Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

Proposed AZ identity theft safeguard too costly for consumers

CU urges lawmakers to make credit security freeze more affordable for consumers

Friday, March 10, 2006

High Cost of Proposed Arizona ID Theft Safeguard Undermines Its Effectivieness

Consumers Union Urges State Lawmakers to Lower Fees in Security Freeze Bill

PHOENIX, AZ – A proposed identity theft safeguard being considered by state lawmakers is too costly, which will deter many Arizonans from taking advantage of the protection it affords, according to Consumers Union, the nonprofit publisher of Consumer Reports. SB 1347 gives consumers the right to put a security freeze on their credit files to prevent crooks from opening new accounts using stolen personal information.

Unfortunately, the legislation allows credit reporting agencies to charge steep fees for the service. SB 1347 has been approved by the Senate Commerce Committee and will be considered by the full Senate soon.

“This legislation offers strong protection for consumers, but it imposes the highest fees in the nation for those who take advantage of this new safeguard,” said Michelle Jun, Staff Attorney for Consumers Union’s Financial Privacy Now campaign. “Unlike nearly every other state that has adopted similar security freeze protection, it forces identity theft victims to pay these same high costs.”

A security freeze enables a consumer to prevent anyone from looking at his or her own credit files for the purpose of authorizing new accounts unless the consumer chooses to lift the freeze for a specific period of time. This gives the consumer control over who has access to essential information needed to process a credit application and prevents crooks from opening new accounts in the consumer’s name.

Most businesses will not issue new credit or loans to an individual without first reviewing his or her credit report or credit score. If an individual’s credit file is frozen and an imposter applies for credit in that individual’s name, a creditor likely would deny the imposter’s application, preventing an instance of identity theft. In addition, if a request for credit is made on a frozen account, then the credit bureau would be required to notify the consumer about the attempted fraud.

Under SB 1347, credit reporting agencies are allowed to charge a fee of $15 to initiate a security freeze and another $15 to remove or lift for a specified period of time. The $15 fee would be a significant expense for a two person household, totaling $90 to place freezes on each adult’s consumer credit files with the three major credit reporting agencies. To remove the freeze once each year would cost $90 for these two adults.

If approved by the state legislature, this would be the highest security freeze fee allowed by any state in the country. California, Connecticut, Louisiana, Maine, and North Carolina all restrict placement fees to $10, and lifting fees to between $8 and $12. The security freeze is even more accessible for consumers in New Jersey and Colorado. New Jersey does not permit a fee to place the freeze, and permits a $5 fee to lift the freeze. In Colorado, the first freeze is free to place and later ones cost $10 to place.

In addition, in eleven of the twelve states that have adopted security freeze legislation to date, the safeguard is provided to identity theft victims free of charge. SB 1347 would make identity theft victims pay the same $15 fee to place, lift, or remove the security freeze.

A better fee structure for the security freeze is established by HB 2705, another bill that is tied up in committee in the House. Under HB 2705, consumers would pay $10 to each of the three credit reporting agencies to initiate, lift or remove a security freeze (similar to most other states). Identity theft victims with a valid police report would be able to place, lift, and remove a security freeze at no charge.

“Arizona lawmakers should be applauded for looking for new ways to protect consumers from identity theft,” said Jun. “But they should strengthen SB 1347 by giving consumers the right to freeze credit files at an affordable price and making this new safeguard available to identity theft victims at no charge.”

For more information on existing security freeze laws, see:
Michelle Jun – 415-431-6747