Resources & Publications

Articles:
Can Spam Act's E-Mail Limits Could Prove Tricky For Firms, March 29, 2004
Electronic Marketing: Privacy, Spamming and The New World Order, February 2, 2004
Consumer Protection Against Identity Theft, September 15, 2003
Considerations For Tenants Entering Into Commercial Leases, January 15, 2003
Account Receivables Factoring: A Cash Flow Solution, November 1, 2002
The Importance Of Buy-Sell Agreements, October 1, 2002
Considerations in Retaining Independent Contractors, September 1, 2002
Securing Capital in a Recessed Economy, August 1, 2002
Protecting Your Proprietary Information,July 1, 2002
To Incorporate or Not to Incorporate, June 1, 2002
Taking Precautionary Steps to Protect Your Business, May 1, 2002
The Myths About Forming a Nevada Entity, April 1, 2002

ALL PUBLICATIONS AND ARTICLES ARE PROVIDED BY THE LAW OFFICES OF DAVID F. MICHAIL FOR INFORMATIONAL PURPOSES ONLY, AND ARE NOT TO BE CONSTRUED OR RELIED UPON AS LEGAL ADVICE. THE READER AGREES TO CONSULT AN ATTORNEY IN THEIR JURISDICTION REGARDING LOCAL LAWS AND THEIR SPECIFIC LEGAL NEEDS OR CIRCUMSTANCES.


Consumer Protection Against Identity Theft
Prepared by
Law Offices of David F. Michail, a Professional Corporation

Consumer and business credit are the fundamental basis for a growing entrepreneurial economy. For both consumers and businesses alike, however, the crime of identity theft is an increasingly difficult problem that imposes more economic risk for the business community in extending credit. To make matters worse, victims are forced to spend hours of their time cleaning up their credit with credit reporting agencies and banks, which means an invariable waste of resources and money.

Historically, the elderly are the most common targets for such fraudulent activity, but as information becomes more readily available and transmitted through the Internet, all consumers are potential prey. The California Legislature has addressed these concerns, by amending Section 1785.11.1 of the California Civil Code, dealing specifically with consumer credit and measures to prevent identity theft. Under the Code, consumers have the right request a security alert or security freeze in his or her credit report, if they suspect fraudulent activity or identity theft. Any business or person that approves credit based upon a credit report with the alert status, may not lend money, extend credit, complete a purchase, lease or rent to the applicant without taking reasonable steps to verify the identity of the applicant by contacting the consumer directly prior to completing the transaction. In the event that the consumer requests a security freeze, the credit reporting agency cannot release any information without the consumer’s express authorization.

This law will have far reaching impact on how business is conducted in the state of California. The law prescribes what constitutes reasonable verification, including telephoning the consumer directly as well as asking other questions that may be used for identification. This verification procedure may invariably delay approvals on legitimate transactions initiated by consumers. These transactions include new loans, credit, mortgage, insurance, government services and payments, rental housing, employment, investment, license, cellular phone, utilities, digital signature, and extension of credit at point of sale. In the event of a violation, Cal. Civ. Code §1785.11.1 imposes a penalty of a civil cause of action against anyone, including credit reporting agencies, who improperly obtain access to a file, knowingly or willfully misuse file data, or fails to correct inaccurate file data.

California businesses that rely on customer credit will have to be aware of these additional measures and change the way they do business in light of this new law. Most notably, subject to limited exceptions, businesses are prohibited from: (i) publicly displaying a consumer’s social security number, (ii) printing a social security number on any membership card, (iii) requiring an individual to transmit his or her social security number over the Internet (unless the connection is secure or the number is encrypted), (iv) requiring an individual to use his or her social security number to gains access to a web site, unless a password or authentication device is also used, or (v) print an individual’s social security number on any mailings.

As a matter of precaution, there are a number of measures consumers can take to protect themselves against identity theft, including:
  • not disclosing their credit card information or social security number to any telephone solicitors or over the Internet (unless encrypted or via a secured server);
  • checking their credit reports annually to ensure that there are no errors or indications of fraudulent activity; and
  • regularly verifying all charges on bank and credit card statements to ensure that no false or erroneous charges have been made in their name.

David Michail is a business, corporate and commercial law attorney for the Law Offices of David F. Michail, a Professional Corporation. This article is intended for informational purposes only, and shall not be construed as rendering legal advice. For further information on this issue, or to schedule Mr. Michail for public speaking engagements related to this or other business law topics, please call 310-670-4656 or email Mr. Michail at david.michail@michaillaw.com.