Credit Card Freeze

By Nov. 1, consumers in all 50 states will be able to freeze their credit file at all three major credit-reporting agencies. TransUnion will roll out its plan Oct. 15, while Experian's offer will take effect beginning Nov. 1.

The third agency, Equifax, said it expects to introduce its new plan some time near the end of October.

Consumers living in states that either don't have credit freeze laws, have laws that aren't in effect yet or limit credit freezes only to ID theft victims will have the ability to place a freeze on their TransUnion and Experian, and presumably Equifax, credit reports. Victims of identity theft will be able to place, lift ("thaw") and remove the freeze for free, while nonvictims will pay $10 each time.

"We're trying to give consumers the opportunity to choose the identity theft fraud solution for their specific circumstances," says Steve Katz, spokesman for TransUnion's Truecredit.com.

Experian and TransUnion's offers will not pre-empt state laws or state-set prices on credit freezes.

TransUnion was the first of the three largest credit reporting agencies to grant credit freezes to all consumers.

Equifax recently announced plans to extend credit freezes to consumers in every state. The agency will release details about the offer shortly, says David Rubinger, vice president of communications at Equifax.

Consumers in all 50 states already have the right to place a fraud alert, regardless of whether they are victims of ID theft. The fraud alert lasts for 90 days and alerts new creditors and other businesses checking the creditworthiness of an applicant that the consumer may be a victim of fraud.

While the fraud alert merely asks the lender to take additional precautions, a credit or security freeze prevents third parties from receiving a copy of the consumer's credit report or credit score, making businesses less likely to grant credit or services to the applicant. Only businesses with a permissible purpose, or for whom the consumer lifts the freeze may obtain the consumer's credit information.

"(The) credit freeze is part of a trend of giving individuals more control over their consumer reports. This control is necessary because credit grantors do not screen applications for fraud carefully enough to stop identity theft," says Chris Hoofnagle, senior staff attorney to the Samuelson Law, Technology & Public Policy Clinic and senior fellow to the Berkeley Center for Law and Technology at the University of California-Berkeley.

Those who wish to freeze their credit report can do so by mailing a freeze request to TransUnion. They will receive a PIN, which they can use to lift the freeze temporarily by either writing or calling. Consumers also can remove the freeze permanently, but must do so in writing. The credit freeze will remain in effect until removed by the consumer.

At Experian, consumers can place a freeze by mail, but can "thaw" it instantly online, over the phone or via mail with their PIN. They must submit a written request for permanent removal.

Consumers must send a written request to freeze their Equifax file. They can call the toll-free number provided to them to remove or lift the freeze.

A credit freeze will stay in effect until the consumer lifts or removes it, except in Kentucky, Nebraska, Pennsylvania, Rhode Island and South Dakota, where it expires after seven years.

Consumer advocates generally expressed support for the credit bureaus' voluntary efforts, but said they would like to see lower fees and the process of freezing and unfreezing credit reports streamlined.

The announcement is really good news for consumers in states that don't provide credit freeze rights or where those rights only apply to identity theft victims, says Jeannine Kenney, senior policy analyst at Consumers Union, the publisher of Consumer Reports. She urges the credit bureaus to make credit freezes even cheaper for consumers.

"The freeze only works if people can afford to use it."

Several consumer advocates said that while charging $10 was better than some state-set prices, fees weren't as low as they should be. There should be a one-time fee of $5 or less, says Ed Mierzwinski, U.S. Public Interest Research Group, or PIRG, consumer program director.

"It should be like the security lock on your house -- you buy it once, and you don't pay every time you use the key."

Removing the freeze should be instantaneous, he adds, just like it is for people who purchase TransUnion's TrueCredit Lock, a credit monitoring service that allows customers to also freeze and unfreeze their credit report instantly online. The service costs $10 or $15 a month, depending on whether the consumer buys monitoring for all three credit reports or just their TransUnion credit report.

People aren't going to use credit freezes unless they're convenient, says Mierzwinski. "A freeze is a consumer right. It should not be a premium product."

In the meantime, 39 states and the District of Columbia have passed credit freeze laws. Prices and procedures for placing and removing credit freezes vary from state to state, so check with Equifax, Experian and TransUnion for more information.

Not for everyone
Some people will find credit freezes burdensome, says Linda Foley, founder of the Identity Theft Resource Center. Until credit freezes can be removed instantaneously, consumers will have to think ahead and remove the freeze several days in advance of any situation where a business needs to check their credit, which poses a problem for getting instant credit.

"It's a personal choice issue," she says, referring to the decision of whether to freeze a credit file or not. "But I'm delighted that they have the opportunity to make that choice."