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Cutting Through Bureaucratic Babble On Credit Freezing
Editorial Director,
Customer Inter@ction Solutions magazine
If you haven't heard about "credit freezing" yet, that's likely to change. Many individual U.S. states, beginning with California, have enacted or are in the process of enacting laws that allow residents to effectively put a complete freeze on their credit (via the three major credit firms) that will essentially inoculate them against identity theft. With a credit freeze, a thief could have your name and social security number and still not be able to scam you. You, and only you, are capable of "unfreezing" your credit when you need it via PIN numbers provided by the three main credit reporting agencies: Equifax, Experian and TransUnion.
It's not easy. It costs money (in Connecticut, the law requires it cost no more than $10 to each credit agency to freeze credit). And it requires a bit of hassle to unfreeze.
It also stops identity thieves in their tracks.
I became interested recently in finding out how to effect the process, since I am a resident of Connecticut. I visited the State of Connecticut's Web site and found nothing. I visited the Web sites of the three credit agencies, and found nothing except a response to a question in Equifax's FAQ section. I have detailed that response in the letter I wrote to Connecticut Governor Jodi Rell, below.
Dear Governor Rell:
I'd like to thank you for enacting the "credit freeze" law that went into effect in Connecticut in January of this year. It's a very wise piece of legislation.
I'm trying to take advantage of it. Problem is, it seems the credit reporting agency are doing their best to make sure we don't.
In addition to having no information whatsoever on their Web sites pertaining to the process (even an advanced search yields nothing), these agencies will not give you a phone number to call UNTIL YOU BECOME A PAID CUSTOMER. On Equifax's site, you cannot get the number of customer service until you buy something. Nice, huh?
On Experian's Web site, they actively discourage you from engaging in a credit freeze with the following (frankly, false, information):
There are many claims about credit file freezing being the perfect fraud protection tool… it's not exactly perfect. In fact there are many challenges with file freezing that you'll hear little about from its proponents.
File freezing is often presented as an instant-on, instant-off process – all you have to do is provide your PIN number. Ironically, providing your PIN number is just the first step. After verifying your PIN number and other identifying information, the credit file must be looked up and the freeze removed. That verification process takes more than a few minutes.
If your identifying information doesn't match, or you don't have your PIN number, you will need to provide copies of identifying documentation through the mail to prove that you, and not an identity thief, are trying to gain access to your credit history. That can extend the unfreezing process into weeks.
The result is that what is promoted as protecting you from fraud actually prevents you from getting the best interest rate or the loan you need.
A more common issue is not remembering or not having access to your PIN number to lift the freeze. The most common example I hear is from people who lose or break their cellular telephone. To get a new phone, the service provider often must access your credit history. However, you can't get a new phone if you don't know your PIN from memory, and it can be a tremendous inconvenience to retrieve your PIN, or worse, have to mail verification documents to request a new one.
Another serious problem with file freezing is that people don't consider the legitimate uses of credit reports beyond granting of credit. Unless removed in advance, a file freezing can prevent you from getting a cellular telephone or utility service. File freezing also can interfere with your ability to get a job, get an apartment, get security clearance for certain government positions, or obtain some government licenses.
Freezing your credit history is an extreme step with extreme consequences. That is why I only recommend freezing your credit history in extreme cases of identity theft. Any benefit it might provide is often far outweighed by the problems it will cause for you.
Allowing these credit firms to be "keepers" of the freeze process is like asking the cats to keep the tuna safe for someone else. It is in their best interest to lie and obfuscate about their responsibilities regarding the credit freeze. The $10 credit freeze process actively eats into the profits of their paid "credit monitoring" packages.
I'm the editor of a Norwalk-based call center/customer service magazine, so my interest is both professional and personal. I'm using myself as a guinea pig to try the process, and then will report to readers.
If anyone on your staff has heard similar feedback from other Connecticut citizens and anyone has come up with suggestions of the best way to approach the process, I would to receive some guidance, if possible. I'm really at a bit of a loss here.
Thank you sincerely,
Tracey E. Schelmetic
Yes…providing your PIN number is the just the first step. It's a real hassle. An asteroid could hit planet earth the day you see the cheap mortgage deal, and because of that, it might slow up unfreezing your credit by an extra day. Pygmies from darkest Africa could invade your town, disrupting the phone system, and your phone call could delay the process of getting a giant-screen TV you can't afford anyway by an extra day.
I was stunned to get a response back, as follows:
Ms. Schelmetic:
This is to acknowledge receipt of your e-mail correspondence regarding credit freezes. The Office of Governor Rell forwarded your letter to the Department of Banking for review and our response.
The credit bureaus should make it difficult for individuals to place a credit freeze onto their credit reports unless the individual is a victim of identity theft. There are other procedures available to consumers to protect their credit files. One is to obtain and carefully examine an annual free credit report. An individual may request a free credit report from each bureau annually and will be able to examine it for accuracy. For a fee, the credit bureau(s) will also provide a credit score. Having the credit report lets the person review his/her credit history and take steps to resolve issues before it becomes a major impediment. Another is to use fraud alerts, whereby a person concerned about possible unauthorized credit report access may request the credit bureaus contact the individual any time an application for credit is being processed. Using the fraud alert will require potential creditors to contact the person to verify whether the credit application was actually generated by that person. (Use of these alerts may slow the application process somewhat but shouldn’t prevent access to new credit.)
The Fair and Accurate Credit Transactions Act (“FACT Act”) provides for initial alerts (for 90 days) to protect a person who, for example, has lost a wallet and is concerned about unauthorized access to credit. There are active duty alerts designed to protect a person in the military for twelve months. There are extended alerts that last for seven years (although a credit freeze would probably be more helpful in these cases.)
The newly enacted state law gives the bureau(s) five business days in place the freeze and requires three business days to lift a freeze upon receipt of a valid request to permanently or temporarily lift the freeze. The law permits assessing a $10.00 fee in both directions unless the person requesting the freeze is an identity theft victim. The suggestion is that the letter(s) requesting a credit freeze be sent via certified mail – an additional cost. A married individual must send a separate request for each spouse and the request would be send to each credit bureau (costing $60.00 for each freeze.)
It is true that if passwords or PIN numbers are lost or misplaced, removing the freeze will be very difficult. It is also true that if a person doesn’t request (at least) temporary lifting of a credit freeze when applying for credit, the potential creditor will be unable to access the credit file and may choose to deny the application for credit based on an incomplete file. The credit freeze is not designed to shield a person’s credit file from creditors with whom the person has an existing business relationship; those creditors will still be able to access a credit file (for their “normal” account reviews.)
During January, the Department of Banking provided information about the new Connecticut law permitting credit freezes to each credit bureau with a request that the information be disseminated onto their websites; it is up to their Web Masters to do so.
The Federal Trade Commission reviews Credit Bureau operations and monitors complaints about consumer experiences with the bureaus. The FTC does take action against a Bureau if a pattern of abuse arises or takes action through enacting new laws (such as the FACT Act) or setting forth regulations if the need arises.
If further explanation or assistance is required, please feel free to contact us.
Michael Buchas
Consumer Affairs Unit
Connecticut Department of Banking
I've never been one to keep my mouth shut when I perceive false information is being packaged as official policy recommendations, and this time is no exception. Ten minutes of clicking away on my keyboard produced the following response:
Dear Mr. Buchas:
I disagree. Saying that only individuals who have already become a victim of identity theft should freeze their credit is like saying that only people who have been victims of muggings should be careful when walking to their cars at night. Connecticut has one of the highest incident rates of identity theft in the country.
As for an annual credit report...I don't think this would be very effective. Many people have credit limits above $20,000 and more...it takes a thief ten minutes to spend that amount of money, and you no wiser until you start receiving the dunning calls from bill collectors. Buying a credit monitoring package costs considerably more than engaging a credit freeze, so I don't think the cost is the issue here.
As for a fraud alert, many retailers fully admit that they frequently ignore these in their haste to make a sale. To the best of my knowledge, there is no requirement by law for them to do anything when they see a fraud alert on an account. They are merely interested in the sale. Also, a fraud alert generally only addresses the situation after the fact, when a consumer may have already been scammed. According to an "experiment" conducted by the Identity Theft Resource Center, consumers with fraud alerts have been able to open accounts on the spot at various retailers. It's not hard to see that the average electronics store is frequently staffed by a bored teenager who just wants to get your transaction finished so he can get back to chatting with his girlfriend on his cell phone
Perhaps credit freezes will not work for impulse buyers. But for individuals who are current homeowners and car owners with no immediate plans to refinance or re-purchase, the limited expense (under $40) is a very small price to pay for an event that can (and frequently does) ruin peoples' lives. There are still many citizens out there who wait until they can afford an item and pay for it out of cash, a fact which probably disturbs retailers. You yourself say that the credit freeze will not affect the ability of companies with whom you have existing business relationships; those creditors will still be able to access a credit file for normal credit-check purposes.
Finally, if the law was passed only for its details to be buried so no one can take advantage of it...why was time and taxpayer money spent to bother passing the law? I believe Governor Rell to be one of those rare politicians who passes laws because they're for the good of the people of Connecticut, not because it looks good on her re-election brochures.
Thanks for addressing these issues for me.
Sincerely,
Tracey E. Schelmetic
Did you like that bit about asking why taxpayer money was spent if credit freezes aren't worth it? That usually motivates government officials like nothing else. I will keep you posted as the follow-up information rolls in.
Interested in knowing how to freeze your credit but don't know how? I do. Look for it in Part II of this article a little later in the week.
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