Protecting consumers from identity theft is a bigger priority than ever for state legislators, according to a new study by Boston-based Aite Group, which found that more than 200 bills focusing on the issue currently are pending at the state level. As a result, financial institutions must keep a careful eye on any changes and be prepared to act on individual state legislation to avoid costly fines.

"Consumer protection has largely fallen into the hands of the state legislature," Eva Weber, analyst at Aite Group and author of the report, said in a release. "While concerns ... have resulted in saber rattling by the U.S. Congress and federal regulators, several states are already putting laws in place to protect their citizens." Noting that tracking information about state regulation can be hard since regulators largely operate independently, Weber added, "Financial institutions must remain focused on consumer measures and be prepared to act on state [legislation]."

According to Aite, pending bills on identity theft fall into three categories. Fifty-eight percent address the issue of security freezes, in particular the rights of consumers to have their credit reports locked down in cases where identity theft is suspected or possible. New bills would allow victims of identity theft to request that a security alert be placed on their credit reports.

Meanwhile, 24 percent of bills are broad measures that define identity theft, including a revision of the definition of "personal identifying information," as well as prevention methods and potential solutions. Finally, 18 percent of bills focus on breach of information requirements and the response a financial institution must adhere to when personal information is mishandled.

Overall, Aite reports that more than 1,300 bills covering a range of issues that could impact financial institutions currently are pending before the 50 U.S. state legislatures. Other hot-button issues beyond identity theft include mortgage lending, payday lending and credit card operations.