The federal government is expected to pass legislation this week allowing Americans to freeze access to their credit reports for free, giving them virtually ironclad protection against fake credit accounts.
The legislation addresses major complaints that arose eight months ago when consumers were advised to freeze their credit report after Equifax disclosed a data breach that exposed personal data of 148 million Americans.
A freeze prevents new lenders from pulling your credit report, a necessary step to open a new loan or other credit account. That keeps criminals from getting credit in your name, but it also means you must temporarily lift the freeze on your credit every time you apply for a credit card, auto loan, mortgage or other loan.
The bill also stipulates that consumers can’t be charged when they want to temporarily unblock access to their credit reports to apply for a loan or credit card.
Before the federal legislation, credit freezes and unfreezes were regulated on the state level. Only four states—Indiana, Maine, North Carolina and South Carolina—currently mandate free credit freezes and unfreezes, but 23 states are pushing through their own legislation to change that. Otherwise, consumers would have to pay anywhere between $2 and $11 for a freeze at each bureau and, again, to temporarily unfreeze.
There is also the nuisance of contacting all three bureaus separately to place or remove a freeze. “Unless a lender tells you which credit report they’re going to pull, you need to unfreeze all three,” says credit expert John Ulzheimer, who formerly worked at Equifax and FICO. “There’s no place to do it quickly all at once.”
Pending bills in California and Connecticut could alleviate that inconvenience by requiring the credit bureaus to inform the others of a consumer’s request to place or lift a credit freeze. But the federal bill doesn’t address this.
Still, it’s unclear how much the fees and the freeze procedures have kept consumers from freezing their credit reports in the first place. The fees are relatively low, “still cheaper than taking your family out for a fast casual meal,” and aren’t profit-making, says Eric Ellman, senior vice president for public policy and legal affairs at Consumer Data Industry Association, which represents the credit bureaus.
Only 13% of consumers who knew about the Equifax breach reported freezing their credit—and 27% planned not to—even though 61% reported feeling at great risk or somewhat at risk because of it, according to a J.D. Power survey in November 2017. Equifax waived fees for freezing its credit report until June 30.
“Even if it’s free, I don’t think that it will act as a catalyst. I don’t think that $3 has been keeping people from doing it,” says Ulzheimer. “It’s partially because, and I hate to say this, consumers don’t care until they have to care. And that’s when they are victims of fraud.”
The House is scheduled to vote this week on the legislation and is expected to pass the measure. The bill—which overhauls the Dodd-Frank Act that came out of the Great Recession—has already passed the Senate. The president is expected to sign the bill into law if it passes the House.