Legislature(2007 - 2008)BELTZ 211

03/04/2008 01:30 PM Senate LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 289 HOME ENERGY CONSERVATION TELECONFERENCED
Heard & Held
*+ SB 293 ELECTRONIC COMMUNICATION DEVICES TELECONFERENCED
Heard & Held
+ HB 65 PERSONAL INFORMATION & CONSUMER CREDIT TELECONFERENCED
Heard & Held
Bills Previously Heard/Scheduled
+= SB 147 WORKERS' COMP EMPLOYER LIABILITY TELECONFERENCED
<Bill Moved Out of Committee 2/28/08>
      CSHB  65(FIN)-PERSONAL INFORMATION & CONSUMER CREDIT                                                                  
                                                                                                                                
2:30:23 PM                                                                                                                    
CHAIR ELLIS announced CSHB 65(FIN) to be up for consideration.                                                                  
                                                                                                                                
KAREN LIDSTER,  staff to Representative John  Coghill, co-sponsor                                                               
of HB 65,  presented a sectional analysis of the  bill. Section 1                                                               
talks about  the care of records  and how they are  to be managed                                                               
from  creation  to  disposal.  Section 2  adds  a  new  paragraph                                                               
relating   to  the   breach   of   security  involving   personal                                                               
information. Section  3 adds a new  Chapter to AS 45  on personal                                                               
information protection  act with  seven articles -  the substance                                                               
of the bill.                                                                                                                    
                                                                                                                                
MS. LIDSTER  said Article 1  describes what is required  if there                                                               
is a breach  of information and definitions. Article  2, pages 7-                                                               
16,  allows  a  consumer  to  put  a  freeze  on  their  personal                                                               
information  and tells  how to  lift it  as well.  Article 3,  on                                                               
pages  16-21, establishes  parameters  for  the collection,  use,                                                               
sale loan or  trade of social security numbers;  it also provides                                                               
for exceptions  and penalties. Article  4, pages  21-24, outlines                                                               
the measures  to follow when  disposing of  personal information;                                                               
it also provides for exceptions, penalties and definitions.                                                                     
                                                                                                                                
2:34:47 PM                                                                                                                    
Article 5,  pages 24-26,  outlines the  rights an  individual has                                                               
when trying to establishing their  innocence after their identity                                                               
has been stolen. Article 6,  pages 26-27, describes the limits on                                                               
businesses  regarding  the  printing  of  credit  or  debit  card                                                               
numbers on consumer  receipts and allows the last  four digits on                                                               
receipts. Article  7, pages 27-29,  provides for  the definitions                                                               
and cites the short title.                                                                                                      
                                                                                                                                
2:38:33 PM                                                                                                                    
Significant changes include giving a  business the time to decide                                                               
whether  harm  was  caused  if   there  was  a  breach  in  their                                                               
information  (page  2,  lines  19-24). The  breach  needs  to  be                                                               
documented,  but  notification  is   not  required.  The  damages                                                               
section was  changed to target  arbitrary lawsuits  against large                                                               
businesses that might  have a breach or mishandle  it without any                                                               
harm being  done to  them personally  by adding  "actual economic                                                               
damages" on  the civil side  of the penalties. The  definition of                                                               
personal  information was  narrowed  down  to delete  information                                                               
that is easily or readily available or public information.                                                                      
                                                                                                                                
2:40:02 PM                                                                                                                    
MEAGAN FOSTER,  staff to Representative  Les Gara,  co-sponsor of                                                               
HB 65, added they  have worked hard on this bill  for a number of                                                               
years and that they would be happy to answer questions.                                                                         
                                                                                                                                
2:40:54 PM                                                                                                                    
GAIL HILLEBRAND, Financial  Services Campaign Manager, Consumer's                                                               
Union,  San  Francisco, said  Consumer's  Union  is a  non-profit                                                               
publisher of  Consumer Reports.  Its mission  is to  test, inform                                                               
and  protect,  and she  is  with  the  protective pieces  of  the                                                               
organization.                                                                                                                   
                                                                                                                                
She  said  HB 65  is  a  moderate  but  strong measure  and  that                                                               
identity  theft is  now  a world  wide crime.  The  crook can  be                                                               
anywhere in  the world, and  the victim  can be anyone  with good                                                               
credit. HB 65  offers prevention as the best remedy,  and it does                                                               
it  in a  couple of  ways. Article  1 provides  notice of  breach                                                               
which  tells   consumers  when  certain  very   narrowly  defined                                                               
categories  of important  information have  been released  to the                                                               
public, stolen  or lost  and might  be in the  hands of  a crook.                                                               
More than 35 states have  enacted some legislation on this issue.                                                               
Alaska takes  an in-between  approach by  narrowing the  scope of                                                               
the information,  saying it  has to  include the  consumer's name                                                               
and that  a determination cannot  be made  that there is  no risk                                                               
before a consumer has to be told about it.                                                                                      
                                                                                                                                
With a security  freeze the concept is the consumer  gets to lock                                                               
up who gets to see their  credit files. Everyone gets a choice of                                                               
using it with a state security freeze law.                                                                                      
                                                                                                                                
MS. HILLEBRAND said the pricing and  fees are kind of in the mid-                                                               
range and she  pointed out that in Indiana consumers  pay no fees                                                               
and Montana has  them pay $3/pop. She summarized  that "it's kind                                                               
of a mid-range but well-crafted proposal."                                                                                      
                                                                                                                                
She said  this measure has  some social security  provisions that                                                               
are common in  a dozen or more states such  as don't print social                                                               
security numbers  on a card and  don't mail it except  in certain                                                               
circumstances. She  said they were  very pleased to  support this                                                               
measure.                                                                                                                        
                                                                                                                                
2:44:00 PM                                                                                                                    
STEVE   CLEARY,  Executive   Director,  Alaska   Public  Interest                                                               
Research Group (AKPIRG), supported HB  65. He said this issue had                                                               
been on their front burner for  a number of years. Identity theft                                                               
costs consumers time  and money and on the average  it takes over                                                               
200 hours to clear a name.                                                                                                      
                                                                                                                                
2:46:59 PM                                                                                                                    
JOHN BURTON, Vice President,  Government Relations, Choice Point,                                                               
said  it is  a publicly  traded  company that  provides data  and                                                               
information  services to  businesses, government,  legal and  law                                                               
enforcement communities  at the  local, state and  federal level.                                                               
They  don't  make loans,  but  help  facilitate them  with  their                                                               
products. He said  they had spent a  lot of time on  this bill on                                                               
the House  side and that he  would continue to work  with them on                                                               
it.  He said  HB 65  is  "quite a  large bill"  and covers  three                                                               
primary issues:  social security  number regulation,  data breach                                                               
notification  and  the credit  breaches.  While  he had  on-going                                                               
concerns about many  of those provisions, he said  he would focus                                                               
his comments on the social security number provisions.                                                                          
                                                                                                                                
MR.  BURTON clarified  that Choice  Point and  companies like  it                                                               
don't oppose  these issues. Approximately  39 states  have passed                                                               
credit freeze  legislation. The  three national  credit reporting                                                               
agencies have  voluntarily adopted this procedure  where a person                                                               
can call up and freeze access  to their credit report. Another 39                                                               
states  have  already  passed breached  notification  bills,  and                                                               
approximately  29 states  have passed  legislation that  seeks to                                                               
protect  the public  access and  availability of  social security                                                               
numbers. Most  of these states  are modeled after  the California                                                               
law.  His  interests  are  two-fold,  he  said:  state  by  state                                                               
consistency and Choice  Point's ability to be  compliant with all                                                               
of them.  None of the  state laws  are exactly identical,  but he                                                               
works   to  get   them  as   consistent  as   possible  on   core                                                               
applications.                                                                                                                   
                                                                                                                                
2:49:38 PM                                                                                                                    
MR.  BURTON  said  all  companies   like  Choice  Point  that  do                                                               
activities  related  to  non-public personal  information  (which                                                               
could include  social security numbers) are  already regulated on                                                               
the federal  level in addition to  whatever state laws may  be in                                                               
existence; these  include the federal Fair  Credit Reporting Act,                                                               
the Gramm-Leach-Bliley  Act and to  a lesser extent,  the federal                                                               
Drivers Privacy Protection Act. If  companies like his can't work                                                               
under  these laws,  services will  become slower,  less efficient                                                               
and more  expensive. An interruption  in services that  are taken                                                               
for granted  now could occur  - like the  ability to walk  in and                                                               
get on-the-spot credit  and the ability to get  an instant binder                                                               
from an insurance company to buy a car and drive it off the lot.                                                                
                                                                                                                                
Unfortunately,  Mr. Burton  said, as  drafted the  bill does  not                                                               
give them the kind of state  by state allowance to continue their                                                               
operations - even under existing  federal law. They have far less                                                               
problem with  the legislative aspect  of this bill than  with the                                                               
legal aspect. Many  provisions that are in other  state laws that                                                               
they need in this bill are  there, but as drafted they don't have                                                               
any legal effect.  So, he asked them not to  delete anything, but                                                               
to redraft certain sections.                                                                                                    
                                                                                                                                
2:51:27 PM                                                                                                                    
SENATOR DAVIS asked for a copy of his drafted legal concerns.                                                                   
                                                                                                                                
2:52:02 PM                                                                                                                    
AUDREY ROBINSON,  Reed Elsevier, said  they own Lexus  Nexus, and                                                               
provide  legal  services like  looking  up  case law  and  public                                                               
records information. However, they also  provide many of the same                                                               
services that Choice  Point provides and she  echoed Mr. Burton's                                                               
sentiments.  She  didn't  oppose  HB  65, but  wanted  it  to  be                                                               
consistent and  workable for businesses.  She wanted to  focus on                                                               
the  social  security  provisions   and  how  they  would  affect                                                               
business here.                                                                                                                  
                                                                                                                                
First  it involves  Patriot Act  compliance.  Under that  federal                                                               
law,  banks   are  required   to  get   identifying  information,                                                               
including  a social  security number,  to check  against a  known                                                               
terror watch list.  They do this to make sure  the person opening                                                               
the account  isn't funding  fundamental extremists  or terrorism.                                                               
Reed Elsevier  maintains those  lists, but  the banks  don't. The                                                               
banks can  gather that information  through the Patriot  Act, but                                                               
they  would no  longer be  able to  transmit it  to her  to check                                                               
against the  terror watch  list, and  they similarly  wouldn't be                                                               
able  to transmit  it back  to them  so they  could issue  a bank                                                               
account.  Though the  bill seeks  to say  that federal  and state                                                               
laws would not  be harmed by this, they would  say their business                                                               
practices would, in  fact, be harmed by not being  able to engage                                                               
in that transaction.                                                                                                            
                                                                                                                                
2:54:48 PM                                                                                                                    
An  additional  transaction Reed  Elsevier  wouldn't  be able  to                                                               
engage in  is reporting judgments for  credit reporting purposes.                                                               
They receive lien  and judgment information from  states and when                                                               
this information  is transmitted to  them it has  social security                                                               
numbers for matching to the  appropriate person. Under this bill,                                                               
they  would no  longer be  able  to collect  that information  or                                                               
transmit  it  to the  credit  bureaus.  If credit  bureaus  can't                                                               
receive the  judgment information from  them, it won't  appear on                                                               
the credit report,  and if that's the case, she  didn't think the                                                               
judgment would be satisfied. She  asked the committee to keep the                                                               
status quo for businesses that  are using social security numbers                                                               
for legitimate business purposes.                                                                                               
                                                                                                                                
CHAIR ELLIS asked if the problem  is that the bill drafting needs                                                               
to have legal import.                                                                                                           
                                                                                                                                
MS. ROBINSON replied  yes. For example the  Fair Credit Reporting                                                               
Act  gives   seven  permissible  uses  for   non-public  personal                                                               
information  which  includes  the  social  security  number;  she                                                               
clarified that they  are "permitted" to use them  under this act.                                                               
They  are also  "authorized"  to get  it  under the  Gramm-Leach-                                                               
Bliley Act. The language in  the bill isn't consistent and refers                                                               
to  "authorized  use"  and  "express   authorized  use".  It's  a                                                               
semantic issue  that needs  to match  with federal  language that                                                               
says "permits."                                                                                                                 
                                                                                                                                
2:57:35 PM                                                                                                                    
KEVIN BROOKS, Deputy  Commissioner, Department of Administration,                                                               
said  he  is  pleased  with  the  amendments.  But  he  said  the                                                               
Department of  Law still has  concerns over exposure  issues. The                                                               
state  collects  data  from many  different  sources  like  vital                                                               
statistics,  motor  vehicles  or   the  Permanent  Fund.  Through                                                               
governing it is required to collect  and keep data on citizens of                                                               
the state and others.                                                                                                           
                                                                                                                                
MR. BROOKS  explained that  their networks  and systems  had been                                                               
developed incrementally over the last  20-plus years and they are                                                               
doing  as thorough  of an  analysis as  they can  on the  state's                                                               
security. The  state had a data  breach when some of  its servers                                                               
were breached  in January  2005. Since that  time they  have been                                                               
making  significant investments  in security  infrastructure, and                                                               
he anticipates  having to continue  doing that. He  said security                                                               
folks tell  him it  happens on  a daily basis  now, and  it's not                                                               
someone in  their garage anymore.  It's often  very sophisticated                                                               
government to government operations.                                                                                            
                                                                                                                                
CHAIR ELLIS  asked if he  shared private business  concerns about                                                               
semantic language issues.                                                                                                       
                                                                                                                                
MR. BROOKS answered that is  beyond his purview, and he suggested                                                               
asking Mr. Sniffen at the Department of Law about it.                                                                           
                                                                                                                                
3:01:17 PM                                                                                                                    
ED  SNIFFEN, Department  of Law  (DOL), said  he would  look into                                                               
questions and get back to them.                                                                                                 
                                                                                                                                
3:01:54 PM                                                                                                                    
SENATOR STEVENS  stated the  key issue is  if businesses  have to                                                               
react  to passed  laws,  that  it is  the  responsibility of  Mr.                                                               
Brooks  and  others in  the  administration  to meet  with  those                                                               
people and let  the legislature know if it's true  or not so they                                                               
can decide how to proceed.                                                                                                      
                                                                                                                                
3:02:59 PM                                                                                                                    
PAT  LUBY, Advocacy  Director,  AARP, said  identity  theft is  a                                                               
growing  concern for  its  members. He  said  many veterans  went                                                               
through  this experience  when the  Army's  computer was  stolen,                                                               
because their  social security  numbers were  used as  their Army                                                               
identification numbers.  He and  Senator Stevens have  just dealt                                                               
with it, and  until they were notified, the  computer located and                                                               
no breach was found, many veterans had a certain anxiety.                                                                       
                                                                                                                                
He said one of the concerns  is the impact on business throughout                                                               
the U.S.  of all the  identity theft  that takes place.  It costs                                                               
millions for  the individuals  who have  lost their  identity and                                                               
have money  stolen from them, but  it costs billions for  many of                                                               
the  businesses that  have suffered  losses  because of  identity                                                               
theft. Finally,  he said AARP  studies identity theft  because it                                                               
is a very  serious issue for its members; but  it's also a health                                                               
issue.  Research has  shown that  identity theft  victims have  a                                                               
higher  death rate  than non-victims.  "Identity  theft can  kill                                                               
you."                                                                                                                           
                                                                                                                                
MR. LUBY  said HB 65 builds  on some excellent work  that Senator                                                               
Gene Therriault and Senator Gretchen  Guess worked on in the last                                                               
session. "It  was good a  couple of  years ago, it's  even better                                                               
right now, and we encourage your positive support of it."                                                                       
                                                                                                                                
CHAIR  ELLIS  remarked  that  his  bill  was  subsumed  into  the                                                               
Therriault/Guess effort. He said HB  65 would be held for further                                                               
work.  There  being  no  further  business  to  come  before  the                                                               
committee, he adjourned the meeting at 3:05:50 PM.                                                                            

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