Lawmakers want to ban fees for freezing personal credit
Magnitude of Equifax breach sparks flurry of legislation
In the aftermath of the huge breach of private information at Equifax, some Wisconsin lawmakers say consumers shouldn’t have to pay a fee for trying to protect themselves by freezing their credit files.
The legislators have written a bill that would prohibit credit bureaus such as Equifax, TransUnion and Experian from charging people to freeze their credit files, a move that can help prevent thieves from opening credit accounts using stolen personal information.
Equifax said the breach, first revealed last month, potentially involves the personal information of 145.5 million Americans — mainly their names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers.
“From our perspective, as people’s personal information has become more vulnerable due to hacks and data breaches, we don’t believe consumers should have to be on the hook and pay a company to have their private information frozen or unfrozen,” state Sen. Patrick Testin (R-Stevens Point), one of the bill’s authors, said in an interview.
Credit bureaus gather information on a person’s credit history and prepare reports that lenders use to evaluate a consumer’s creditworthiness when he or she applies for a loan or line of credit.
Under Wisconsin law, a credit bureau is allowed to collect a fee of up to $10 from people to freeze or unfreeze their credit file. Freezing or locking a credit file stops most third parties from gaining access to the file in connection with an application for new credit.
For example, if someone with stolen information tries to open a credit card at a retail store, the retailer routinely would contact a credit bureau to see if the applicant is a good risk or bad risk. If a credit file is locked, it generally signals to the retailer not to issue the credit.
“It blocks the lender from being able to view or pull your credit file,” said D.J. Vogel, a partner in the Brookfield based security and compliance practice of the professional services firm Sikich LLP. “Lenders aren’t in the habit of giving out credit without being able to check what the risk is for the consumer they’re giving it to.”
A freeze can be lifted temporarily by a consumer if he or she is applying for credit. The Wisconsin proposal would prohibit a fee from being assessed for freezing or unfreezing a credit file.
The legislation proposed by Testin, along with state Sen. Fred Risser (D-Madison), state Rep. Jim Ott (R-Mequon) and Rep. Patrick Snyder (R-Scholfield), would permanently ban credit bureaus from charging
consumers a fee to freeze their file.
“This actually stems from a constituent of mine who contacted my office who was frustrated that he would have to essentially pay a company to freeze and unfreeze his private information,” Testin said.
Cyber security expert Vogel said that in light of the magnitude and possible long-lasting threat from the Equifax breach, he has been suggesting that people freeze their credit files at each of the bureaus, including a lesser-known credit bureau called Innovis. He said “a breach of this scale is just unprecedented.”
“Unlike with credit card fraud, where I can go to my bank and change my credit card number, the fraud here is throughout our lifetimes,” Vogel said. “We can’t go and change our Social Security number. So it’s not just in the next year or two years or three years that we need to be mindful.”
Vogel said the average consumer still is unaware of what the Equifax data breach means and what action they should take.
He said that in addition to the possibility of private information being sold on the “dark web,” a digital underworld where crooks buy stolen personal data they can misuse for credit fraud, the type of data exposed in the Equifax case could be used in tax fraud by thieves claiming income tax refunds in someone else’s name.
Vogel said although a credit freeze “doesn’t solve everything,” it is a better option than credit monitoring because it can prevent some types of fraud from occurring.