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New rule curtails ID theft concerns

By HELEN HUNTLEY
Published June 25, 2006

Floridians get a new weapon against identity theft Saturday, and state Rep. Sandra Adams plans to be among the first to wield it.

Adams, a Republican from Oviedo, led the charge in this year's Legislature to allow any Floridian to put a security freeze on credit bureau files. She said she's concerned about the regular reports of personal data such as Social Security numbers being lost or stolen. In the wrong hands, the information becomes a tool for fraud.

A file freeze is designed to stop lenders from issuing credit to a thief trying to open an account in your name.

"It's like a deadbolt on your credit file," said Susanna Montezemolo, policy analyst for Consumers Union. "This is the single most effective tool consumers have today to protect themselves against identity theft."

The downside is that it will stop you from taking out a new credit card or loan unless you lift the freeze, and it could interfere with the ability to do anything that involves a credit check, such as renting an apartment or signing up for cell phone service or utilities.

"A file freeze is a very extreme step to take," said Rod Griffin, spokesman for credit bureau Experian. "What it essentially does is remove you from the credit system. People don't realize the extent to which access to credit is important and needed."

Adams thinks the security is worth the inconvenience.

"If you do a credit freeze, you're in the driver's seat," she said. "You decide if you want anyone to see your information."

She convinced her fellow legislators, who voted unanimously for her bill, and Gov. Jeb Bush, who signed it. Now the only potential obstacle is Congress.

Floridians' new right could be short-lived because Congress is considering several proposals to pre-empt state laws and set its own standards. Eighteen states have passed laws allowing anyone to get a credit file freeze and five allow freezes in some situations. One of the bills being debated in Congress would limit freezes to people who can prove they are victims of identity theft.

"People shouldn't have to be victims first in order to have a preventative measure," said Adams, who said she has been lobbying several members of Congress.

State Sen. Dennis Jones, R-Seminole, a co-sponsor of the bill in the Florida Senate, said he plans to freeze his files and hopes Congress won't take away that right.

"We have the ability to pre-empt local government and Congress has the ability to pre-empt us, but I would hope they would allow this law to stand the test of time and see how many people take advantage of it."

If you want your files frozen, here's a primer on how the law works:

To ask for a freeze, you will have to contact all three major credit bureaus by certified mail and pay them $10 apiece unless you are 65 or older or you can prove you were a victim of identity theft. You can pay by personal check or contact individual credit bureaus for other payment instructions. Do not mail cash.

You should delay your request if you think you may need to apply for credit in the near future. Temporarily lifting the freeze will cost $10 per credit bureau. That adds up to $60 for a couple to lift the freeze with all three credit bureaus.

There can be a delay of up to three business days before the freeze is lifted, which means no "instant credit" impulse purchases.

A file freeze comes with a personal identification number you'll have to give to lift the freeze, and there's a $10 fee for a new number if you forget yours.

Permanent removal of a freeze is free, although companies are allowed to charge for it under Florida law.

Much as you might like it to, a file freeze does not prevent your lenders or their collection agencies from accessing your information. It will not stop those credit card offers you get in the mail.

Retailers have opposed file freezes because of the potential dampening effect on consumer spending. Credit bureaus don't like the prospect of complying with dozens of state laws.

"We're concerned about being able to abide by all this when credit is an interstate business," said Norm Magnuson, vice president of the Consumer Data Industry Association. "We're also concerned about liability issues."

He said the industry thinks the existing system of fraud alerts is an adequate alternative to freezes. It just takes a telephone call to have a free fraud alert placed on your file, but the request must be renewed every 90 days. For a seven-year alert, you must have proof of identity theft. Alerts serve as warning flags to potential creditors, but are less effective than a freeze.

Another alternative is frequently checking your credit file for unauthorized transactions, by ordering a report yourself or by paying for a credit monitoring service. However, that technique finds identity theft after it has occurred rather than preventing it.

Although file freezes are relatively new, demand has been underwhelming. In California, which has allowed file freezes for the past three years, slightly more than 9,000 people have signed up for them, according to a Consumer Data Industry Association report to Congress in September.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, go to www.sptimes.com/blogs/money or write Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified June 25, 2006, 05:50:40]