a “nationwide specialty consumer reporting agency” and “consumer file” for purposes of California law and authorizes consumers to place security freezes on consumer files compiled and maintained by nationwide specialty consumer reporting agencies. The full text of the bill is here: California SB 1384.

SB 1384 defines a “consumer credit reporting agency” as any person who “regularly engages in whole or in part in the business of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer credit reports to third parties.” Along with a consumer credit reporting agency, SB 1384 also defines “nationwide specialty consumer reporting agency” as a consumer reporting agency that compiles and maintains “consumer files” on a nationwide basis relating to the following:

  • Medical records or payments.
  • Residential or tenant history.
  • Check writing history.
  • Employment history.
  • Insurance claims.

If passed, SB 1384 would amend several sections of the Civil Code relating to consumer information privacy with, among other additions, the following:

  • Consumers may elect to place a “security freeze” on their consumer credit reports or consumer files by making a request in writing by mail to a consumer credit reporting agency or nationwide specialty consumer reporting agency. “Security freeze” means a notice placed in a consumer credit report or consumer file, at the request of the consumer, that prohibits the consumer credit reporting agency or nationwide specialty consumer reporting agency from releasing the consumer credit report or consumer file to a third party without the express authorization of the consumer.
  • A consumer credit reporting agency or nationwide specialty consumer reporting agency shall place a security freeze on a consumer credit report or consumer file no later than three business days after receiving a written request from the consumer.
  • The consumer credit reporting agency or nationwide specialty consumer reporting agency shall send a written confirmation of the security freeze to consumers within 10 business days and shall provide consumers with a unique personal identification number or password to be used by consumers when providing authorization for the release of their consumer credit report or consumer file information.
  • If consumers want to allow their credit reports or consumer files to be accessed while a freeze is in place, they can contact the consumer credit reporting agency or nationwide specialty consumer reporting agency and request that the freeze be temporarily lifted by providing proper identification or unique personal identification number or password provided by the consumer credit reporting agency or nationwide specialty consumer reporting agency.
  • A consumer credit reporting agency or nationwide specialty consumer reporting agency that receives a request from a consumer to temporarily lift a security freeze on a consumer credit report or consumer file, or to remove the security freeze entirely, must comply with the request no later than three business days after receiving the request.

In addition, SB 1384 would allow a third party who requests access to a consumer credit report or consumer file in connection with an application for credit or any other use to “treat the application as incomplete if a security freeze is in effect and the consumer does not allow his or her credit report or consumer file to be accessed for that specific party or period of time.”

By authorizing consumers to place a security freeze on “consumer files” compiled and maintained by “nationwide specialty consumer reporting agencies” relating to employment history, SB 1384 could potentially include background screening firms that maintain ongoing databases on the past employment history of job applicants. SB 1384 may also impact other firms that maintain “consumer files” as defined in the bill, such as tenant screening databases.

“The plain language of the bill does not appear to directly impact background screening firms that work directly with employers and only gather employment information on an applicant when a request for a background checks made,” according to background check expert Lester Rosen. “However, there can be an impact if a consumer freezes their past employment history file, which could potentially delay obtaining that information,” says Rosen, author of ‘The Safe Hiring Manual,’ a comprehensive guide to employment screening.

“The common denominator appears to be records that are related to an applicant’s financial condition,” adds Rosen, founder and CEO of San Francisco-area based background check firm Employment Screening Resources (ESR).

The full text of the Senate Bill 1384 (SB 1384) ‘Consumer Reporting Agencies Act’ is available at: http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_1351-1400/sb_1384_bill_20120224_introduced.pdf.

For more information about background checks, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by the National Association of Professional Background Screeners (NAPBS) – at http://www.esrcheck.com or call 415.898.0044.

Sources:
http://www.senatorsimitian.com/entry/sb_1384_security_freeze_on_consumer_reports/
http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_1351-1400/sb_1384_bill_20120224_introduced.pdf

About Employment Screening Resources (ESR):

Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM’– provides accurate and actionable information, empowering employers to make informed safe hiring decisions for the benefit for our clients, their employees, and the public. ESR literally wrote the book on background screening with “The Safe Hiring Manual” by Founder and CEO Lester Rosen. ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by a small percentage of screening firms. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about Employment Screening Resources (ESR), visit http://www.esrcheck.com/ or call 415.898.0044 or 888.999.4474.

About ESR News:

The Employment Screening Resources (ESR) News blog – ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at tahearn@esrcheck.com.