BILL REQ. #:  S-4337.1 

Read first time 01/18/2006.   Referred to Committee on Financial Institutions, Housing & Consumer Protection.

     AN ACT Relating to victims of personal information security breaches; amending RCW 48.18.545; adding new sections to chapter 19.182 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 48.18.545 and 2002 c 360 s 1 are each amended to read as follows:
     (1) For the purposes of this section:
     (a) "Adverse action" has the same meaning as defined in the fair credit reporting act, 15 U.S.C. Sec. 1681 et seq. Adverse actions include, but are not limited to:
     (i) Cancellation, denial, or nonrenewal of personal insurance coverage;
     (ii) Charging a higher insurance premium for personal insurance than would have been offered if the credit history or insurance score had been more favorable, whether the charge is by:
     (A) Application of a rating rule;
     (B) Assignment to a rating tier that does not have the lowest available rates; or
     (C) Placement with an affiliate company that does not offer the lowest rates available to the consumer within the affiliate group of insurance companies; or
     (iii) Any reduction, adverse, or unfavorable change in the terms of coverage or amount of any personal insurance due to a consumer's credit history or insurance score. A reduction, adverse, or unfavorable change in the terms of coverage occurs when:
     (A) Coverage provided to the consumer is not as broad in scope as coverage requested by the consumer but available to other insureds of the insurer or any affiliate; or
     (B) The consumer is not eligible for benefits such as dividends that are available through affiliate insurers.
     (b) "Affiliate" has the same meaning as defined in RCW 48.31B.005(1).
     (c) "Consumer" means an individual policyholder or applicant for insurance.
     (d) "Consumer report" has the same meaning as defined in the fair credit reporting act, 15 U.S.C. Sec. 1681 et seq.
     (e) "Credit history" means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's creditworthiness, credit standing, or credit capacity that is used or expected to be used, or collected in whole or in part, for the purpose of serving as a factor in determining personal insurance premiums or eligibility for coverage.
     (f) "Insurance score" means a number or rating that is derived from an algorithm, computer application, model, or other process that is based in whole or in part on credit history.
     (g) "Personal insurance" means:
     (i) Private passenger automobile coverage;
     (ii) Homeowner's coverage, including mobile homeowners, manufactured homeowners, condominium owners, and renter's coverage;
     (iii) Dwelling property coverage;
     (iv) Earthquake coverage for a residence or personal property;
     (v) Personal liability and theft coverage;
     (vi) Personal inland marine coverage; and
     (vii) Mechanical breakdown coverage for personal auto or home appliances.
     (h) "Tier" means a category within a single insurer into which insureds with substantially like insuring, risk or exposure factors, and expense elements are placed for purposes of determining rate or premium.
     (2) An insurer that takes adverse action against a consumer based in whole or in part on credit history or insurance score shall provide written notice to the applicant or named insured. The notice must state the significant factors of the credit history or insurance score that resulted in the adverse action. The insurer shall also inform the consumer that the consumer is entitled to a free copy of their consumer report under the fair credit reporting act.
     (3) An insurer shall not cancel or nonrenew personal insurance based in whole or in part on a consumer's credit history or insurance score. An offer of placement with an affiliate insurer does not constitute cancellation or nonrenewal under this section.
     (4) An insurer may use credit history to deny personal insurance only in combination with other substantive underwriting factors. For the purposes of this subsection:
     (a) "Deny" means an insurer refuses to offer insurance coverage to a consumer;
     (b) An offer of placement with an affiliate insurer does not constitute denial of coverage; and
     (c) An insurer may reject an application when coverage is not bound or cancel an insurance contract within the first sixty days after the effective date of the contract.
     (5) Insurers shall not deny personal insurance coverage based on:
     (a) The absence of credit history or the inability to determine the consumer's credit history, if the insurer has received accurate and complete information from the consumer;
     (b) The number of credit inquiries;
     (c) Credit history or an insurance score based on collection accounts identified with a medical industry code;
     (d) The initial purchase or finance of a vehicle or house that adds a new loan to the consumer's existing credit history, if evident from the consumer report; however, an insurer may consider the bill payment history of any loan, the total number of loans, or both;
     (e) The consumer's use of a particular type of credit card, charge card, or debit card; ((or))
     (f) The consumer's total available line of credit; however, an insurer may consider the total amount of outstanding debt in relation to the total available line of credit; or
     (g) The consumer's status as a victim of identity theft as defined in RCW 9.35.005(5).
     (6)(a) If disputed credit history is used to determine eligibility for coverage and a consumer is placed with an affiliate that charges higher premiums or offers less favorable policy terms:
     (i) The insurer shall reissue or rerate the policy retroactive to the effective date of the current policy term; and
     (ii) The policy, as reissued or rerated, shall provide premiums and policy terms the consumer would have been eligible for if accurate credit history had been used to determine eligibility.
     (b) This subsection only applies if the consumer resolves the dispute under the process set forth in the fair credit reporting act and notifies the insurer in writing that the dispute has been resolved.
     (7) The commissioner may adopt rules to implement this section.
     (8) This section applies to all personal insurance policies issued or renewed after January 1, 2003.

NEW SECTION.  Sec. 2   A new section is added to chapter 19.182 RCW to read as follows:
     (1) A consumer may elect to place a security freeze on his or her credit report by making a request in writing by certified mail to a consumer credit reporting agency. "Security freeze" means a notice placed in a consumer's credit report, at the request of the consumer and subject to certain exceptions, that prohibits the consumer credit reporting agency from releasing the consumer's credit report or any information from it without the express authorization of the consumer. If a security freeze is in place, information from a consumer's credit report may not be released to a third party without prior express authorization from the consumer. This subsection does not prevent a consumer credit reporting agency from advising a third party that a security freeze is in effect with respect to the consumer's credit report.
     (2) A consumer credit reporting agency shall place a security freeze on a consumer's credit report no later than five business days
after receiving a written request from the consumer.
     (3) The consumer credit reporting agency shall send a written confirmation of the security freeze to the consumer within ten business days and shall provide the consumer with a unique personal identification number or password to be used by the consumer when providing authorization for the release of his or her credit for a specific party or period of time.
     (4) If the consumer wishes to allow his or her credit report to be accessed for a specific party or period of time while a freeze is in place, he or she shall contact the consumer credit reporting agency, request that the freeze be temporarily lifted, and provide the following:
     (a) Proper identification, which means that information generally deemed sufficient to identify a person. Only if the consumer is unable to reasonably identify himself or herself, may a consumer credit reporting agency require additional information concerning the consumer's employment and personal or family history in order to verify his or her identity;
     (b) The unique personal identification number or password provided by the credit reporting agency under subsection (3) of this section; and
     (c) The proper information identifying the third party who is to receive the credit report or the time period for which the report is available to users of the credit report.
     (5) A consumer credit reporting agency that receives a request from a consumer to temporarily lift a freeze on a credit report under subsection (4) of this section, shall comply with the request no later than three business days after receiving the request.
     (6) A consumer credit reporting agency may develop procedures involving the use of telephone, fax, the internet, or other electronic media to receive and process a request from a consumer to temporarily lift a freeze on a credit report under subsection (4) of this section in an expedited manner.
     (7) A consumer credit reporting agency shall remove or temporarily lift a freeze placed on a consumer's credit report only in the following cases:
     (a) Upon consumer request, under subsection (4) or (10) of this section; and
     (b) When the consumer's credit report was frozen due to a material misrepresentation of fact by the consumer. When a consumer credit reporting agency intends to remove a freeze upon a consumer's credit report under this subsection, the consumer credit reporting agency shall notify the consumer in writing thirty days prior to removing the freeze on the consumer's credit report.
     (8) When a third party requests access to a consumer credit report on which a security freeze is in effect, and this request is in connection with an application for credit or any other use, and the consumer does not allow his or her credit report to be accessed for that specific party or period of time, the third party may treat the application as incomplete.
     (9) When a consumer requests a security freeze, the consumer credit reporting agency shall disclose the process of placing and temporarily lifting a freeze, and the process for allowing access to information from the consumer's credit report for a specific party or period of time while the freeze is in place.
     (10) A security freeze remains in place until the consumer requests that the security freeze be removed. A consumer credit reporting agency shall remove a security freeze within three business days of receiving a request for removal from the consumer, who provides both of the following:
     (a) Proper identification, as defined in subsection (4)(a) of this section; and
     (b) The unique personal identification number or password provided by the credit reporting agency under subsection (3) of this section.
     (11) This section does not apply to the use of a consumer credit report by any of the following:
     (a) A person or entity, or a subsidiary, affiliate, or agent of that person or entity, or an assignee of a financial obligation owing by the consumer to that person or entity, or a prospective assignee of a financial obligation owing by the consumer to that person or entity in conjunction with the proposed purchase of the financial obligation, with which the consumer has or had prior to assignment an account or contract, including a demand deposit account, or to whom the consumer issued a negotiable instrument, for the purposes of reviewing the account or collecting the financial obligation owing for the account, contract, or negotiable instrument. For purposes of this subsection, "reviewing the account" includes activities related to account maintenance, monitoring, credit line increases, and account upgrades and enhancements;
     (b) A subsidiary, affiliate, agent, assignee, or prospective assignee of a person to whom access has been granted under subsection (4) of this section for purposes of facilitating the extension of credit or other permissible use;
     (c) Any state or local agency, law enforcement agency, or trial court, or a private collection agency acting under a court order, warrant, or subpoena;
     (d) A child support agency acting under Title IV-D of the social security act (42 U.S.C. et seq.);
     (e) The department of social and health services acting to investigate benefits fraud;
     (f) The internal revenue service acting to investigate or collect delinquent taxes or unpaid court orders or to fulfill any of its other statutory responsibilities;
     (g) The use of credit information for the purposes of prescreening as provided for by the federal fair credit reporting act;
     (h) Any person or entity administering a credit file monitoring subscription service to which the consumer has subscribed; and
     (i) Any person or entity for the purpose of providing a consumer with a copy of his or her credit report upon the consumer's request.
     (12) This section and sections 3 through 8 of this act, do not prevent a consumer credit reporting agency from charging a fee of no more than ten dollars to a consumer for each freeze, removal of the freeze, or temporary lift of the freeze for a period of time, except that a consumer credit reporting agency may not charge a fee to a victim of identity theft, as defined in RCW 9.35.005(5), who has submitted a valid police report.

NEW SECTION.  Sec. 3   A new section is added to chapter 19.182 RCW to read as follows:
     If a security freeze is in place, a consumer credit reporting agency may not change any of the following official information in a consumer credit report without sending a written confirmation of the change to the consumer within thirty days of the change being posted to the consumer's file: Name, date of birth, social security number, and address. Written confirmation is not required for technical modifications of a consumer's official information, including name and street abbreviations, complete spellings, or transposition of numbers or letters. In the case of an address change, the written confirmation shall be sent to both the new address and to the former address.

NEW SECTION.  Sec. 4   A new section is added to chapter 19.182 RCW to read as follows:
     Sections 2 and 3 of this act do not apply to a consumer credit reporting agency that acts only as a reseller of credit information by assembling and merging information contained in the data base of another consumer credit reporting agency or multiple consumer credit reporting agencies, and does not maintain a permanent data base of credit information from which new consumer credit reports are produced. The consumer credit reporting agency that receives the request for a security freeze must forward the request to each of the other major credit reporting agencies within five business days. Each consumer credit reporting agency must honor any security freeze placed on a consumer credit report by another consumer credit reporting agency.

NEW SECTION.  Sec. 5   A new section is added to chapter 19.182 RCW to read as follows:
     The following entities are not required to place a security freeze in a credit report under section 2 of this act:
     (1) A check services or fraud prevention services company, which issues reports on incidents of fraud or authorizations for the purpose of approving or processing negotiable instruments, electronic funds transfers, or similar methods of payments; and
     (2) A deposit account information service company, which issues reports regarding account closures due to fraud, substantial overdrafts, ATM abuse, or similar negative information regarding a consumer, to inquiring banks or other financial institutions for use only in reviewing a consumer request for a deposit account at the inquiring bank or financial institution.

NEW SECTION.  Sec. 6   A new section is added to chapter 19.182 RCW to read as follows:
     A consumer may elect that his or her name be removed from any list that a consumer credit reporting agency furnishes for credit card solicitations, by notifying the consumer credit reporting agency, by telephone or in writing, under the notification system maintained by the consumer credit reporting agency. The election is effective for a minimum of two years, unless otherwise specified by the consumer.

NEW SECTION.  Sec. 7   A new section is added to chapter 19.182 RCW to read as follows:
     A consumer credit reporting agency may furnish to a governmental agency a consumer's name, address, former address, places of employment, or former places of employment.

NEW SECTION.  Sec. 8   A new section is added to chapter 19.182 RCW to read as follows:
     A consumer credit reporting agency that maintains a website on the internet, for use by consumers, shall make available information for consumers regarding how to implement a credit security freeze. The information shall be prominently displayed and easily accessible, and shall include, at a minimum, a definition of a security freeze, how to obtain and utilize one, costs involved, and a toll-free telephone number for more information.

NEW SECTION.  Sec. 9   A new section is added to chapter 19.182 RCW to read as follows:
     Credit reporting agencies shall provide data to the attorney general on an annual basis regarding the number of Washington state consumers who utilize a security freeze. The attorney general must make this data available to the legislature and the public upon request, in a manner selected by the attorney general.

NEW SECTION.  Sec. 10   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.