Victims of ID Theft Applaud New Way to ‘Freeze’ Credit Reports
Bridget Thomas of Prairieville, Louisiana, lobbied for a way to block access to credit reports in her state after she was badly burned by identity theft that destroyed her credit status.
A woman with the same name as Thomas, but a different middle initial, obtained her social security number and started spending.
Lawmakers in Louisiana and a few other states, moved by stories like Thomas’, have instituted a privacy option called a security freeze. Individuals can block access to their credit reports until they personally unlock the files by contacting the credit bureaus and providing a PIN code.
"It's like putting a new lock and key on your security files," Thomas said, according to the Associated Press. "This gives you a modicum of control. Instead of the social security number being the old key, this PIN is your new key."
The option isn’t widely known among those who have not been victimized by ID theft, and the process of freezing and unfreezing credit reports - at all three credit bureaus - may turn people off. The credit-reporting industry said the option is confusing and complicated. In fact, a spokesman likened the security freeze to “using a machine gun to get at a fly.”
But with the increase in identity theft, consumers are looking for a tool to stop fraudsters from opening unauthorized accounts. California and Texas allowed security freezes last year; Louisiana and Vermont will allow it beginning next July. However, only ID theft victims can use the option in Texas and Vermont.
A study for the Federal Trade Commission determined that in 2002, 3.2 million Americans' personal information had been stolen. On average, victims lost $1,180 and spent 60 hours resolving the problem. Meanwhile, it’s quick and easy for thieves to obtain credit once they get a social security number, sometimes found on the Internet and consumer databases.
Consumers can place fraud alerts on their credit reports as a way to tell creditors that they suspect trouble, but the alerts are often ignored, said Joanne McNabb, chief of the California Office of Privacy Protection. Retailers are willing to take the risk that the buyer of a big ticket item is legitimate.
The freeze would block a creditor from checking your history unless you call the credit bureaus, private the PIN and say who will be asking about your history. For victims of ID theft, the freeze option is free, but for others, it will cost a small fee, multiplied by three to cover Experian, Equifax and TransUnion.
Because of the time and money involved, the option may not be a good one for consumers who open new accounts often. The credit bureaus say the freeze is unnecessary, pointing to fraud alerts and other protections.
Eric Ellman, a lobbyist for the Consumer Data Industry Association, told a Louisiana legislative committee that efficient access to credit histories means quick mortgage approvals and other conveniences. He called the freezes “the most dramatic and draconian alteration" ever to hit the credit reporting system.