States consider laws to put ID theft on ice

There will be other unexpected frustrations, too, said Experian's Henson.

"Consumers don't think about the fact that if they lose their cell phone, and they need a new one, the cell phone company will need access to their credit report to do that," Henson said. "And with a freeze, it just takes time."

It can also be pricey. In California, freezes are free to ID theft victims, but others must pay about $10 to each credit bureau each time the freeze is turned on or off. That can add up quickly for a household with two or more adults who apply for credit a couple of times each year. And delays caused by credit freezes could also cost consumers a chance at a home in a fast-moving market, the bureaus say.

Consumer advocates reply that the bureaus could develop a system which allowed instant on-off toggling of credit freezes, since so many other credit decisions are made at light speed.

Even if some consumers might be frustrated, locking up credit reports has become a necessary evil, given the proliferation of identity theft, said Beth Givens, director of the Privacy Rights Clearinghouse.

"Someone who has been the victim of an aggressive identity thief will find comfort in establishing a freeze, and put up with the inconvenience," Givens said. 

Fraud alerts pushed as alternative
Pratt said consumers already have the tool they need. Anyone concerned about identity theft can have a fraud alert placed on their files with the credit bureaus at no charge. With such an alert in place, retailers who pull a credit report are given a warning to take additional steps to verify the identity of the consumer.

This system, however, relies on the retailers to verify the consumer's identity and privacy advocates criticize it as ineffective. Unlike freezes, retailers are still able to access credit reports, just with fraud alerts attached.

The alert system was improved by the latest update to the Fair Credit Reporting Act, called the FACT Act, passed by Congress at the end of 2003, and those measures should be given a chance, Pratt said.

"We need to give the FACT Act a chance to be effective," he said. "We are concerned about any new initiative, we have so much in the pipeline right now that is going to be an effective deterrent to identity theft."

Fraud alerts have already been tried and failed, said McNabb of the California privacy office.

"The reason (credit freezes) passed here was frustration with ineffectiveness of fraud alerts," she said.  "We had a parade of identity theft victims who placed fraud alerts on their files and credit was issued anyway."

The alerts have another characteristic that dooms them to ineffectiveness, Givens said -- they generally expire after 90 days. Con artists know this, so often they simply steal data and wait for a few months before attempting fraud. ChoicePoint victims, for example, were told to place fraud alerts on their accounts when they received their letters in February. But that protection will expire at the end of May unless they request a new alert.

"I know a man puts a note on his calendar and refiles for a fraud alert every 90 days," Givens said. "Fraud alerts just aren't working. It's really a shame we have to go this far, but we do."

On a more fundamental level, Hillebrand argued that even if freezes ultimately aren't popular with consumers, the option to lock up personal files is an important consumer right.

"Every consumer in America should be able to do this," she said. "In light of ChoicePoint and the other incidents, people are beginning to understand that other people have their personal information and have an interest in selling it. And that interest is very different from your interest in protecting it.

"There will always be hackers, and information about us will always be stolen. A freeze is the one thing that gives consumers control over who can look at their files for granting credit. We as individuals need one way to close the door."

Bob Sullivan is author of  Your Evil Twin: Behind the Identity Theft Epidemic

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