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New Jersey rang in the New Year
with a new law that will help freeze out identity theft by allowing
consumers to freeze their credit information.
New Jersey is the 12th state to adopt this type of law, which prohibits
anyone from accessing your credit files, even the credit reporting
agencies, without your consent.
"What this credit freeze means
for New Jersey residents is the right to decide who can and cannot
access their personal information and provide them with the security
they need and deserve," says Abigail Caplovitz, legislative advocate
for the New Jersey Public Interest Research Group.
But this credit freeze, which would
prevent anyone from opening new credit card accounts or taking out
loans in your name without your knowledge, is not available to all
Americans.
Putting your
credit on ice: convenience versus safety
California was the first state to allow
its residents to place a freeze on their credit files. The state
law helped to expose security breaches at companies, such as ChoicePoint,
Bank of America and LexisNexis, by including a stipulation that
requires data brokers to inform consumers of data breaches.
Those breaches endangered significant
consumer information, such as Social Security, credit card and banking
account numbers.
The need to protect customers should
not be underestimated, especially since most consumers don't have
the option of giving their consent about where their personal information
is being sent.
"Credit bureaus and data brokers buy and sell
your name, address, Social Security number and credit file to anyone
who will pay for it," says Evan Hendricks, author of Privacy
Times.
According to the Federal Trade
Commission, about 10 million people are victims of identity theft
every year, making it the No. 1 consumer fraud complaint for the
past five years.
A credit
freeze essentially gives consumers control over their personal financial
information.
Consumer advocates hail this as
the best protection against ID theft and fraud available, but lenders,
credit bureaus and some businesses argue that the inconveniences
created by a credit freeze outweigh potential benefits.
Craig Shearman, vice president of public relations
for the National Retail Federation, says that a credit freeze is
not necessary for most consumers.
"Our concern is that the credit freeze issue
has become overkill, because most consumers are never going to be
the victims of ID theft. If millions of consumers place a credit
freeze on their files, it can cause difficulties when trying to
purchase homes, cars or even opening simple lines of credit at a
department store," he says.
Opponents of the credit freeze say that placing
a fraud alert on your account is just as effective for notifying
the three credit bureaus that your information has been tampered
with or stolen. The fraud alert allows
all U.S. citizens to place a 90-day watch on their credit file,
requiring banks and other credit lenders to take extra steps to
verify their identity before issuing credit.
But consumer advocates warn that fraud alerts
are ignored 50 percent of the time by the three credit bureaus.
The three major credit reporting
agencies -- TransUnion, Experian and Equifax -- would not comment
on their stance on credit freezes, but did advise Bankrate.com to
contact Norm Magnuson with the Consumer Data Industry Association,
who had this to say in early December: "This is not the moment
to talk openly about credit freezes when it's up for discussion
for a federal bill."
Chris Hoofnagle, the west coast director of the Electronic
Privacy Information Center, says consumer reporting agencies interests
are not in tune with consumers' interests.
"The credit bureaus are creatures that serve
the creditors and don't want any slowdown of instant credit."
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