Marylanders due weapon in preventing identity theft

Personal Finance

May 20, 2007|By Eileen Ambrose | Eileen Ambrose,Sun Columnist

You don't give out your Social Security number to strangers. You never click on phishing schemes. You shred all credit card solicitations or papers bearing account information.

For all your precautions, it only takes one computer hacker or one stolen laptop for thieves to get your personal information and open credit accounts in your name.

You can't control data breaches at businesses and government agencies. But next year you will have more power to limit the damage thieves can inflict.

Beginning in January, Marylanders will be able to place a "security freeze" on their credit report. A freeze will block access to your report and credit score by potential creditors. Businesses aren't likely to extend credit without first looking at a credit report, so a freeze can stop a criminal from opening an account using your information. And when you need to take out a loan or open a line of credit, you can lift the freeze.

"Security freezes are a new tool in the arsenal to protect one's identity," says Joseph DeMattos Jr., AARP's Maryland director. The advocacy group for those 50 and older lobbied for the legislation, arguing that older Marylanders are often targeted by thieves because they have built up significant assets over a lifetime.

But freezes aren't just for older consumers. Anyone who has been a victim of identity theft or security breaches - or is worried about becoming a victim - should freeze their reports. That could be thousands of consumers in Maryland. The state ranks No. 11 in the country for identity theft, with residents filing 4,395 complaints of ID theft last year to the Federal Trade Commission.

One other benefit to a freeze: It can eliminate the need for credit monitoring services that alert you to changes on your credit report. "Credit monitoring is expensive and at the same time it doesn't stop new accounts," says Michelle Jun, a staff attorney with Consumers Union.

Understand if you put a freeze on your report, it will affect your ability to open new lines of credit or take out a loan on the spot. So you won't want to freeze your report if you'll be taking out new credit cards or shopping for a house or car.

Also, you'll pay a fee to credit agencies each time you lift the freeze, so if you'll be thawing your report every time you hit the mall the costs will add up quickly. (Of course, if you're an impulse shopper, a freeze may give you pause so you don't make big, unplanned purchases with instant credit.)

Thirty-five states and the District of Columbia now have passed freeze legislation.

From the start, banks, retailers and credit reporting agencies resisted. Retailers feared lost sales if consumers couldn't get instant credit. Banks worried about a slowdown in an economy based on easy credit. Credit reporting agencies complained about the cost and the challenge of developing a system to freeze reports.

Some industry players, though, support freezes.

ING Direct, the giant online bank, wants customers to feel comfortable doing business over the Internet and lobbied for security freezes in California and Delaware, where ING has offices.

Freeze opponents often try to make the process too complicated, says Arkadi Kuhlmann, ING Direct's chief executive officer.

You can stop your newspaper or mail delivery when you go on vacation and restart it just as easily, Kuhlmann says. "Why can't you do that with your credit? Why can't you turn it on and turn it off by a phone call?"

The Colorado Bankers Association also broke ranks with its counterparts in other states by backing freezes. "The driving force was the level of our fraud losses," says Don Childears, president of the Colorado trade group. Colorado banks estimate they lose $150 million a year to fraud, including identity theft.

Security freezes have been available for nearly a year in Colorado. "I have yet to hear a single complaint," Childears says.

In fact, Childears and his wife froze their credit reports last summer after a home burglary. "That gave us a lot of peace of mind," he says.

Here's how the freeze in Maryland will work:

Initially, you will need to send a letter by certified mail to each of the three major credit reporting agencies to request a security freeze. You'll also be able to do it electronically if the agencies make this option available. By 2010, you'll be able request a freeze over the phone.

Agencies can charge up to $5 to freeze a report, and up to another $5 to remove a freeze or temporarily lift it. Victims of identity theft won't pay a fee to freeze a report.

You'll receive a password or personal identification number to use later to remove or temporarily lift a freeze.

Agencies initially must temporarily lift a freeze for a specific creditor or period of time within three days of your request. Beginning in February 2009, temporary thaws must be done within 15 minutes.

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