LEGISLATURE GETS TOUGH ON IDENTITY THEFT

The Arizona State Legislature has taken several steps to combat identity theft and to help those who have been the victims of identity theft clear their name.

First, we address House Bill 2587, which is amending Title 44, Chapter 11, Article 6, by adding A.R.S. § 44-1698. The first portion deals with consumer credit reports, the extension of credit, identity theft and security freeze. Subsection (A) deals with persons who do not use a consumer credit report in connection with the approval of credit. An entity that extends credit under those circumstances, needs to use reasonable steps to verify the consumer’s identity. The statute does not set forth what reasonable steps are, one assumes that it means seeing picture I.D. and presumably a driver’s license would do. However, there is no specific definition as to what reasonable steps to verify the consumer’s identity are required. Subsection (B) deals with a person who does use a consumer credit report, and such person who relies on a consumer credit report is only obligated to take steps to verify the consumer’s identity if the creditor has received a notification that the applicant has been a victim of an offense involving identity theft or the creditor has received notification that the consumer has placed a fraud alert or security freeze on his own consumer credit report. The portion of the statute which actually provides the protection is in subsection (C) which indicates that if there is an action taken to collect on a debt as a result of an extension of credit, a consumer may defend such action by proving by a preponderance of the evidence, that the extender of credit violated this section, that is, did not use reasonable steps to verify the identity of the consumer. Then, the finder of fact may infer that someone other than the consumer, applied for and received the benefit of the credit.

Subsection (D) also says that if a person extends credit in violation of this section, that is, without exercising reasonable care to verify the consumer’s identity, such an extension of credit is an unlawful practice under § 44-1522, and the person is subject to enforcement through private action or by the Attorney General, and there may be injunctive relief sought to prevent future violations. The statute defines reasonable steps as “any commercially reasonable action taken by an extender of credit.” This, of course, is circular and essentially meaningless. However, it does indicate that the legislature is very concerned that persons are “willy nilly” advancing credit to persons who are pretending to be someone else, and thus damaging the credit of consumers who are not actually receiving the benefit of the credit that is being extended.

While in most circumstances this statute will not create any large burden for the extender of credit or even those persons applying for credit legitimately, since most will be armed with picture I.D. and in particular a valid driver’s license, the statute may create a hardship for those persons who are legitimately applying for credit but do not have standard methods of proving their identification.

The next statute which the Arizona State Legislature adopted deals with methods now available for clearing your name, both civilly and criminally as a result of identity theft. House Bill 2321 was enacted to amend Title 12, Chapter 6, Arizona Revised Statutes, by adding Article 17, amending Title 13, Chapter 40, and by adding A.R.S. § 13-4440. Article 17 has the interesting title of Declaration of Innocence. A.R.S. § 12-771 indicates that a person or prosecuting agency may petition the superior court for a judicial determination of a person’s factual innocence, where a person’s name was either:

1. Used by another person who was arrested, cited or charged with a criminal offense; or

2. Entered of record in a judgment of guilt in a criminal case. Section (B) indicates that a petition in this regard is to be filed in superior court in the county in which the arrest was made. If no charge was actually filed but an arrest was made, then the petition is to be served on the arresting officer or citing law enforcement agency. If a charge was filed, then the petition is to be served on the prosecuting agency, and the prosecuting agency is required to provide notice to all victims pursuant to A.R.S. § 13-4440. This section indicates that the court may then conduct a hearing to determine the person’s “factual innocence,” and “if the court determines by clear and convincing evidence that the person’s name was used as set forth in Subsection (A), then the court shall find the person factually innocent of the offense.”

If you think about it, the mere fact that the State Legislature has taken time to have a specific procedure adopted by statute for clearing the name of a person who otherwise is convicted of a crime or arrested for a crime because someone else claimed his identity, is both remarkable and a little frightening. Evidently the Legislature believes that the problem of identify theft has gotten to the point where arresting agencies are not able to determine the identity of the person that they have arrested, indicted or even convicted. This means the problem has grown out of control.

The second section which is A.R.S. § 12-772, deals with a person in a civil matter who has been the victim of identity theft to the extent that he has been named in a civil action or judgment. The provisions for a notice and appearance in superior court are very similar to those dealing with the criminal indictment, arrest or conviction. The petitioner who claims that his identity has been taken and therefore he is an improper party to a civil lawsuit or a civil judgment, is required to serve a petition on all of the parties to the action. The court may then conduct a hearing to determine if the person is factually an improper party the civil litigation, and if the court finds by clear and convincing evidence that the person is not a proper party to the civil action or judgment as a result of the person’s personal identification information being taken, the court then is required to find that the person “a factual improper party” in that civil action or judgment. The court is then required to notify the person and all parties to the court’s proceeding of the court’s finding.

While it may not be as shocking to think that someone might be wrongfully named in a civil action because their identify has been stolen, it is frightening to think that the State Legislature is faced with a problem of such magnitude that it must create a specific statutory method for clearing the name of an innocent person whose name has been wrongfully utilized in a lawsuit, even to the extent that a judgment has been entered against him.

Taken together, the two statutory changes should give a fair warning to any person extending credit that they better be pretty careful that the person that they think they are extending credit to is indeed that person.