Credit Reporting Firms Attempt To Block States As They Step In To Protect the Consumer from Identity Theft

Since 2005, 155 million consumer records have been reported breached as a result of newly instituted state-data-loss notification laws that require companies, universities, hospitals, government agencies, and merchants to report all suspected breaches of consumer credit information. This is terrifying given that Gartner, banking security analyst, Avivah Litan estimates 15 million Americans will become victims of identity theft in 2007 resulting in an average loss of $3,257

One of the most common identity theft scams is to open new accounts under another consumer’s name and to date the best protection against this type of fraud is a credit- freeze, says credit consultants and fraud investigators. A credit-freeze bars the credit bureau from issuing your credit report and because few lenders will issue credit without first seeing a credit score, identity thieves can’t use stolen data to open new accounts. Therefore, the credit freeze, out of anything else that’s been conceived, has potential to be the most effective tool for preventing crocks from fraudulently using your Social Security number or other personal data to open new accounts.

Fortunately, for consumers the last two years has seen an onrush of states passing legislation that will empower the consumer to freeze access to their credit histories in an effort to prevent identity theft. However, while good for consumers the big three credit bureaus: Experian, Equifax, and TransUnion, whose combined annual revenue exceeds $4 billion, continue to lobby Washington to stop this trend since it will limit their ability to sell consumer information to lenders who target consumers with junk mail and telemarketing campaigns.

Nevertheless, consumers are demanding protection against identity theft and of date 35 states have passed credit-freeze legislation and the remaining 15 remaining states are considering passing similar laws in the near future. Therefore in an effort to defuse this trend the CDIA (Consumer Data Industry Association) has spent a whopping $1.4 million dollars, in 2006 alone, on federal lobbying efforts that have at times found friendly ears in Washington, D.C. There failure, however, resonates throughout America with the result being Senator Mark Pryor of Arkansas introduction of a national credit-freeze bill, based on the California standard – a $10 per bureau fee and certified mail application, which would be folded into a broader data security data bill co-sponsored by Senators Daniel Inouye of Hawaii and Ted Stevens of Alaska.

However, Susanna Montezemolo, senior legislative representative for AARP states that “We don’t want a federal law unless it is stronger than state laws.” And adds “She cannot imagine Congress will move on a weak, pre-emptive credit-freeze bill given the number of high-profile data breaches.  

While this would be good news for consumers, this bill needs to be amended to allow the consumer to quickly unseal their account when they need a creditor to have access to it. This would be similar to a “quick thaw” that could then be refrozen as soon as the necessary information was retrieved by the reputable company seeking the information.

I know that I for one am all in favor of this bill as identity theft is something that all of us live in fear of.

[tags]fraud, identity theft, credit-freeze, CDIA, Consumer Data Industry Association, [/tags]