States consider laws to put ID theft on ice

Consumers who implement freezes will be frustrated the first time they try to get new credit, the industry claims.

"It completely eliminates any point of sale type of credit transaction.  If credit files were frozen, certainly that source of income for retailers would stop," said Experian spokeswoman Susan Henson.  "We feel there are other tools consumer can take advantage  of that are a little less draconian."

"Identity theft solutions have to be effective and practical. We really do want to engage in commerce," Pratt said. "A freeze really is not practical."

State lawmakers take up the case
Neither is the current state of affairs, said Gail Hillebrand, senior attorney at Consumers Union, which is lobbying on behalf of the state credit freeze bills. Nearly 10 million people are hit with identity theft every year, and there is currently nothing consumers can do ahead of time to prevent it, she said. 

"Consumers can do everything right, shred all their mail, read all their statements, but still be a victim," Hillebrand said. "You can't stop someone from stealing your personal information from someone else."

The high-profile thefts at ChoicePoint and other firms highlight this helplessness, said Utah state Sen. Carlene M. Walker, chief sponsor of Utah's credit freeze law. Even after consumers find out their data has been stolen, there's little a consumer can do until after an identity theft has occurred, she said.

The Salt Lake City Republican said she spent the better part of the last year fighting to get her bill passed after she learned of a particularly brutal ID theft case in her hometown district.

"Consumers don't have a preventative, proactive tool," she said. "A credit freeze would let consumers be proactive. I just feel like we owe it to the consumer."

Walker's bill died before it reached a floor vote, killed largely by the auto dealer lobby, she said. A similar bill has already been dropped by the Indiana legislature.

But despite lobbying efforts by the credit bureaus and retail industry, momentum for security freezes continues to build.

In Illinois, a freeze bill was passed by the state's lower house unanimously on March 17. The state senate is scheduled to take up the measure in April. A similar bill was passed out of committee on Tuesday in Connecticut, and has the support of the state Attorney General Richard Blumenthal. According to the Public Internet Research Group, consumer advocates have active lobbying efforts in 12 other states.

If you build it, will they come?
While lawmakers and privacy advocates may like security freezes, will consumers actually use them? The credit bureaus say no, pointing to the evidence in the two states where they already have the option.

In California, which passed a freeze law in 2003, only about 4,000 consumers have taken the option, according to Experian. In Texas, where the option is only available to identity theft victims, only 133 consumers have filed for a freeze.

Consumer advocates respond that few consumers in either state are aware of the freeze option.

Joanne McNabb, who runs California's Office of Privacy Protection, said phone inquires about freezes have skyrocketed in recent weeks as consumers responded to the rash of high-profile data thefts. Last July, only 1 percent of phone inquires to the office concerned credit freezes. So far this month, 15 percent of callers are asking about freezes, she said.

Few disagree that the current system for using a security freeze is complicated. At the moment, files are unlocked by PIN numbers that consumers must remember and provide to the credit bureaus before they apply for credit. Consumers could easily forget these rarely-used PINS, or fail to realize that they need to unlock their files at all three credit bureaus before applying for a home mortgage, the credit trade group's Pratt said.

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