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Freezing out ID theft

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.

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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."

Next: "... our financial information is going offshore ..."
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