Last week, a new law torched some of the banking rules that were put in place after the financial crisis to protect us. But also tucked into the otherwise awful bill was a win for consumers.
By Sept. 21, everyone will be able to place and remove a “security freeze” on their credit files for free. Such a freeze — also called a “credit freeze” — blocks lenders from pulling your credit reports. It’s a powerful tool to thwart identity thieves from using your financial information to open credit cards or take out loans.
Establishing a security freeze is much more potent than putting a fraud alert on your credit report. With a fraud alert, a lender is supposed to verify your identity before it issues credit. But this does not always happen, and you have to keep renewing the alert every 90 days to keep it in place.
With a freeze, the credit bureau can’t release any information in your file without your permission. Until last week, with the new law rolling back parts of the Dodd-Frank financial reform package, there wasn’t a federal security-freeze law, so the rules varied by state. Some states had moved to eliminate the fees for starting, temporarily lifting or removing a freeze, while others had costs that ranged from $2 to $10 for each part of the process.
When you want to apply for a credit card or need someone to view your file for any other reason, you have to unfreeze your credit report and then replace it later. For some customers, this freezing and unfreezing at all three major credit bureaus could cost as much as $60.
Here’s what to expect once the freezes are on the house:
• If you request a freeze by telephone or electronically, it has to be done in at least one business day. After receiving a freeze request by regular mail, the bureaus have three business days to activate it.
You will also need to request a freeze at each of the three bureaus for it to be truly effective.
“This does not fix everything but does fix one problem,” said Francis Creighton, president and chief executive officer of Consumer Data Industry Association, a trade group representing the consumer reporting industry. “The idea of the freeze is to prevent someone from using your information to access new credit.”
Practically speaking, the credit bureaus are going to want to make placing and lifting a freeze pretty quick, Creighton said.
If the process to lift a freeze is too long or cumbersome, companies that rely on credit files sold by the bureaus could lose some business.
• The Federal Trade Commission was charged with establishing a single webpage that includes a link to each credit bureau to make it easier for consumers to place a freeze.
• An initial fraud alert will now last for one year. Identity-theft victims will still be able to extend a fraud alert for seven years.
• There are quite a few exceptions as to who can still view your files with a freeze in place. Financial companies with whom you do business — or to whom you owe money — can see them. Any federal, state or local agency as well as law enforcement, trial court, or private collection agency with a court order, warrant or subpoena would have access. So, too, would a child-support agency or a federal or state agency investigating fraud or trying to collect delinquent taxes or unpaid court orders.
Your file can also be viewed by any person using the information in connection with getting insurance, or a background screening for housing or employment.
“The federal free credit freeze is bittersweet,” said Ed Mierzwinski, consumer program director with U.S. PIRG.
Mierzwinski was critical that the federal law isn’t as strong as some state laws, which allow the freeze to also apply to employment and insurance uses of credit reports.
“There are a lot of areas where people’s identity can still be stolen,” he said.
Remember the Equifax breach? That data hack exposed personal information for close to 148 million Americans, including Social Security numbers, driver’s license information, birthdays and other data that can be used to steal people’s identity. For example, thieves could still file a fraudulent tax return even if you have a freeze in place.
With so much of our data being stolen, having the ability to quickly freeze and unfreeze your files at no cost is a good step toward protecting your identity. But don’t be overly confident that your credit is so secure that you can’t still become a victim of identity theft. The threat is still out there.
— Washington Post Writers Group
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