Lockyer Voices Identity Theft Worries

Atty. Gen. Bill Lockyer warned Tuesday that the timing of new federal protections against identity theft threatens to expose California consumers to the very scams the laws were designed to prevent.

Some of the new federal safeguards in a law signed earlier this month by President Bush will take effect in June, others on Dec. 1. However, the law prohibits states from enacting stricter protections in the field of consumer credit than those approved by Congress, a practice known as preemption.

That appears to mean that new state identity theft laws effective today will be preempted with the start of the new year, “leaving consumers with no protection for six months to a year,” Lockyer said.

In a letter to the Federal Trade Commission and the governing board of the Federal Reserve System, Lockyer said identity thieves and other criminals could seize on the gap to prey on victims.

One California law that would be preempted is a pioneering and highly controversial consumer privacy safeguard that requires banks and other financial institutions to get permission before they can sell or share customers’ confidential financial information with other businesses.

The bill, SB 1 by Sen. Jackie Speier (D-Hillsborough), was opposed in the Legislature by major business interests. But a compromise version was signed into law by then-Gov. Gray Davis last summer. Some of the same interests that opposed the California bill prevailed later in Congress, which passed the preemption bill as part of an overhaul of the Fair Credit Reporting Act.

Lockyer made the appeal to federal regulators as president of the National Assn. of Attorneys General.

Lockyer suggested that the federal regulation be reconsidered or clarified so there would be no gap in protection between Jan. 1, when he said the preemption provisions would take hold, and later implementation in June and next December of the identity-theft provisions.

Lockyer spokesman Tom Dresslar said keeping consumer protections intact without interruption could involve nothing more than several hours of work to rewrite the regulation and then to notify banks, stockbrokers, credit card companies, insurance carriers and others of the change.

“It’s not a major task. It takes half a day to put out a clarifying letter,” he said.

Later, Lockyer’s office released a copy of a letter by J. Virgil Mattingly Jr., general counsel to the board of the Federal Reserve, and J. Howard Beales III, director of consumer protection for the Federal Trade Commission. Saying their letter did not necessarily reflect the official views of their superiors, they disagreed with Lockyer’s contention that gaps in consumer protection would occur.

The letter, dated Dec. 23 and addressed to the Consumer Federation of America and the U.S. Public Interest Research Group, said the two regulators believed that requirements of current state laws would remain in effect until the applicable provisions of the new federal law became effective and replaced them.

They said they believed that activating the federal law’s preemption provisions still would allow the state’s laws to remain in force until the “respective federal protections” took effect.

But Dresslar said Lockyer was not satisfied. He said the attorney general wants the issue to be resolved so there would be “no question” that consumers will keep the identity theft safeguards of the state law until the federal protections replace them.