States Offer Consumers New Tool To Thwart Identity Theft

DiPietro denied ever making the statement. A CDIA representative said DiPietro did not speak for the national organization.

Fitzgerald brought the idea to his local Republican state representative, and met with aides to the state's Democratic governor. Both expressed interest, but little progress was made until late April. That's when Fitzgerald received a phone call from an aide to the governor. He was informed that Sen. Robert Venables, a populist Democrat from the rural, southern Delaware, planned to introduce a credit-freeze bill in May modeled after California's pioneering statute.

Prior to the initial hearing on the bill in June 2005, the bill had official support from two organizations, a local credit union and ING Direct, a huge online banking operation whose executives feared that the identity-theft wave hitting consumers might undermine faith in Internet-based financial services.

Venables said he was unprepared for the fierce opposition his bill engendered.

"The banks, the insurance companies, credit bureaus and retailers really came out of the woodwork and fought hard against it," he said. "I thought it was good for them and the banks. I thought with all the ID theft going on, people might even get to the point where they'd be afraid of using the [banking] system. I thought that since the credit bureaus were making a bundle of money off of trading consumers' information ... that they should offer a way to protect that information."

For a few months, Fitzgerald said it appeared as though the CDIA was on track to meet its objective. The Delaware freeze bill languished for the remainder of the legislative session. Meanwhile, CDIA lobbyists turned their attention to fighting a similar bill in New Jersey, urging lawmakers there to model their proposal on Vermont's law, which provided freezes only for identity-theft victims.

By May 2005, Delaware was alongside Maryland, New Jersey and Massachusetts in debating credit-freeze legislation. Advocates affiliated with the U.S. Public Interest Research Group who attended individual state hearings said the CDIA opposed credit freezes for all but confirmed victims of ID theft, and that the organization would only support a bill modeled after the Vermont law.

But by early July, New Jersey had bucked the CDIA and enacted a freeze law that addressed what consumer advocates saw as the biggest shortcoming of the California measure -- that consumers had to wait three days after unlocking their credit file before they could apply for new lines of credit. New Jersey was the first state to require a "fast thaw" provision allowing consumers to unfreeze their credit files within 15 minutes of supplying a pre-arranged, four-digit personal identification number to the credit bureaus. Additionally, the state's new law allowed consumers to use e-mail or the Web in addition to U.S. mail to unlock their data.

Abigail Kaplowitz Field, a legislative advocate for the New Jersey PIRG who worked with Fitzgerald in shepherding Delaware's measure, said that without a quick-thaw provision, few consumers would take advantage of a credit freeze because many businesses will not authorize new, on-the-spot accounts, such as for a new cell phone, without access to a consumer's credit file.

"If someone invaded your home, you'd buy a new lock for the door, but it wouldn't do you much good if every time you unlocked your door you had to pay a fee and wait three days in the cold before going inside. A freeze should really operate like a lock on your front door," Field said.

The New Jersey law wasn't a total loss for financial data brokers. The credit bureaus won a two-to three-year delay in implementing the 15-minute thaw requirement. In addition, New Jersey residents still must file requests for credit freezes through certified mail, which generally adds another $10 to the cost of filing a freeze as consumers must send separate letters to each credit bureau.

To Freeze or Not to Freeze...

Under federal law, individuals have the right to place a 90-day "fraud alert" on their credit files. They also are entitled to a free copy of their credit report from each of the three big credit reporting bureaus annually. However, unlike a security freeze, a fraud alert merely notifies the consumer if an inquiry has been made against his or her credit file. It does not prevent identity thieves or other businesses from accessing a consumer's credit file or obtaining new lines of credit under false pretenses. Consumers who can provide police reports proving they are victims of identity fraud are eligible for a seven-year fraud alert.