[ Report Home | Press Index | Consumer Issues ]
Identity Theft II
Press Release (9/23/97): Identity Theft II
For Immediate Release, 23 Sept 97
CONTACT: Liz Hitchcock or Ed Mierzwinski, U.S. PIRG 202-546-9707
Pam Pressley, CALPIRG, 310-397-3404
Beth Givens, Privacy Rights Clearinghouse, (619) 298-3396
NEW CREDIT REPORT LAW TAKES EFFECT SEPT. 30TH, BUT CHANGES WON'T STOP GROWING IDENTITY THEFT PROBLEM
Report highlights new law on credit report accuracy and privacy -- Revised credit and theft-of-identity fact sheets announced
Despite major amendments to federal credit bureau laws that take effect September 30th, fraudulent theft of financial identity remains a growing problem requiring additional action, according to a report released today by the U.S. Public Interest Research Group (PIRG). The report updates an August 1996 PIRG identity theft report. Updated consumer fact sheets on identity theft and credit reporting are also provided.
The report reviews the high and low points of the new federal and several 1997 state credit reporting laws (CA, CO, NJ). It makes recommendations to state governments and Congress urging additional reforms to protect the privacy of personal information and to provide relief to the victims of financial identity theft. It also describes the activities of lesser known credit bureaus that affect consumers' lives, including tenant screening companies and check verification firms.
"We fought the credit bureaus, banks, department stores and other data dealers for seven years to help pass the new federal credit reporting law that will help most consumers correct credit report mistakes once and for all," said Ed Mierzwinski, U.S. PIRG Consumer Program Director. "But much more must be done to end the data dealers' sloppy practices that are causing a worsening theft of identity problem."
The Privacy Rights Clearinghouse, based in San Diego, has noted a sharp increase in calls related to identity theft. "Calls on identity theft have been the number one topic on our hotline in 1996 and 1997," said project director Beth Givens. "Clearly, many consumers are being harmed by this growing crime. The credit industry needs to step in and adopt policies and practices to stop the imposters in their tracks."
Based on interviews with police, credit experts and identity theft victims, the report, "Return To The Consumer X-Files: A Second PIRG Report On Identity Theft," concludes that identity theft, although difficult to measure, has grown worse in the last year and won't be solved by the 1996 federal amendments.
REPORT RECOMMENDS KEY REFORMS TO STOP IDENTITY THEFT:
- All consumers should have the right to a free credit report annually on request, as only the states of Colorado, Georgia (2/year), Massachusetts, Maryland, New Jersey (effective 1998) and Vermont provide;
- All consumers should have the right to block access to their credit reports to anyone who does not have the consumer's express authorization;
- Credit bureaus should be required to match at least 4 pieces of identification -- such as exact name and exact address -- between credit reports and credit applications so that incomplete fraudulent applicants for credit are not processed;
- Creditors and credit bureaus should be required to improve change of address verification to prevent credit cards from being sent to false addresses of thieves; and,
- The "credit header" loophole that allows social security numbers and other personal information derived from credit reports to be sold on the internet outside the protection of the credit laws should be closed.
"With the explosion of hundreds of smaller, lesser known credit bureaus, including check verification companies, tenant screening companies, and other "bad consumer blacklists", it is more important than ever to give consumers these basic tools to protect their personal information from identity thieves and to deal with the fallout if they do become fraud victims," Mierzwinski said.
The 1996 Consumer Credit Reporting Reform Act is the first major amendment to the archaic 1970 Fair Credit Reporting Act (FCRA). It was enacted in response to thousands of consumer complaints about errors in credit reports made to PIRG, state attorneys general and the Federal Trade Commission (FTC) throughout the 1990's. A 1993 PIRG report found that the Number One consumer complaint to the FTC from 1989-92 -- over 20% of all complaints -- was against credit bureaus. Most complaints involve either the repeated failure of bureaus to fix mistakes, especially when the files of two or more consumers are mixed together, or the lack of privacy of credit reports.
Following a seven year battle between consumer groups and the entire financial industry, including banks, department stores, and credit bureaus, the 104th Congress enacted the 1996 amendments on the last day of its session, September 30, 1996. Most amendments take effect September 30, 1997.
HIGHLIGHTS OF NEW FEDERAL CREDIT REPORT LAW, TAKES EFFECT SEPT 30TH:
- The three major credit bureaus (Equifax, Trans Union, and Experian (formerly TRW)) are required to establish a joint error re-investigation system to prevent re-insertion of incorrect information in reports. In response to complaints about "voice mail jail," the three are also required to establish national toll-free telephone numbers, to be staffed during regular business hours, to handle complaints.
- The three national bureaus are required to establish a joint national system so consumers can "opt-out" of receiving "pre-screened" credit, and now also insurance, offers derived from credit reports. Companies mailing offers to consumers are required to inform them how to opt-out in each offer and the bureaus are required to run ads in major newspapers announcing the program. These so-called "pre-approved" credit card offers have been implicated in theft-of-identity schemes.
- Banks, department stores, and other furnishers of information to credit bureaus, for the first time nationally, are required to avoid errors, to participate in re-investigations, and to certify that disputed information is accurate.
- Banks, landlords, merchants, insurers and others taking adverse action based on credit reports are now all required to disclose to consumers their right to obtain a free credit report for 60 days following denial. Indigent persons, unemployed persons looking for work, and identity theft victims are granted the right to obtain one free credit report annually on request.
- Companies must now obtain the consent of applicants and employees before using a credit report for employment purposes and must show the report to the applicant or employee before making an adverse employment decision.
- Activities of so-called credit repair doctors are severely restricted, including prohibiting credit doctors from attempting to change consumer's social security numbers to avoid negative credit items.
- All credit bureaus, including specialized tenant screening, check verification and medical information bureaus, are subject to new requirements to ensure accuracy and protect privacy and new deadlines for reinvestigating disputes. For the first time, bureaus are required to consider information provided by the consumer in their error re-investigations.
"Consumers should thank U.S. Sens. Dick Bryan (D-NV) and Kit Bond (R-MO) and Reps. Joe Kennedy (D-MA), Esteban Torres (D-CA), and Henry B. Gonzalez (D-TX), for championing the new law," added U.S. PIRG Consumer Program Director Ed Mierzwinski. "The banks and credit bureaus fought for seven years to stop all the pro- consumer proposals included in this law."
"Unfortunately, consumers had to pay a high privacy price," added Mierzwinski. "In return for improving the accuracy of credit reports, Congress gave the banks and other data dealers increased access to our personal information without our informed consent."
KEY FLAWS IN THE NEW FEDERAL LAW:
- A controversial provision vigorously opposed by consumer groups, the FTC and state attorneys general allows large holding companies to share credit reports and credit applications among affiliates that do not have a permissible purpose under the FCRA to look at your report. However, banks and other firms expected to take advantage of the new law must offer consumers the right to opt-out of affiliate information sharing (but with no telephone opt-out required).
"Watch for a confusing, probably purposely uninformative mailing from your bank about information sharing between affiliates," added Mierzwinski. "We advise consumers to opt-out of allowing banks to retain your credit report and share it outside of the law. When you need more credit or insurance or other financial products, you should shop around, instead of relying on junk mail or phone offers from your own bank." Other flaws include:
- The new law increases the amount of personal information that can be obtained from credit reports for pre-approved offers, which now can be made by insurers, as well as creditors. Although the national opt-out system was established, the data dealers insisted that a telephone opt-out would only be good for two years and must be followed up with a written opt-out if the consumer wants it to be made permanent.
- The new law preempts the states, until 2004, from enacting tougher laws in most areas, including pre-screening and affiliate sharing. However, states can enact new laws in some areas, such as providing free credit reports, limiting report uses, and preventing identity theft through report blocking.
- An amendment to close the FTC's credit header loophole, which allows names, addresses, social security numbers and other information derived from credit reports to be sold outside of the law, was not approved. PIRG-supported legislation introduced in the 105th Congress by Sens. Dianne Feinstein (D-CA) and Charles Grassley (R-IA) and Rep. Jerry Kleczka (D-WI) would close the loophole, protecting social security numbers and other personal information from data dealers, Mierzwinski said.
"Although some good bills have been introduced in Congress this year, Congress probably won't act again soon," Mierzwinski added. "But we're encouraged that several states enacted tough amendments this year that go farther than the new federal law to prevent identity theft and protect consumer privacy."
- In August, PIRG-backed Colorado legislation took effect requiring, for the first time anywhere, that credit bureaus send most consumers an annual notice of their rights, including their new right to request a free credit report annually.
- In July, New Jersey passed a PIRG-backed law granting consumers a free credit report on request effective in 1998.
- PIRG-backed legislation granting consumers the right to block access to their credit reports passed the California State Senate in 1997 but was weakened and died in the House. However, a more modest proposal that will improve address verification by creditors before issuing new credit cards has passed both houses and is expected to be signed into law.
"We urge consumers to take advantage of the new federal and state law provisions to protect the accuracy and privacy of their credit reports," said Pam Pressley, CALPIRG Consumer Attorney and principal author of "Return to the Consumer X-Files." "But the best way to prevent theft of identity is to take precautions to protect your personal information. If you think you may already be a victim, take action immediately."
IDENTITY THEFT VICTIMS: 3 KEY ACTIONS TO TAKE IMMEDIATELY:
1) report identity theft to local law enforcement, including police, postal inspectors, and Secret Service;
2) contact all banks and others with whom your name has been used fraudulently by phone and in writing, sending a copy of a police report or any other documentation to show that you are a victim of fraud; and,
3) call the 3 major credit bureaus' fraud departments to get free copies of your credit reports to check for fraudulent accounts and have fraud flags and statements added to your credit report that all potential creditors should contact you to verify credit applications.
PIRG announced that updated fact sheets on credit reports and theft of identity are available free to consumers, who can obtain them in two ways:
- send e-mail, no subject or message is necessary, to the automatic reply address firstname.lastname@example.org, or
- send a self-addressed stamped envelope marked "ID THEFT" to PIRG's national office at 218 D St SE, Washington, DC, 20003.
U.S. PIRG is the national lobbying office for state Public Interest Research Groups. PIRGs are non-profit, non-partisan consumer and environmental advocacy organizations active around the country. PIRG's consumer web site is http://www.pirg.org/consumer/. The full report is at http://www.pirg.org/consumer/xfiles/. Other credit resources are locate at http://www.pirg.org/consumer/credit/.