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F I S C A L I M P A C T R E P O R T

SPONSOR HJC

DATE TYPED 3/11/05

HB 246 & 734/HJCS

SHORT TITLE Remedies for Identity Theft Victims

SB

ANALYST Ford

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$1,250.0-

$2,000.0 Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB 260, SB 646

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of Bill

The House Judiciary Committee substitute for House Bills 246 & 734 increases the crime of

identity theft from a misdemeanor to a fourth degree felony, establishes the time limit for prose-

cution of identity theft, expands the definition of identity theft, provides a method for expunging

court records of false information, requires the attorney general (AGO) to issue a new form of

identification, known as identity theft passports, to victims, requires the AGO to maintain a data-

base of reported identity theft victims, and requires consumer reporting agencies to block inaccu-

rate information on consumer reports.

Significant Issues

. Penalties and Prosecution

The bill changes identity theft from a misdemeanor to a fourth degree felony. The bill estab-

lishes a time limit for prosecution of 5 years from the time the crime was discovered. This is

consistent with the general statute of limitations for a fourth degree felony except that the time

limit begins when the crime was discovered, not when it was committed.

By starting the statute of limitations at the time the crime was discovered instead of committed,

House Bill 246 & 734/HJCS -- Page 2

the bill recognizes that victims often do not discover that their identities have been stolen until

well after the initial fraudulent act has been committed.

Changing the crime to a fourth degree felony allows district attorneys to subpoena witnesses

from out of state, which may aid in prosecution.

. Definition of Identity Theft

The bill expands the definition of identity theft to include using a person’s identifying informa-

tion with the intent to sell or distribute the information to another for an illegal purpose.

The bill also extends the definition to include using personal identifying information of another

person, or of a false or fictitious person, to avoid summons, arrest, or prosecution or to impede a

criminal investigation.

The bill expands the definition of “personal identifying information” to recognize changes in

technology and business practices and adds a definition of “biometric data.”

. Expungement from Police and Court Records

The bill establishes a process by which an identity theft victim whose identity was used by

someone who was charged or arrested under his/her name can petition the court for a determina-

tion of factual innocence. If the court finds by clear and convincing evidence that the person did

not commit the offense with which the person’s identity has been associated, the court shall issue

an order certifying the person’s factual innocence. The court shall then order that person’s name

to be removed from the records. The court shall order expungement of the arrest. The bill also

provides a process for vacating the determination of factual innocence.

.Written Police Reports

The bill requires a law enforcement officer who interviews a victim of identity theft to make a

written report on forms provided by the AGO and to file the police report with the AGO.

. Identity Theft Passport and Database

The bill requires the AGO, in cooperation with the department of public safety and the motor

vehicle division (MVD) of the taxation and revenue department, to issue an identity theft pass-

port to persons who claim to be a victim of identity theft and provide the following specific in-

formation:

•

Certified copy of a court order determining factual innocence

•

A driver’s license or other government-issued identification or record and

•

Other information as required by the attorney general

The passport shall contain a picture of the person and shall be accepted as evidence of identity by

law enforcement and others who may challenge the person’s identity.

The bill allows the AGO and MVD to enter into a memorandum of understanding for the devel-

opment and issuance of the passport and requires MVD to make a note in the person’s driver re-

cord when an identity theft passport has been issued.

House Bill 246 & 734/HJCS -- Page 3

The passport would be available only to those victims whose identities have been used by some-

one who has been arrested or charged with a crime. This is a relatively small percentage of iden-

tity theft victims. According to the federal trade commission (FTC), only 4.6% of New Mex-

ico’s 1,317 identity theft cases in 2003 involved the illegal/criminal use of the victim’s identity.

There may be concerns about the security of the identity theft passport and the considerable

damage that could be done by someone if a passport is stolen or forged, particularly since law

enforcement is required to accept it as evidence of identity.

The bill requires the AGO to maintain a database of identity theft victims who have reported to a

law enforcement agency or have been issued an identity theft passport. Access to the database

will be limited to criminal justice agencies or to the person who has been the victim of identity

theft.

The measure also requires the AGO to develop information on identity theft, distribute it to law

enforcement and make it available to the public. This should be relatively easy to do since the

AGO already has information posted on its website which could be supplemented by readily

available information provided by numerous consumer groups.

. Credit Reports

The measure requires a consumer reporting agency, within 30 days of receipt of a police report

from an identity theft victim, to block any information the victim alleges appears on his report as

a result of the identity theft. The bill establishes provisions for the consumer reporting agency to

decline or rescind the block.

These provisions appear to duplicate federal law which prescribes the requirements of consumer

reporting agencies to block fraudulent information. However, federal law requires the consumer

reporting agencies to block the information within 4 business days of the receipt of the informa-

tion. (See “Other Substantive Issues” below.)

FISCAL IMPLICATIONS

The bill will result in significant costs to the general fund resulting from increased workload to

the courts, NMCD, AGO and MVD.

Significant costs will be incurred by the AGO, which will be charged with establishing the iden-

tity theft passport system and database. AGO suggests that it would incur startup costs to de-

velop the database, as well as yearly costs to maintain the program. AGO analyzes that these

costs will, among others, include staff of 1 general administrative staff, 1 data entry/data base

maintenance staff, 1 attorney, 2 investigators, and 2 advocates. Combined with the costs of sup-

plies, hardware, travel, training, equipment and other basic needs, these costs are estimated by

the AGO to be $1 million to start up and $750 thousand annually thereafter.

The expansion of the definition of identity theft and the provision allowing for a determination of

factual innocence will result in an increased number of judicial proceedings. However, accord-

ing to the FTC, only 4.6% of New Mexico’s 1,317 identity theft cases in 2003 involved the ille-

gal/criminal use of the victim’s identity. Thus, the number of individuals seeking to clear their

criminal records is likely to be low.

House Bill 246 & 734/HJCS -- Page 4

Increasing identity theft from a misdemeanor to a fourth degree felony may result in an increase

in costs to the NMCD. According to the Federal Trade Commission, there were 1,317 victims of

identity theft in New Mexico in 2003. According to the Identity Theft Resource Center, the ar-

rest rate for identity theft is under 5%. As an example, if even 2.5% of roughly 1,300 cases re-

sulted in an arrest and 4

th

degree felony conviction, the NMCD could see an increased population

of 32 individuals, generally serving 18-month sentences. Based on NMCD per-inmate cost esti-

mates, this could result in increased costs of approximately $990 thousand to $1.26 million. This

does not take into consideration any probation and parole costs. However, it is difficult to pre-

dict what the actual arrest and conviction rate would be.

Law enforcement may incur minor cost increases to make their police reports on the prescribed

forms and to file those forms with the AGO. MVD will incur minor costs to update driver re-

cords.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 260 makes the crime of identity theft a fourth degree felony. Senate Bill 646 codifies

the process to expunge a criminal record for, among others, victims of identity theft.

OTHER SUBSTANTIVE ISSUES

Section 5, relating to credit reports duplicates provisions of federal law regarding the blocking of

inaccurate information. The Fair and Accurate Credit Transactions (FACT) Act provides:

15 USCS § 1681c-2 (2005) Block of information resulting from identity theft

(a) Block. Except as otherwise provided in this section, a consumer reporting agency shall

block the reporting of any information in the file of a consumer that the consumer identifies

as information that resulted from an alleged identity theft, not later than 4 business days after

the date of receipt by such agency of--

(1) appropriate proof of the identity of the consumer;

(2) a copy of an identity theft report;

(3) the identification of such information by the consumer; and

(4) a statement by the consumer that the information is not information relating to any

transaction by the consumer.

This provision went into effect on December 1, 2004. The law also provides authority to the

consumer reporting agency to decline or rescind a block.

With certain limitations, the states are allowed to enact laws that go beyond the provisions of the

FACT Act. However, the provisions in this bill do not go beyond federal law and thus, would be

pre-empted by federal law.

The crime of identity theft remains prevalent and costly. According to the 2005 Identity Fraud

Survey Report co-released by Javelin Strategy & Research and the Better Business Bureau, 9.3

million American adults were victims of identity fraud in 2004 for a total cost of $52.6 billion.

Most thieves obtain personal information through traditional channels, such as through a lost or

stolen wallet or theft of mail, rather than through electronic means

House Bill 246 & 734/HJCS -- Page 5

POSSIBLE QUESTIONS

Are the bill’s provisions requiring the blocking of consumer data given pre-empted by federal

law.

Given the presumption created in the bill that the identity theft passport is accurate, does the bill

create a new avenue for identity theft and/or fraud.

EF/yr