States Offer Consumers New Tool To Thwart Identity Theft

Consumers also can order a copy of their credit report at annualcreditreport.com or sign up for credit-monitoring services over the phone or the Web. Consumers are not allowed to file for a credit freeze electronically. While some states have enacted laws that eventually will allow consumers to request and thaw a freeze electronically, bureaus still have at least a couple of years to implement those requirements.

Critics of the consumer-reporting agencies say credit bureaus oppose freeze laws because they threaten to curb the billions of dollars they reap from credit monitoring services. The services, which the credit bureaus offer for prices ranging from $6 to $12 per month, are designed to alert consumers if someone applies for credit in their name or makes an inquiry on their credit file. More than 11 million Americans subscribe to credit monitoring services, according to Javelin Strategy and Research.

Consumer advocates note that credit-monitoring services will not stop identity thieves from opening new lines of credit in a consumer's name.

"This expensive service gives you a report of all the things that are happening to you as a consumer but they don't do anything to stop new accounts from being opened," said Michelle Jun, a staff attorney with the San Francisco office of Consumers Union. "I think [the credit bureaus'] big concern is a lot of customers will start using the freezes as they gain more awareness of them, but the bureaus aren't really making that information easily available."

CDIA President and Chief Executive Officer Stuart Pratt said credit monitoring and fraud alerts are effective tools for consumers who want to remain informed about activity on their credit file, without the inconveniences of a credit freeze. In most cases, consumers who have frozen their credit must wait at least three days after thawing their file before applying for new credit, or opening a retail account, for example.

"I've intuitively always thought that credit freezes may be too rigid for many consumers, because it really does stop you from engaging in a lot of transactions that you have to do in normal, everyday life," he said.

Pratt said the bureaus have insisted that credit-freeze requests be submitted via certified mail as a way to provide authoritative documentation. "The key to [requiring a written request] is to make sure we have a record of what the consumer asked for, so that we have something to show [the consumer] who comes to us angry because they can't unfreeze their credit fast enough or they don't remember doing it in the first place."

Pratt said it should be harder for consumers to thaw a credit freeze than it is to place it, noting that more than 40 million Americans move, change their last name or other identifying information each year. He added that alterations in a consumer's record often demand more rigorous re-verification of the consumer when he or she requests a thaw on a frozen credit file.

"If I chose to freeze my credit report, I'd expect the bureau to do a good job verifying me if I later wanted to unfreeze it," Pratt said. "I think consumers are willing to tolerate a number of steps to make sure we verify them. It's really no different from getting on a plane these days. The difference between customer service and a freeze is much more about security than it is about ease of use."

Advocates for swifter and more convenient credit freezes and thaws, he said, often gloss over these important operational details. "These folks want to have their cake it and eat it too, but the reality is that security and customer service don't always operate co-terminously."

The CDIA says there is little indication that consumers are taking advantage of the freeze laws already on the books. The group claims that as of the first quarter of 2007, only about 50,000 consumers nationwide have requested a credit freeze.

But Adam Goldberg, a senior legislation representative with the AARP, said that's because the credit bureaus have erected hurdles for consumers seeking a freeze. Goldberg said he had difficulty finding any information about consumers' rights to a security freeze on two of the three credit bureaus' Web sites.