Free Credit Freezes and Fraud Alerts Are Here!

The Federal Trade Commission (FTC) just issued some FAQs explaining a new consumer protection law known as the Economic Growth, Regulatory Relief and Consumer Protection Act. It was signed by President Trump in May and took effect on September 21, 2018.

Freezing Accounts to Protect against Fraud

Under the new law, credit reporting agencies — Equifax, Experian and TransUnion — must promptly block access to your credit files without charge. Specifically, if you request a freeze online or by phone, the company must put it into effect within a business day.

You can also request a freeze for children under age 16, as well as for anyone for whom you act as a guardian, conservator or you're authorized to care for by a power of attorney. A credit freeze prevents anyone, including you, from opening a new account in the individual's name until the account is unfrozen.

The new law doesn't require credit reporting agencies to refund any fees you've previously paid to have your accounts frozen. But, if you have already frozen creditors' access to your credit data, you don't have to do anything new to take advantage of the law.

To clarify, you don't have to wait until a breach happens to request a free credit freeze. If you're concerned about identity theft, you can request a freeze at any time. In addition, credit freezes don't affect your credit score or prevent you from:

• Getting your free annual credit report,
• Opening a new account,
• Applying for a job,
• Renting an apartment, or
• Buying insurance.

If you're doing any of these, you'll need to lift the freeze temporarily. Credit freezes also don't prevent thieves from making charges to your existing accounts. So, you'll still need to monitor all bank, credit card and insurance statements for fraudulent transactions.

If you haven't frozen access to your credit files, you're not required to do so, even if your data has been breached in the past. Frozen accounts can be a nuisance if, for example, you want to open a new credit card account, apply for a loan or start a new job that requires a background check. But they can be an effective way to protect people who aren't planning to apply for credit or switch jobs — such as retired people, children and people under guardianship — from identity theft.

Thawing Your Accounts

Another free service required under the new law is unfreezing access to your credit files. Credit reporting agencies must act within an hour when you request to have your account reactivated. Requests made via regular mail can take up to three days of receipt of your request, so you're probably better off calling or making a request online.

Keep in mind that a credit freeze will generally last until you request it to be unfrozen. That's different from a "lock," which isn't covered by the law. A lock is a freeze that only lasts for a prescribed period of time, and the agency can still charge you for that service.

You can ask for a temporary freeze or limit your unfreezing request to a specific credit reporting agency, if you know which agency the creditor or employer will use to check your credit.

Saving PINs

When you ask an agency to freeze your data for the first time — whether for a specified period or indefinitely — you'll receive a personal identification number (PIN). Keep your PIN in a safe place, because you'll need it to unfreeze your account in the future. Lost PINs can cause major headaches.

It's important to note that, while your credit is frozen, the credit reporting agencies continue to track your loans and repayments. That way, when your accounts are unfrozen, prospective lenders and employers will have access to current information.

Sounding the Fraud Alert

The new law also establishes standards for fraud alerts. This allows you to request that businesses contact you before opening a new account in your name. You need to ask only one credit reporting agency for the fraud alert service. The agency you ask will pass on the word to the other agencies.

Previously, fraud alerts were granted for only three months. So, for continuous coverage, you'd have to renew your request to extend the alert four times a year. Under the new law, fraud alerts last for a year. And, if you've been the victim of identity theft, you can put one in place that lasts for seven years.

Military personnel on active duty get additional protections, including automatic blocking offers of preapproved credit cards, for two years. (If you're in that category, you can ask the credit reporting agencies not to block those offers, if you prefer.)

If you encounter difficulties with any financial product or service (including credit reporting agencies), the Consumer Financial Protection Bureau (CFPB) offers tips and a procedure for filing a complaint. The CFPB tries to at least get a financial company to respond to your grievance, usually within 15 days.

For More Information

Identity theft is on the rise. Contact your financial advisors for more ideas on how to protect your personal data from thieves who want to use it to access your accounts, open new accounts or claim bogus tax refunds.