Thursday, June 15, 2006


Florida to Allow Citizens to Freeze Credit Reports

This story from the Sun Sentinel, You can chill identity theft with a credit freeze starting July 1, details a newly passed Florida state bill which allows a citizen to freeze their credit report. For a fee of $10 and sufficient proof of identity (a DNA test?), one will be able to "lock" their credit report. If a credit grantor wants to see your report, they can only do so if you specifically unlock the report (for another $10 fee).

From the article:
Credit bureaus caution that consumers might not like a freeze because the process will involve sending certified letters to each credit bureau and proof of identification.

Once it is in place, a credit freeze is a complete block that could hamper your own access to your report. With a frozen credit report, you might not be able to take out a loan or get instant credit at a retail store or obtain a cell phone contract.

So the credit bureaus think this is a bad idea because it will make it difficult for you, the consumer, to get credit in your own name. Instead, the bureaus would prefer the current system where it is very easy for not only you, but anyone else who knows some information about you, to get credit in your name. Credit bureaus make money by selling credit reports. If you freeze your report, they won't be able to sell it. It is obviously in the bureaus' best interest to make the freezing process as painful as possible.

I, for one, would certainly like to excercise more control over who sees my credit report. The current system, with its heavy reliance on the Social Security Number (SSN) as the "key" to granting credit in your name, is very much broken. Permitting you to freeze your credit account, requiring better security in those systems which store personal identifying information about you and requiring disclosure if your personally identifying information has been compromised don't address the real issue.

How might one fix the system? Well, how about automatically giving each consumer a PIN as the key to their credit bureau account. This PIN, when combined with the other identifying information, would allow a credit grantor to view the consumer's credit history. For added security, this PIN could be made "single-use". That is, it would expire after a single credit grantor employed it. Even without the single-use feature, merely being able to issue a new PIN, much the same way you are issued a new credit card number if your card is lost or stolen, should minimize fraud.

Or, better yet, why not turn over the whole identity management process to a credit card company? They have certainly proven themselves adept at managing fraud. The primary reason, of course, is that they are held liable for fraudulent card use (or at least that in excess of $50). Until the credit bureaus and credit grantors are held similarly liable, they are under no incentive to "fix" the current system.

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