Brian Krebs reports good news: Trans Union, one of the three major consumer reporting agencies, will offer all consumers the option to freeze their credit files in order to prevent identity theft:
A credit freeze directs the credit bureaus to block access to a consumer's credit report and credit score. At present, at least 39 states and the District of Columbia allow consumers to freeze their credit files, but many of those laws do not take effect until 2008 or 2009. TransUnion would be the first bureau to voluntarily offer freezes to consumers in all 50 states (and D.C.).
There's a lot to say about credit freeze, the ability to lock one's credit report in order to avoid identity theft, but I want to use this opportunity to discuss how when this remedy was first proposed in California by then Senator Debra Bowen, the industry predicted gloom and initially killed the legislation (2000 Cal. SB 1767). Now, years since the first credit freeze bill passed, the sky didn't fall, and Trans Union is actually offering freeze nationally.
After Bowen's bill failed in 2000, she reintroduced it as SB 168 in 2001. A report accompanying the legislation details the arguments that the industry used against it:
The three national credit reporting agencies, Equifax, Experian and TransUnion oppose the security alert and security freeze provisions in the bill. On this point, Equifax states that the bill would:
Add significant new costs to the credit economy by forcing credit reporting agencies to develop new computer architecture to issue consumers PIN numbers to turn off and on their files as they like;
[...]
Harm consumers by delaying or preventing altogether necessary credit transactions for consumers who had blocked their files. In mortgage reporting instances, for example, consumers would have to remember three PIN codes for each of the national credit reporting agencies. Automobile dealers and auto finance companies, cellular phone providers, financial institutions, retailers, insurers, and those in the mortgage lending and real estate business would suffer as the process from freeze to unfreeze could take up to 14 days. Instant, online transactions would not be possible for consumers with a
"frozen" file.
Regular readers of the blog should be able to spot the denialism. But the broader point I'm making is that the consumer reporting agencies hated the idea of credit freeze seven years ago, and now, one of them is offering it nationally on a voluntary basis. Most of the objections, such as the supposed 14-day waiting period for a credit thaw, in retrospect, are silly (New Jersey requires a 15 minute thaw). This is a great example where regulation created a market that the free market never wanted to exist!
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So what's the motivation for TransUnion if Equifax and Experian still provide the information?
And what difference does it make if the two others aren't in lockstep; won't agencies that want to rifle through credit reports just ask for them through the other organizations?
Ted - I think the way those credit card offers get sent out to so many people is that the credit agencies sell names and addresses of people with credit scores above "X", with "X" specified by the buyer. I don't think the buyers get to rifle through the credit reports.
I filled out a form and mailed it to something like the "Direct Marketing Assn" entity years ago to stop getting unsolicited credit card offers and other junk mail. It worked. I guess at some point I'll have to do it again, my recollection is that it is only effective for a certain number of years.
Ted, for this to really be effective, the other two CRAs will have to offer nationwide freeze too. But the fact that Trans Union is offering it will make it difficult for the other two to explain why they're not.
@Texas--those unsolicited credit card offers can be stopped, more or less cold, by calling 1-888-5-OPTOUT.
Huh? So when a law was opposed in California, that meant the entire "market" was against it, but now that TU is willing to offer it as a service, then the entire "market" is for it?
It's kind of strange that you praise when scientists make decisions against an idea based on what they believe at the time, but change their minds later. When busineses do it, you get to wag your finger and say, "I told you so"?
You conclusion is not supported by your premises. All that happened is that the credit reporters didn't believe that the costs of offering the service were merited by the potential benefits, and now they do, perhaps because the laws that were passed provided them with data they were unwilling to spend money to collect for themselves.
One group of businesses is not "the market."
This is not to imply in any way that business has the level of integrity built into its culture that science is purported to have. Even when the data tells a business owner that she should make choice X, she can have many other reasons that she would feel are compelling to make choice Y.
The problem with government meddling with business practices is that the goals of governement have little or nothing to do with the goals of individual businesspeople to keep their businesses afloat. Government meddling does cost businesses money. It may help some at the expense of others, and it may not necessairly lead to the demise predicted by business writers and business lobbyists, but when legislation is passed telling businesses how to act, costs that were externalized get internalized until the CEOs and CFOs can figure out how to externalize them again.
Well, of course the free market didn't want this to exist. The market relationship is between the CRAs and the creditors. We're just the commodity.
But hey, I'm not going to argue with anything that combats identity theft (although I don't know how "voluntary" it is if 39 states are going to require it). I just wish my banks and stores and insurance companies would stop losing all my data. Sometimes I feel like I could just pitch my bank statements in a downtown trashcan with no net increase in risk.
I agree with Liz that our data is the commodity and we are not party to the exchange at all. If the government were actually intent on potecting me and my identity, then legislators would write laws that made my buying and credit data my own to trade as I saw fit. The credit bureaus and marketing companies would have to pay -me- to collect my data and to offer it to other companies. This does happen somewhat withe the grocery store club cards - data collection is compensated with lower prices.
I would wholeheartedly endorse a law that said if companies wanted to collect and distribute my data they would have to pay me for it up front.
When it comes to credit reporting, the market is three companies--Trans Union, Experian, and Equifax. And yes, they opposed credit freeze uniformly. Now they offer it, because regulations required them to.