New York Democratic Senator Charles Schumer has threatened legislative action against US credit bureaus for fees they charge on credit freezes.
Three credit bureaus – Experian Group Ltd., TransUnion and Equifax Inc. – charge processing fees of $10 each for consumers to freeze their credit histories. All three bureaus have either started offering or are preparing to offer nationwide credit freezes.
Thirty-nine states and the District of Columbia already have laws governing credit freezes. Stuart Pratt, president/CEO of the Consumer Data Industry Association û of which the credit bureaus are members û expects all 50 states to enact credit freeze legislation by 2008.
No-fee freezes on credit history are already offered to proven victims of identity theft. “Every state in the union except one allows credit bureaus to charge a fee for credit freezes,” said Pratt. “There’s a majority of states thus far who have made two decisions: they’ve agreed that a victim of identity theft will not be charged, so nothing would impede the consumer’s choice of getting a credit freeze if they’re a victim.
“Secondly, the states have agreed with a principle of fairness,” he continued. “A concerned consumer can pay a fair but cost-controlled fee [for a credit freeze]. More than half of states do the $10 fee, so that’s $30 for all three credit bureaus û which is probably less than you pay for a home security service. It’s important to set a fee for the service. Like OnStar or a home security service it’s a safety feature.”
Because the primary purpose of a credit freeze is to keep new lines of credit from opening, they are primarily recommended to identity theft victims. Because they limit access to credit histories, credit freezes act as an opt-out from pre-approved credit offers and other financially-oriented direct mail offers.
Freezes are not good preventatives of identity theft, and Experian executives have said they neither see nor expect widespread adoption of freezes from non-victims.
Schumer has said he may take legislative action against the credit bureaus unless they start allowing instant, no-charge freezes via mail, Internet or telephone.
Schumer also asked, in letters sent to Experian, Equifax and TransUnion, that the bureaus share freeze requests. Sharing among the companies would mean the consumer only has to contact one credit bureau for a full freeze.
“Our highest priority is to make sure if you as a consumer come to a credit bureau and ask for a freeze that we’re 100% successful,” countered Pratt. “Each database architecture is a little different each authentication process is a little different, so we think it’s important in the early stages for the consumer to make that personal contact. Ease of use can’t be the highest priority in issues of security.”
In related legislation, the Senate introduced a bill on Tuesday that would allow identity theft victims to seek restitution for their efforts to repair their credit histories. Vermont Democrat Patrick Leahy and Pennsylvania Republican Arlen Specter sponsored the bill.