Requires credit card issuers to implement as a fraud prevention measure telephone confirmation including proof of identity or contact through any other medium provided by the issuer, prior to activation, except for in-person transactions; provides that applications offering pre-approved credit cards may not indicate their contents on the envelopes; applies to both solicited and unsolicited applications.
Sponsor: KLEIN Committee: CONSUMER PROTECTION
Law Section: General Business Law
Law: Amd SS515 & 520, Gen Bus L
Law Section: General Business Law
Law: Amd SS515 & 520, Gen Bus L
- Jan 30, 2012: RECOMMIT, ENACTING CLAUSE STRICKEN
- Jan 4, 2012: REFERRED TO CONSUMER PROTECTION
- Jan 5, 2011: REFERRED TO CONSUMER PROTECTION
BILL NUMBER:S533 TITLE OF BILL: An act to amend the general business law, in relation to requiring issuers of credit cards to implement certain fraud prevention measures PURPOSE: The purpose of this bill is to deter credit fraud at the point of the application process. SUMMARY OF SPECIFIC PROVISIONS: This bill requires that the holder of any credit card issued after the effective date provides to the issuer proof of identity prior to the credit card's activation except where the credit account is opened in person by the authorized card holder. Lastly, the bill prohibits credit card issuers from mailing pre-approved credit card applications in envelopes whose exteriors contain any words, phrases, or indicia describing the enclosed pre-approved credit material. JUSTIFICATION: Credit card fraud continues to be a pervasive problem for both consumers and the financial industry. Credit issuers lose an estimated $1 billion annually to credit card fraud, with the majority of these losses resulting from the unauthorized use of lost and stolen credit cards, and from fraud caused by cards issued by a bank but never received by this fraudulent activity, the losses are generally passed onto consumers. According to estimates, the average cardholder, who possesses eight cards, is forced to pay an extra $55 a year in higher interest rates and annual fees to cover losses caused by such fraud. Additionally, credit card holders must deal with the hassles of cancelling and replacing fraudulently used cards and of clearing up their often damaged credit records, a process which can take months. There are, however, certain preventive measures for issuers to take to combat credit card fraud. Requiring holders of new credit cards to telephone their issuer and provide proof of identity as a precondition to activation will further reduce fraud caused by stolen and lost cards. Unless the fraudulent user is involved in a complex scheme and has access to a cardholder's personal identification, a card activation program will significantly decrease the likelihood that a new credit card will be able to be used by an unauthorized person. Applications of pre-approved credit mailed to residents in this state are increasingly being stolen from mailboxes and trash bins. As banks continue to send out more and more pre-approved applications, some residents receive several a week, their theft has become more popular. When a resident notices from the writing on the envelope that the enclosed materials contain a pre-approved application for credit, that person often throws the unopened envelope into the garbage along with other perceived "junk mail". Thieves pick out the pre-approved applications, change the mailing address to which to send the cards, and then return the applications to the issuing bank. The new address will often either be for a post office box or private delivery firm. With all these pre-approved and generally unsolicited applications being mailed out, consumers often don't know until it's too late that a thief has been fraudulently using their credit. To impede such activity, issuers should be more responsible in how they label the exterior of envelopes containing pre-approved credit applications. To a thief, the words "pre-approved credit" or "guaranteed credit" emblazoned on the envelope is often the same as saying "credit card inside". Prohibiting the use of such words or phrases will make stealing pre-approved applications out of the mail or trash considerably more difficult. Thus, to combat credit card crimes, several fraud prevention devices should be made available to consumers. These prevention measures are relatively easy to implement and inexpensive when compared to the huge losses suffered by the financial industry each year. Furthermore, this bill will provide both consumers and merchants the extra security and peace of mind necessary in an increasingly technological era. PRIOR LEGISLATIVE HISTORY: 1996 - A.8375 - Passed the Assembly 1998 - A.4286 - Passed the Assembly 1999 - A.5384A/S.3914A - Passed both Houses, Vetoed by Governor 2000 - A.11122 - Referred to Consumer Affairs 2002 - A.2093B - Advanced to Third Reading, Assembly Calendar 36 2004 - A.6449 - Referred to Consumer Affairs 2006 - S.4601 - Referred to Consumer Protection 2008 - S.2228 - Referred to Consumer Protection 2009 - S.1855 - Referred to Consumer Protection FISCAL IMPLICATIONS: None to the state. EFFECTIVE DATE: This act shall take effect on the one hundred eightieth day after it shall have become a law and shall apply to all credit cards issued on or after such effective date.
S T A T E O F N E W Y O R K ________________________________________________________________________ 533 2011-2012 Regular Sessions I N SENATE (PREFILED) January 5, 2011 ___________ Introduced by Sen. KLEIN -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection AN ACT to amend the general business law, in relation to requiring issuers of credit cards to implement certain fraud prevention measures THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS:
Section 1. Legislative findings and intent. The legislature finds that credit card fraud has a substantial negative impact on the commerce of the state of New York, and that the burden of this fraud is shared jointly by consumers and the financial industry. Most credit card fraud is caused by the use of lost or stolen cards, or by the theft of credit cards or pre-approved credit applications from the mail. The legislature further finds that certain fraud prevention measures have been effective in detecting and reducing credit card fraud, primarily in the verifica- tion process. Therefore, it is the purpose of this legislation to provide security and protection against credit card fraud by requiring that as a precondition to a credit card's activation, the authorized holder contact the issuer and provide proof of identity, in certain cases. Also, this act prohibits issuers who mail applications of pre- approved credit to residents of this state from indicating on the exte- rior of the envelope that the enclosed material contains a pre-approved credit application. S 2. Section 515 of the general business law is amended by adding a new subdivision 3 to read as follows:
3. NO CONSUMER CREDIT CARD ISSUED TO A RESIDENT OF THIS STATE SHALL BE ACTIVATED UNLESS AND UNTIL THE AUTHORIZED HOLDER CONTACTS THE ISSUER VIA A TOLL-FREE NUMBER OR THROUGH ANY OTHER MEDIUM PROVIDED BY THE ISSUER AND PROVIDES THE ISSUER WITH PROOF OF IDENTITY OR PROVIDES THE ISSUER WITH PROOF OF IDENTITY AT THE POINT OF SALE WHEN THE CONSUMER CREDIT CARD IS USED FOR THE FIRST TIME, EXCEPT WHERE THE CARD IS ISSUED IN EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD04420-01-1 S. 533 2 PERSON TO THE AUTHORIZED HOLDER OR WHERE THE CREDIT ACCOUNT IS OPENED IN PERSON BY THE AUTHORIZED HOLDER. S 3. Section 520 of the general business law is amended by adding a new subdivision 10 to read as follows:
(10) IT SHALL BE UNLAWFUL FOR ANY ISSUER WHO MAILS AN APPLICATION FOR A PRE-APPROVED CREDIT CARD TO A RESIDENT OF THIS STATE TO PRINT ON THE EXTERIOR OF THE ENVELOPE ANY WORDS, PHRASES OR INDICIA SIGNIFYING THAT THE ENCLOSED MATERIAL CONTAINS A PRE-APPROVED CREDIT CARD APPLICATION OR ANY SUCH RELATED MATERIAL. THIS SUBDIVISION SHALL APPLY WHETHER THE PRE-APPROVED CREDIT APPLICATION WAS SOLICITED OR UNSOLICITED. S 4. This act shall take effect on the one hundred eightieth day after it shall have become a law and shall apply to all credit cards issued on or after such effective date.