New Law about Free Credit Freezes

September 27, 2018

When your personally identifiable information is compromised, you have to take action. Many reach out to credit agencies and stop additional lines of credit from being opened using their information, also known as a credit freeze. Until recently, this action triggered a fee, but no longer. Congress has officially amended the rules and made credit freezes free.

The bill, which is a general credit reform act, features an amendment to the Fair Credit Reporting Act. Now, reporting agencies must leave fraud alerts on file for longer and stop charging for credit freezes. Consumers must also be made aware that free freezes are available. The bill contains further provisions designed to protect the credit records of minors.

What Does the Law Mean?

It's important to look into the actual implications of the legal language embedded in the bill to see what free credit freezes will actually look like in practice. According to the AARP, the ability to enact such a freeze will come into force in the next few months, and it mainly applies to states that haven't already banned account freeze fees. Before the law, freezes cost between $2 and $10, and those fees had to be paid individually to each credit reporting agency.

Because of so many high-profile leaks in recent months, it makes sense that representatives from across party lines supported free credit freezes. With so much data circulating among criminals, a huge cross-section of people could find themselves facing credit fraud. The lawmakers want to make sure the onus is on credit agencies to defend individuals from theft.

U.S. News & World Report further illuminated how the provisions designed to protect kids' credit will work. Parents will be able to either call or reach out online and put free freezes on their children's credit accounts, which will protect them from having new accounts opened using their Social Security numbers with no parental input. Financial crimes using children's personally identifiable information are relatively common because young people have never used their numbers to open real lines of credit - and they may not discover the criminals' activity for years.

What Are the Specifics and Exceptions?

Consumers should make sure they know the difference between locking and freezing credit, especially because the new law will affect only the latter. An Equifax spokesperson explained the two kinds of account shutdown. A lock is a less severe form of protection than a freeze, as it comes directly from a credit agency and doesn't have any government oversight. It's easier to lift a lock, and the fact that the government doesn't have any impact on locks means they aren't required to be free by the new law.

Those same consumers should also know that some categories of fraud aren't necessarily stopped by either locks or freezes. For instance, criminals may still file fraudulent tax returns. Furthermore, attackers who have access to open credit accounts can still misuse them. The freeze is designed to stop new lines of credit from being opened. And freezes do have repercussions that don't involve identity theft. In an interview with U.S. News & World Report, Digital Risk's Jeff Taylor cautioned a freeze may also cause problems with making major new purchases, especially when trying to finance a house.

Why Keep Protecting Accounts?

The risk associated with lost personally identifiable information doesn't dissipate when credit freezes are available. There are simply too many ways for criminals to use stolen data. These exceptions are a major reason to keep up with account protection of all kinds. Not only are there still scenarios unaddressed by present laws, but data thieves are always learning new ways to turn personal information into financial gain.

To set up extra defenses around your personal data and gain warning when suspicious activity occurs, get Identity Guard.

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