Credit freeze

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A credit freeze (also known as a security freeze) allows an individual to control how a consumer reporting agency (also known as a credit bureau such as Equifax, Experian, TransUnion, and Innovis) is able to sell personal financial identity data. [1] The credit freeze locks the data at the consumer reporting agency until the individual gives permission for the release of the data. [2] [3] [4] [5]

Contents

Typically, consumer reporting agencies only develop such a feature when prompted to by legislation. In Canada, this has led to TransUnion and Equifax not offering any form of credit freeze (instead directing consumers to their paid identity monitoring services, which have been described as 'ineffective'), until the passage of Quebec's Bill 53, the Credit Assessment Agents Act. [6] [7]

Lifting a credit freeze requires a PIN. [8] However, in September 2017, a security vulnerability in this system was identified: the PIN is in many cases guessable, and difficult or impossible to reset. [9] Freezing one's credit will not prevent the credit score from changing. Existing companies with access to one's credit profile can still report positive and negative feedback on a credit profile, meaning if the credit profile is frozen, one's credit can still go up or down. [10]

Canada

The first jurisdiction in Canada to legislatively provide for credit freezes was Quebec, with the passage of Bill 53 (the Credit Assessment Agents Act). Starting in February 2023, Quebec residents can place a freeze. [11] As of February 2021, Ontario was considering changes to its Consumer Reporting Act that would provide for credit freezes. [12]

United States

All 50 states and the District of Columbia have a credit freeze law, the last state to pass such a law being Michigan in 2018. [13] [14] [15] [16]

The first state to pass a credit freeze law was California, with SB 1386 sponsored by Debra Bowen in 2002, effective 2003. [17] In late 2007, all three of the major credit bureaus (following TransUnion's lead) announced that they would let consumers freeze their credit reports, regardless of the state of residency. [18] State laws still apply, however, in instances where the cost or other details of the freeze are more favorable than they are under the industry-sponsored alternative.

Credit freezes are frequently viewed as the most effective way to prevent financial identity theft. Each year in the United States, approximately 15 percent of all cases of identity theft are cases of new account origination identity theft, according to the Federal Trade Commission. [19] This form of identity theft occurs when a criminal opens credit in another individual's name. In the credit origination process, access to a credit report is critical for a lender to make a risk assessment. Because a credit freeze effectively stops any access to the credit report, it places a block in the process of issuing credit. Individuals who freeze their credit reports must therefore unfreeze their reports before they wish to apply for credit themselves.[ citation needed ] However, these can be avoided with proper preplanning. With proper documentation, most individuals should be able to unfreeze your credit scores with all three bureaus within 15 to 20 minutes. Generally, electronic unfreezing process takes effect immediately.

A credit freeze can also be placed on the credit file with The National Consumer Telecom & Utilities Exchange (NCTUE) in order to limit fraud through a bad actor creating a utilities account in some else's name. [20]

Federal preemption of state laws

In 2018 the Economic Growth, Regulatory Relief and Consumer Protection Act, was passed which includes a provision to preempt state laws replacing the large variation of state laws with a federal one that requires all credit freeze to be free of charge. The law is effective September 21, 2018 at which point the credit bureaus will no longer be able to charge for a freeze and a request must be completed within one business day if made online or via phone. They will have three business days to comply with a request if received via mail. [21]

Related Research Articles

<span class="mw-page-title-main">Identity theft</span> Deliberate use of someone elses identity

Identity theft, identity piracy or identity infringement occurs when someone uses another's personal identifying information, like their name, identifying number, or credit card number, without their permission, to commit fraud or other crimes. The term identity theft was coined in 1964. Since that time, the definition of identity theft has been legally defined throughout both the U.K. and the U.S. as the theft of personally identifiable information. Identity theft deliberately uses someone else's identity as a method to gain financial advantages or obtain credit and other benefits. The person whose identity has been stolen may suffer adverse consequences, especially if they are falsely held responsible for the perpetrator's actions. Personally identifiable information generally includes a person's name, date of birth, social security number, driver's license number, bank account or credit card numbers, PINs, electronic signatures, fingerprints, passwords, or any other information that can be used to access a person's financial resources.

A credit score is a number that provides a comparative estimate of an individual's creditworthiness based on an analysis of their credit report. It is an inexpensive and main alternative to other forms of consumer loan underwriting.

<span class="mw-page-title-main">Experian</span> Irish multinational consumer credit reporting company

Experian is a multinational data analytics and consumer credit reporting company headquartered in Dublin, Ireland. Experian collects and aggregates information on over 1 billion people and businesses including 235 million individual U.S. consumers and more than 25 million U.S. businesses. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. Experian is a partner in USPS address validation. It is one of the "Big Three" credit-reporting agencies, alongside TransUnion and Equifax.

<span class="mw-page-title-main">Fair Credit Reporting Act</span> U.S. federal legislation

The Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., is federal legislation enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. It was intended to shield consumers from the willful and/or negligent inclusion of erroneous data in their credit reports. To that end, the FCRA regulates the collection, dissemination, and use of consumer information, including consumer credit information. Together with the Fair Debt Collection Practices Act (FDCPA), the FCRA forms the foundation of consumer rights law in the United States. It was originally passed in 1970, and is enforced by the U.S. Federal Trade Commission, the Consumer Financial Protection Bureau, and private litigants.

TransUnion LLC is an American consumer credit reporting agency. TransUnion collects and aggregates information on over one billion individual consumers in over thirty countries including "200 million files profiling nearly every credit-active consumer in the United States". Its customers include over 65,000 businesses. Based in Chicago, Illinois, TransUnion's 2014 revenue was US$1.3 billion. It is the smallest of the three largest credit agencies, along with Experian and Equifax.

<span class="mw-page-title-main">Equifax</span> American consumer credit reporting agency

Equifax Inc. is an American multinational consumer credit reporting agency headquartered in Atlanta, Georgia and is one of the three largest consumer credit reporting agencies, along with Experian and TransUnion. Equifax collects and aggregates information on over 800 million individual consumers and more than 88 million businesses worldwide. In addition to credit and demographic data and services to business, Equifax sells credit monitoring and fraud prevention services directly to consumers.

Equifax Canada Inc is one of two credit bureaus which are private companies in Canada that collect, store, and share information about how Canadians use credit. Reports are provided for both individual and commercial entities. Owned by Equifax of Atlanta, Georgia, Equifax Canada is based in Toronto, Ontario.

A credit history is a record of a borrower's responsible repayment of debts. A credit report is a record of the borrower's credit history from a number of sources, including banks, credit card companies, collection agencies, and governments. A borrower's credit score is the result of a mathematical algorithm applied to a credit report and other sources of information to predict future delinquency.

<span class="mw-page-title-main">Fair and Accurate Credit Transactions Act</span> U.S. federal law

The Fair and Accurate Credit Transactions Act of 2003 is a U.S. federal law, passed by the United States Congress on November 22, 2003, and signed by President George W. Bush on December 4, 2003, as an amendment to the Fair Credit Reporting Act. The act allows consumers to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies. In cooperation with the Federal Trade Commission, the three major credit reporting agencies set up the web site AnnualCreditReport.com to provide free access to annual credit reports.

A credit bureau is a data collection agency that gathers account information from various creditors and provides that information to a consumer reporting agency in the United States, a credit reference agency in the United Kingdom, a credit reporting body in Australia, a credit information company (CIC) in India, a Special Accessing Entity in the Philippines, and also to private lenders. It is not the same as a credit rating agency.

Innovis is the credit reporting division of CBC Companies and is considered the fourth largest consumer credit reporting agency in the United States, behind the “big three” Experian, TransUnion, and Equifax. Based in Columbus, Ohio, the company offers services like fraud protection, credit information, identity verification, and receivables management.

A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.

AnnualCreditReport.com is a website jointly operated by the three major U.S. credit reporting agencies, Equifax, Experian, and TransUnion. The site was created in order to comply with their obligations under the Fair and Accurate Credit Transactions Act (FACTA) to provide a mechanism for American consumers to receive up to three free credit reports per year.

Credit report monitoring or company tracking is the monitoring of one's credit history in order to detect any suspicious activity or changes. Companies offer such service on a subscription basis, typically granting regular access to one's credit history, alerts of critical changes to one's credit history, and additional services. Credit monitoring can help detect credit related fraud and identity theft.

A credit score is a numerical expression representing the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.

An identity score is a system for detecting identity theft. Identity scores are increasingly being adopted as a means to prevent fraud in business and as a tool to verify and correct public records.

OptOutPrescreen.com is a joint venture among Equifax, Experian, Innovis, and TransUnion, allowing customers to opt out of receiving credit card solicitations by mail.

TransUnion CIBIL Limited is a credit information company operating in India. It maintains credit files on 600 million individuals and 32 million businesses. TransUnion is one of four credit bureaus operating in India and is part of TransUnion, an American multinational group.

Noddle was a credit report service offered by the British arm of American company TransUnion. The business was launched in 2011 and was sold to Credit Karma in 2019.

The Equifax data breach occurred between May and July 2017 at the American credit bureau Equifax. Private records of 147.9 million Americans along with 15.2 million British citizens and about 19,000 Canadian citizens were compromised in the breach, making it one of the largest cybercrimes related to identity theft. Equifax discovered the breach end of July, but didn't disclose it to the public until September 2017. In a settlement with the United States Federal Trade Commission, Equifax offered affected users settlement funds and free credit monitoring.

References

  1. ↑ Combley, Roz (2011). Cambridge Business English Dictionary. Cambridge, UK: Cambridge University Press. p. 191. ISBN   978-052-112250-4 . Retrieved 31 March 2022.
  2. ↑ "How I Learned to Stop Worrying and Embrace the Security Freeze — Krebs on Security". krebsonsecurity.com. 8 June 2015. Retrieved 20 June 2023.
  3. ↑ Lamberg, Erica; Kim, Paul (6 December 2022). "How to freeze your credit". Business Insider . Retrieved 20 June 2023.
  4. ↑ Lukic, David (5 August 2020). "Credit Freeze vs. Lock: What's the Difference?". idstrong.com. Retrieved 20 June 2023.
  5. ↑ Singer, Adam (11 October 2022). "My Identity Has Been Stolen! What Do I Do Now?". Forbes . Retrieved 20 June 2023.
  6. ↑ Cowley, Jenny (22 February 2019). "Credit freezes are one easy way to protect against identity fraud — but they're not available in Canada". CBC News . Archived from the original on 2019-02-22.
  7. ↑ "Equifax Canada Set to Release Freeze Designator Code in Q4 2022". www.truescreen.com. 1 November 2021. Retrieved 2022-01-11.
  8. ↑ Robertson, Adi (8 September 2017). "Can you join a class action suit if you use Equifax's free identity theft protection?". Theverge.com. Retrieved 20 June 2023.
  9. ↑ Lieber, Ron (10 September 2017). "After Equifax Breach, Here's Your Next Worry: Weak PINs" . The New York Times . Retrieved 20 June 2023.
  10. ↑ "What Is a Credit Freeze? Should I Freeze My Credit?". www.lifelock.com. Retrieved 2021-09-02.
  11. ↑ Aline (2023-02-02). "Credit lock: what you need to know about securing your file". Milesopedia. Retrieved 2023-05-17.
  12. ↑ Government of Ontario, Ministry of Economic Development. "Government of Ontario, Canada". www.ontariocanada.com. Retrieved 2022-01-11.
  13. ↑ "Security Freeze - Consumers Union". Consumerunion.org. August 8, 2011. Retrieved 2017-09-16.
  14. ↑ "Missouri Security Freeze Law". Archived from the original on September 1, 2008.
  15. ↑ "Alabama HB15 | 2012 | Regular Session". LegiScan. Retrieved 2016-07-07.
  16. ↑ "New law allows credit freezes for everyone in Michigan". 13ABC News. 18 June 2018. Retrieved 2022-01-11.
  17. ↑ "SB 1386 Senate Bill - CHAPTERED". Archived from the original on 2007-06-13. Retrieved 2007-06-01.
  18. ↑ "Newsroom TransUnion". newsroom.transunion.com.
  19. ↑ "Archived copy" (PDF). Archived from the original (PDF) on 2006-07-16. Retrieved 2006-07-22.{{cite web}}: CS1 maint: archived copy as title (link)
  20. ↑ "Consumers – nctue".
  21. ↑ Smith, Andrew; Hillebrand, Gail (21 September 2018). "Free credit freezes are here". Federal Trade Commission . Retrieved 20 June 2023.
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