Second Credit Bureau Offers File Freeze
Consumer credit reporting bureau Experian today announced that it would allow consumers in all 50 states to freeze their credit histories, becoming the second of the three national credit bureaus to offer the freeze option.
The service, which will be offered in all 50 states and the District of Columbia starting Nov. 1, gives consumers another option for safeguarding their credit file against identity thieves. The file freeze will be free for ID theft victims, and cost $10 to place, temporary lift, or remove for all others.
The move comes just two weeks after another of the big three credit bureaus -- TransUnion -- broke ranks with the industry in providing the service nationwide.
"Now that a national model for file freezing has emerged, Experian is offering this option to help prevent consumer confusion," said Kerry Williams, group president of Experian's credit services division.
David Rubinger, a spokesperson for Atlanta based credit bureau Equifax, said the company plans to make a similar announcement soon, but that it is "still finalizing the operational details."
Currently, at least 39 states and the District of Columbia allow consumers to freeze their credit files, but many of those laws do not take effect until 2008 or 2009. Assuming Equifax does offer the freeze, it would effectively mean that consumers in 15 states will have the ability to freeze their credit where they previously did not, as four states with freeze laws already on the books only offer the right to confirmed ID theft victims.
For the millions of consumers who receive notice each year that their personal or financial data was lost or stolen, a preemptive security freeze can offer peace of mind. It blocks businesses and potential fraudsters from gaining access to a consumer's credit report and score, and from granting new lines of credit in the consumer's name. In many states, consumers who want to remove the freeze can use a special identification number to unlock access to their credit file.
Consumers should be aware of the side-effects that a credit file freeze can bring. For one thing, a freeze can make it very difficult to obtain instant credit, as the consumer must first thaw the freeze (for a fee). In addition, some companies routinely run background checks on potential employees, so job hunting could become more complicated with a freeze in place.
Consumer advocates say the credit bureaus have traditionally resisted offering credit file freezes because they make money by selling access to the information to potential creditors. In May, washingtonpost.com ran a story that examined the resistance that the credit bureaus and its industry lobbyists staged in fighting state freeze laws.
Experian's Williams said a fraud security alert is a better option for many consumers who are concerned about possible ID theft. If you have a fraud alert on your credit file, and you or someone else tries to open a new line of credit in your name, the bureaus are supposed to contact you by phone to verify the transaction. In theory, the bureau is not authorized to open the account without reaching you, but even fraud alerts are sometimes ignored.
Consumers in all 50 states and the District can place a 90-day fraud alert for free by phone by calling any one of the big three bureaus (in turn, that bureau is required to alert the other two to take similar measures). Consumers are free to renew the 90-day fraud alert as many times as they want. By submitting a police report documenting their plight, ID theft victims can place an extended fraud alert for free that lasts for seven years.
The credit bureaus prefer to sell credit monitoring services, but consumer advocates say these pricey services don't prevent ID thieves from opening new lines of credit in your name. The bureaus also have profited by selling consumers the right to view their own credit histories. Be advised that under federal law, all Americans have a right to one free copy of their credit report from each of the big three bureaus, per year.
Jeannine Kenney, a senior policy analyst with ConsumersUnion applauded Experian's decision as "a strong first step," but said more action is needed by states and the federal government to guarantee that these new abilities become rights, and that freezes are not bundled with other fee-for-service offerings.
"State and federal action is appropriate to ensure that consumers are not misled about what their rights are," Kenney said.
Kenney added that states need to continue to fight for reducing the barriers to filing a freeze, such as cost and the current requirement that the initial freeze be placed via certified mail. Such requirements add to the cost of filing a freeze while doing little to verify the identity of the filer (the Post Office typically doesn't check your ID when you send something via certified mail).
"The cost, method and ease of temporarily a freeze can all be artificial barriers if not done correctly," Kenney said.
Before you pay for a credit freeze, check to see whether your state already offers such a right. Some states allow consumers to place and lift freezes for free, or at a lower cost. More information on state credit freeze laws is available at this link. Check out Privacy Rights Clearinghouse for contact information for the big three, as well as tips on what to do if you suspect you've become a victim of ID theft.
Update, 10:15 a.m. ET: Added information and quotes from Consumers Union and Equifax.
Update, 4:01 p.m. ET: Previously, the credit bureaus have required consumers who wish to freeze their credit file to do so in writing, via certified mail -- unless required to provide other options by state laws. Experian now says that beginning Nov. 1, it will allow consumers to file, lift or remove freezes through an automated process on its Web site or over the telephone.
Update, 4:55 p.m. ET: Round and round we go. Experian's Maxine Sweet just called me again to say that she spoke too soon, and that the company will in fact not be able to offer consumers the right to file a freeze by phone or the Web by Nov. 1. Until the company says otherwise, consumers will still need to file for a freeze in writing, via certified mail.
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