Released: November 01, 2006

California court: Credit freezes unconstitutional

Source: Kenneth Ofgang, Metropolitan News-Enterprise

A state law that allows consumers to bar the dissemination of their credit reports, designed to deter identity theft, violates the First Amendment because it precludes the reporting of information containing in public records, the Court of Appeal for this district has ruled.

Div. Five ruled Monday that U.D. Registry, Inc., which maintains information on tens of millions of people in California and elsewhere and provides landlords and property managers with reports about prospective tenants, had established that Civil Code Sec. 1785.11.2, the “security freeze” law, is unconstitutional as applied to those reports.

The court, however, reversed an injunction that completely barred the state from enforcing the law, and directed that a new injunction be issued barring enforcement against U.D. Registry only.

The law, which took effect Jan. 1, 2003, provides that a consumer may place a notice on his or her credit report, that generally prohibits reporting agencies from releasing credit information without a specific authorization from the consumer.

U.D. Registry contended that the law deprives it of free speech rights by allowing the consumer to suppress information that the company would otherwise disseminate from public records, including information about evictions, foreclosures, and bankruptcies.

Los Angeles Superior Court Judge Andria K. Richey found that the law was unconstitutional on its face to the extent that it barred dissemination of information based on public records, but was otherwise constitutional, and granted an injunction allowing the state to enforce the law, against U.D. Registry and others, only with respect to information not obtained from public records.

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