States Offer Consumers New Tool To Thwart Identity Theft

By the end of 2005, the legislative playing field on credit freezes had changed dramatically. Eight had passed credit freeze laws by that point, and bills to give consumers the right to freeze their credit files had been introduced in nearly 40 other states.

When Venables reintroduced his bill in January 2006, he included language on the 15-minute thaw provision and the data-breach penalties sought by the banking industry. In April, supporters and opponents of the new bill convened an unofficial meeting to see if there were any compromises that could be struck to improve the bill's chance of passage.

Faced with opposition from insurance providers and private investigators, Venables agreed to include language that would allow private investigators, banks and insurance companies to access information contained in the first few lines of a consumer's credit report, including name, address, Social Security number and credit score.

With that allowance, banks and credit-card companies would remain free to offer new lines of credit to consumers who had opted for a credit freeze. According to U.S. PIRG, the average U.S. household receives nearly 100 offers for new credit cards and loans each year.

It also was at that April meeting that Fitzgerald said he was approached by DiPietro. The CDIA representative offered to support a state freeze law modeled after California's measure, which does not include the 15-minute thaw option for consumers.

"I said to him, 'Why would I accept a California law when I can have this New Jersey model?' I told him that had he come to me with that offer back in February of 2005, I'd have jumped on it then. But now what they were offering was a step backwards for us."

In late May, the 15-minute thaw bill passed the Democratic-controlled state Senate unanimously. Supporters expected a tough battle for the bill in the Republican-dominated House. But a month later, during a hearing on the measure in the House Banking Committee, there was a surprise. Among those testifying in favor of the measure was the owner of the largest automobile dealership in the committee chairman's home district.

Retailers had strongly resisted the original credit-freeze bill that was modeled after the California law, fearing it would limit consumers' access to instant credit. Delaware has no sales tax, and its huge outlet malls are a major destination for many bargain shoppers from surrounding states. After the bill was changed to include the 15-minute thaw provision, retailers effectively dropped their opposition, Fitzgerald said.

"What it ultimately came down to was that we had neutralized most of the previous opponents, and the credit bureaus were left alone in their opposition to the bill," he said.

The bill made it to the House floor, where lawmakers approved it 40-0 after stripping out the fines for mechants that fail to secure their customers' data. Gov. Ruth Ann Minner (D) signed it on June 30, and it became law that September.

Since the Delaware law was enacted, a number of states have moved to improve their credit-freeze laws. New Mexico, Utah, West Virginia and Wyoming enacted 15-minute thaw requirements. Other states have sought to lower the amount citizens must pay to place, lift or remove a credit-file freeze. Montana's freeze now has the lowest fee in the nation; it's $3 to establish and lift a freeze at each of the major credit bureaus. Vermont and Illinois subsequently expanded the right to a freeze to all citizens, not just identity theft victims. The legislature in Washington did the same, with the bill currently awaiting the governor's signature. A similar effort is underway in Texas.

Consumers Union estimates that by the end of this year, about 40 states will have enacted credit freeze laws. For the states without them, it sees hope in a data-breach bill currently before the U.S. Senate. That measure would give consumers the right to freeze their credit at a cost of $10 per bureau. The measure would do nothing to interfere with state freeze laws already enacted.

Shortly after the Delaware bill became law, Fitzgerald decided to take it for a test run by freezing his credit. Pretending to be a Delaware citizen with no knowledge of the law, he asked what he needed to do to establish a credit freeze. The customer service representative told him he needed to assemble the necessary documents and send them via certified mail. Fitzgerald then challenged the credit bureau to find in the statute where certified mail was required. It wasn't. He had quietly removed the language from the bill before the measure was approved by the Delaware Senate.

"I'd scratched that portion out, and I guess they never noticed," Fitzgerald said. "It was another minor victory."