Actual protection against identity theft

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Sen. Dede Feldman blogs about identity theft and her bill to help curb it:

This past week I’ve been trying to hammer out a compromise with everyone who’s interested in protecting consumers from identity theft by allowing them to freeze their credit report. The bill I’m sponsoring is supported by the AG, AARP and many others. It allows consumers to call the credit agencies, and, for $5, place a freeze on their account information so no one with whom they do not already do business can have access to their data to open new accounts or commit crimes. Consumers can then unfreeze their accounts (for a fee) and allow people to see it when they want to make a major purchase.

This is in line with something Kevin Drum has talked about in the past:

Basically, a credit freeze prevents credit reporting agencies from revealing your credit history without first getting your express permission. This makes it nearly impossible for thieves to acquire phony credit cards in your name, since card issuers won’t issue new cards without first requesting your credit score from a credit reporting agency. If you’ve frozen your report, you’ll be notified when the request is made and can shut it down immediately.

The downside is that if you apply for new credit, you can’t get it until the credit reporting agency has contacted you first. In other words, no more same-day credit. It might take two or three days instead.

That’s not much of a downside, is it? In fact, for my money, all credit reports ought to be frozen by default. If you prefer to have your report unfrozen — that is, you’re willing to run the risk of ID theft in return for slightly faster approval of your credit applications — then you can unfreeze it.

There’s simply no reason for consumers not to have this choice, and the credit industry opposes it solely because the slight delay it introduces might make people think twice about applying for new credit — and that’s bad for business. Who cares about identity theft when there’s same-day credit to be extended?

Drum also wrote an article (in 2005!) regarding identity theft, which is essential reading if you want to understand the problem:

Identity theft would be much harder–and the costs to victims much lower–were it not for the carelessness of the credit industry and of other institutions that handle personal data. Many institutions that handle sensitive personal data don’t do enough to keep it safe. This year alone, there have been widely-reported security breaches at Time Warner, Bank of America, and data-brokers ChoicePoint and LexisNexis, involving the loss of personal information about millions of people. There’s probably little that can be done to prevent thieves from getting information from doctors’ offices, or from people’s wallets, but it’s currently far too easy for them to get it from large corporations or from institutions such as government agencies and universities.

In addition, credit-card companies and other credit lenders–banks, oil companies, and department stores, among others–rarely exercise significant oversight before signing up new customers. So, when thieves apply for a new credit card using pilfered information, they are rarely turned down.

Finally, and most devastatingly, credit-reporting agencies routinely add negative information to credit scores without checking whether all those unpaid bills might have been the result of identity theft. And they’re slow and uncooperative when it comes to correcting their mistakes.

Sen. Feldman is looking for help — specifically, calls to her fellow Senators, to urge support of a compromise bill, Senate Judiciary Committee Substitute for 448 and 165. Should you feel the need, you can find your Senator by clicking here. The $5 fee is hard to swallow, but giving consumers the option to freeze their credit reports is worth it.

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