Credit Reports, Freezes and Thaws

When my clients don’t understand why they are having certain problems with credit reporting agencies (“CRA’s”), I ask them how much money they have paid the three major credit reporting agencies lately. I usually get a blank look followed fairly quickly by the realization that they aren’t the CRA’s’ customer — the creditors are. That understanding is central to understanding why the credit reporting agencies’ trade organization pays two full-time lobbyist to lobby State Legislatures and Congress opposing legistlation increasing consumer’s access to and control over their credit reports.

A credit freeze allows a consumer to place a freeze on his credit history — which means the CRA’s may not issue a report to any creditor on that consumer. It is from those reports that the CRA’s make their money. So, credit freezes are not good for the CRA’s business.  However, a credit freeze is usually the best tool to fight new account fraud and other types of credit fraud stemming from identity theft.

Hence, the current political game. The CRA’s, through their industry organization, hire lobbyists to argue that credit freezes are too expensive, too much trouble and not really worth it. Despite those efforts by the end of this year 35 States will have some laws requiring companies to inform consumers when the consumers’ personal data turns up missing — and a lot of those States also provide for some form of credit freeze.

The next player on the field are car lenders. Impulse car purchases can get lost if creditors have to wait three days (standard waiting time) to remove (or thaw) a credit freeze so that a car loan can be approved. Car lenders want a 24-hour time period to thaw a freeze — or less.
Finally, Congress is being hauled into what started at the State level. The CRA’s want a national standard, and hopefully one that is at least as lenient as the most lenient of the State statutes. Consumer advocates only want a federal standard if it is at least as effective as the most effective state statutes.

In April Sen. Mark Pryor from Arkansas introduced a bill to implement a national standard for credit freezes. His bill is modeled after the California legislation which allows for a $10 fee per CRA and application by certified mail only. If a Federal bill passes it will preempt all conflicting State statutes. Most of the State statutes I am familiar with require the payment of a smaller fee ($10 per CRA adds up to $30) and request by regular mail instead of certified.

USA Today has run an article recently on this issue, but it hasn’t made my local paper. I think it is an issue that warrants some attention and public discussion.


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