Knowledgebase-Requiring Social Security Numbers for Utility Service


Information Product

Title:Requiring Social Security Numbers for Utility Service
Summary:MTAS was asked about requiring social security numbers for utility service, collection fee for delinquent bills and code enforcement against current utility customers.
Original Author:Ashburn, Melissa
Co-Author:
Product Create Date:01/11/2006
Last Reviewed on::03/06/2017
Subject:Utilities--Administration; Utilities--Termination policies; Utilities--Rates and charges
Type:Legal Opinion
Legal Opinion: Requiring Social Security Numbers for Utility Service public.doc

Reference Documents:

Text of Document: January 11, 2006


Dear Sir:

Bill Young, Utility Finance Consultant, forwarded your email to me for response. The questions you asked, and my responses, follow:


Question 1: Does the City have the legal right to refuse to provide utility service to persons who refuse to provide their social security numbers when applying for service?

In my opinion, the City may refuse service to prospective customers who refuse to provide social security numbers on their application. I recommend that the City utility department consider adopting a policy which will permit applicants to withhold their social security number if they make a cash deposit sufficient to cover anticipated billings for the address for a specified period of time.

My opinion is based on two conclusions: 1) the U.S. Privacy Act does not apply to local governments; and 2) potential customers have no contractual right to receive this city service.

The United States Privacy Act does not apply to local governments

The United States Privacy Act, 5 U.S.C. ' 552(a), states in part:

(1) It shall be unlawful for any Federal, State, or local government agency to deny to an individual any right, benefit, or privilege provided by law because of such individual ' s refusal to disclose his social security number.

The exceptions stated in the law include any requirement by statute that the SSN be recorded, as in the case of application for drivers licenses. Section 7(b) of the act requires that agencies which request disclosure of social security numbers inform the individual "whether the disclosure is mandatory or voluntary, by what statutory authority such a number is solicited, and what uses will be made of it."

The Tennessee Attorney General opined in a 2002 opinion that this act applies to the State Department of Safety requirement that applicants for hand gun carry permits supply their social security number. The Attorney General determined that the State can require the SSN of applicants due to state and federal statutes that require such information be recorded for enforcement of child support obligations. Tenn. Op. Atty. Gen. No. 02-003.

However, the Sixth Circuit Court of Appeals, which has federal jurisdiction over Tennessee, has determined that the Privacy Act does not apply to local governments. Despite the clear language of the section of the act quoted above, concerning local governments, the Court found that section to be inconsistent with the definition of "agency" used earlier in the Act, which makes clear the law is only intended to apply to federal agencies:

We are therefore confronted by two provisions of the Privacy Act that contradict one another to some degree: the statutory definition, which unambiguously contemplates that the Privacy Act applies exclusively to federal agencies, and ' 7(b), which by its terms includes state and local agencies within its ambit....The statutory definition of an agency found at ' 552a(a)(1) contains no language to indicate that it does not apply to the Privacy Act as a whole. Were we to hold that ' 7(b) applies to state and local agencies, we would effectively say that an unambiguous definition of a core term...applies only part of the time. This we will not do.

The fact that the Privacy Act contains a section that defines the term "agency" as including only those agencies that fall under control of the federal government, coupled with a legislative history that supports such a reading of its scope, forces us to conclude that - notwithstanding the codification of ' 7(b) - the Privacy Act applies exclusively to federal agencies.

Schmitt v. City of Detroit , 395 F3d 327, 330-331 (6th Cir. 2005). The facts of the Schmitt case involve a resident's complaint about the city's income tax collection practices, which required residents to disclose their social security numbers. The numbers were inadvertently disclosed by a vender. The city agreed to make the required disclosure under the Privacy Act, stating the authority for requesting the information and for what use after the lower court issued a restraining order. The higher court, however, disagreed and reversed the lower court decision that the Privacy Act applies. After determining that the Privacy Act does not apply to local governments, the Sixth Circuit states "the City may, for policy reasons, continue to include disclosure notices when requesting social security numbers, but it is not required to do so under the Privacy Act." Schmitt at 331.

The Schmitt opinion stands, as no appeal was sought to the U.S. Supreme Court. There is no case overruling or modifying the opinion, so it is the law in the federal jurisdiction that includes Tennessee that the U.S. Privacy Act does not apply to local governments.

That being said, it is very possible that the act will be amended by congress to remove the inconsistencies and make the provisions applicable to states and local governments. For that reason, it may be best for cities to provide a statement when requesting social security numbers. No law currently requires such action.

Prospective customers of utility have no legal entitlement to receive service

If the applicant for utility service has no prior contract with the utility, and if the decision as to whether to provide service is not based on classifications such as ownership, the City may refuse to provide service if the applicant does not provide a social security number. In the recent case Golden v. City of Columbus, 404 F.3d 950 (6th Cir. 2005), the Sixth Circuit Court of Appeals ruled the city violated the equal protection clause by refusing service to a tenant whose landlord owed the city for unpaid water bills. The decision is based on the city policy of treating customers differently based on ownership of property, and the practice of terminating service as a means of collecting the landlord's water service debt.

One argument made by the plaintiff in the Golden case which was rejected by the Court is the assertion that all residents of a city have a legitimate claim of entitlement to utility services of the city. The plaintiff cited the case Memphis Light, Gas & Water Div. V. Craft , 436 U.S. 1, 98 S.Ct. 1554, 56 L.Ed.2d 30 (1978), in support of her position, and the Sixth Circuit Court explained that the Craft opinion concerns procedural due process rights of customers of a utility, not persons who are not customers currently receiving services. The Craft opinion found the city's policy of terminating service to be in violation of the due process rights of the customer, and cannot be applied to extend the right to receive utility services to all persons.

So, although the Sixth Circuit ruled that the plaintiff in Golden was entitled to receive utility services, it did not find that utility services are an entitlement that all inhabitants of a city receive. The Court actually states that there is no fundamental right to receive water services. That being the case, city policies governing the connection to the water system and new accounts will be reviewed under the "rational basis" test - that is, if there is any rational basis for the policy which supports a legitimate government interest, the policy will be upheld. The city failed the test in the Golden case because there was no rational basis for classifying tenants differently than owners.

Applicants for utility service do not have an absolute right or entitlement to receive utility service. The city ' s policies concerning connection govern the rights of applicants, although they may not discriminate against applicants by treating persons differently based on property ownership or other factors.

I recommend that your City consider adopting a policy and providing a notice with language similar to the following statement to persons applying for utility hook ups and service:

Your social security number is required by the City utility department in order to activate your account and commence service, and the SSN may be used by the City for collection purposes if your account becomes delinquent. Under the Tennessee Public Records Act, social security numbers are designated as confidential, and as such the City cannot release your number to any person or entity. [As an alternative to providing your social security number, you may make a cash deposit in the amount of _____. When your service is terminated, the deposit will be returned to you if all billings have been satisfied and the account is not delinquent.]

In my opinion, most people just want reassurance that their social security number will not be released to unauthorized persons. The bracketed portion of the language above will provide the option of a cash deposit in lieu of providing the number, and I suggest that the amount for residential customers be reasonable, perhaps no more than $300. The draw back to this practice is the accounting requirements: deposits must be kept in a separate account and may have different reporting requirements than other utility accounts.

Such a practice is not required by law. The first portion of the statement suggested (before the brackets) may be sufficient to alleviate concerns and will likely make the application process go smoother. The second portion, in brackets, is only to be used if the City wishes to extend such an option. Neither of these statements or policies is required by law.

In my opinion, the City may refuse utility service to applicants who refuse to provide their social security number. This practice should be reflected in the City's utility policies, so that applicants are put on notice that social security numbers are required.


Question 2: The application for utility service states that the customer is responsible for any and all collection fees associated with the collection of delinquent bills and reasonable attorney fees. Years ago, a local judge ruled that a 30% collection fee is unreasonable. Are there limits on reimbursements of collection fees?

There is no statutory cap on the amount of a collection fee. The Fair Debt Collection Act requires that debt collectors only collect amounts, including interest, fees and expenses, which are "expressly authorized by the agreement creating the debt or permitted by law." 15 U.S.C. ' 1692f(1). In Tennessee, no debtor may be charged attorney fees unless he signed an agreement with the creditor acknowledging that he will be responsible for such fees. The same hold true for collection fees. Merely stating that the customer will be expected to pay "any and all collection fees" may result in a lower fee than anticipated, as your City experienced.

Delinquent utility accounts are viewed under the law as breach of contract cases. Therefore, the agreement to provide the utility service is the document that defines the parties rights and obligations, including liability for collection costs. The Tennessee Attorney General has opined that "if there is no contractual provision between the debtor and the creditor as to the payment of the costs of collection upon default of payment there is no legal basis upon which the collection agency can charge a collection fee to the debtor." Tenn. Op. Atty. Gen. No. 77-411.

Your application for service does state that a collection fee will be charged against the customer should the account become delinquent. In order to be sure you can collect the entire fee, the amount of the fee should be stated in the application. I suggest that you insert the following language in your service application:

The customer is responsible for any and all collection fees associated with the collection of delinquent bills, which may amount to 30% of the total amount of delinquent bills, in addition to reasonable attorney fees and court costs.

If the customer signs an application containing such a statement, the court will recognize that he has been put on notice that such a large collection fee may be charged. If notice has been provided, and evidenced by the customer's signature, the court will not get into the determination of what is a reasonable fee to charge.


Question 3: A customer has an old, 60 amp meter base and regularly fails to pay his bill on time. The meter is so old that utility employees do not want to remove it, as they fear it cannot be replaced. The customer has been told to correct the problem, but has failed to do so. Can the City require a customer to upgrade, on threat of disconnection of service?

In my opinion, the answer is "yes." The City adopted the National Fire Code, 1999 Edition, as prepared by the National Fire Protection Association. You need to determine if the City has adopted the 2004 edition of the Code. The 1999 edition is no longer in print, and is not available on-line through the NFPA. The 1999 edition is also not in the MTAS office, so I had to look at the current edition to respond to your question. I believe these sections cited from the code have not changed since the 1999 edition, but I am not sure. Please check with your city manager or recorder to see what the latest edition is that has been adopted by the City.

In any event, the National Electrical Code currently contains a provision for the inspection of one and two family residential dwellings, at NFPA 73. I have enclosed copies of the Code sections that apply to your question.

NFPA 73 enables the City to identify "hazardous conditions that are evident during a visual inspection of the electrical systems in existing one-family, two-family, and multifamily dwellings." I believe the situation you described would qualify, particularly if removal of the meter is impossible without messing up the wiring. It does seem to be the type of problem that is easily identifiable from the exterior of the residence.

Chapter 4 of NFPA 73 contains the general requirements for outside feeders and outside branch circuits. I believe these requirements will apply to this customer, and that he is in violation of this chapter. Copies of these requirements, along with the section on administration, are enclosed in this mailing.

Following are the steps I recommend for enforcement against this customer, and others similarly situated:

1. Someone who is certified to conduct electrical inspections should view the outside electrical equipment on this customer ' s house and determine if these provisions of the code have been violated.

2. If violations exist, written notice of the violations must be sent to the customer, with instructions on what must be done to bring his residence into compliance with the Code.

3. The customer must be given the opportunity to complain or contest the inspector's findings, possibly at the next board meeting. State a time and place where he can appear and contest the findings in the notice provided.

4. The notice should further contain a deadline for the work to be completed, which will run out after the date of his opportunity to contest the findings.

5. The notice should clearly state that if no action is taken by a certain date to repair the problem and bring the residence into compliance with the Code, the electrical service will be terminated.

As long as the customer has "due process," which consists of the right to complain or contest the findings of the inspector, the utility may proceed with cutting off service once notice is served and the time period has passed.

As an alternative to cutting off the service, the utility may do the work needed. In this situation, the utility may require the customer to sign an agreement to repay the utility on an installment basis, and may further have an agreement that a lien will attach to the property until the debt is satisfied. I know liens do not usually pay off, but that may be all the assurance of repayment this customer can offer.

The City Utility will have to make a judgment call on this. Cutting off a person's electrical service during cold winter months may result in bad press. On the other hand, if the City does the work there is no guarantee of repayment. Either option has drawbacks.

The City Utility should also make sure that this customer is not being singled out for late payment or other problems with his account. Other customers with similar wiring or other electrical code violations should not be overlooked. The customer at issue may argue to the board that he is being treated differently than other, similarly situated customers of the utility. The City is always in a better legal position if codes are applied uniformly to all residents.

I hope this information is helpful. Please let me know if you need further information or assistance.

Sincerely,


Melissa A. Ashburn
Legal Consultant

cc: Bill Young
Utility Finance Consultant

Please remember that these legal opinions were written based on the facts of a given city at a certain time. The laws referenced in any opinion may have changed or may not be applicable to your city or circumstances.

Always consult with your city attorney or an MTAS consultant before taking any action based on information contained in this database.