July 22, 2005

Important Credit Freeze Update: Freeze Provision Is in Pending Federal Legislation

Filed under: Economy,Privacy/ID Theft,Taxes & Government — Tom @ 1:43 pm

Lisa Vass at eWeek reports that the ability for consumers to freeze their credit, which BizzyBlog has called for, is in pending federal legislation (bold is mine):

The Identity Theft Protection Act, sponsored by Sen. Gordon Smith, R-Ore., and a slate of bipartisan supporters, is a bill that touches on data protection and safeguards, as well as data breach notification.

… At the heart of the battle between industry and consumer groups lies three key legislative components: First, the bill doesn’t specifically exempt data that’s encrypted.

It also has stringent notification requirements wherein the breach of a single consumer’s data triggers notification requirements, as opposed to other bills’ stipulations that larger totals, such as 10,000 records, will trip the notification requirement. Finally, and most importantly, it provides for a consumer’s right to freeze their credit report.

Hoofnagle suspects that the committees will water down consumer protection in the bill by targeting the credit report freeze. “[Credit freezes] can at least theoretically slow down impulse buying decisions,” he said. “With the freeze, you have to call an agency to say, ‘Please thaw my record so I can buy a big-screen TV.’ In that delay, you might speak with your spouse or think to yourself, ‘Can I really swing this?’”

The credit industry’s view is that people vote with their pocketbooks, and they want the convenience of instant credit. As McNabb pointed out, however, California’s law has a provision whereby consumers can receive a PIN to thaw credit temporarily.

A credit bureau has three business days to act on the thaw request, and the thaw can last as long as it takes to refinance a house—for example, 10 days or 30 days. Three days isn’t that far away from instant credit, McNabb said. Besides, pre-ChoicePoint, a mere 4,000 Californians had frozen their credit reports in the three years of the law’s existence.

“Even when they know about it, not everybody will do it,” McNabb said. But the idea of a freeze is particularly appealing for people who aren’t in the market for credit, such as the elderly or disabled; in other words, people who are traditional targets of fraud.

Very few have consumers have used the freeze in California because the new law has received almost no visibility, and because it costs $10 to put on a freeze for EACH bureau, and another $10 each to take it off (freezes are free if you have been a victim of identity theft).

The cost structure is ludicrous. Freezes and thaws should be free, and whatever real costs are involved should be considered a cost of doing business for the bureaus and ultimately their business clients (unless I’m missing something, it’s a lot less than $10 per freeze or thaw, at least once it becomes available to the entire population). I also believe that there are no insurmountable barriers that make freezes and “(nearly) instant credit” incompatible.

Never forget: It’s your information, not theirs.

The credit freeze option needs to be in the final legislation when passed, or it won’t be worth the paper it’s printed on, or for that matter the hard drive space it takes up.

UPDATE: Outside the Beltway Traffic Jammer.

UPDATE 2: Trey Jackson chronicles the data breach litany of just the past few months. These things will keep happening, folks. Of course it’s important to do everything possible to prevent them, but too many people have too much access to too much data for anyone to seriously believe that all data breaches can be prevented. The question is whether you are protected when it does happen. That’s why the credit freeze must be available to everyone who wants it, and why it should be the “default” option.

UPDATE 3: A Consumers Union press release confirms eWeek’s worries:

Consumer groups are concerned that an intense lobbying campaign in Congress by industry groups may leave Americans without the safeguards they need. Industry lobbyists are fighting to block a new right for consumers to freeze access to credit files, stricter rules regarding data security, mandatory notices of all security breaches, and the ability of states to provide stronger identity theft protections.


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