Identity theft may not be as important as contributions from the credit bureaus

The problem of identity theft is one that is getting worse daily. Ever savvy thieves are forever finding new and clever ways to steal and take advantage of the personal information of unwary consumers. This wave of theft, with losses in the tens of millions of dollars, has prompted several state legislatures to pass tough laws protecting consumers. California has led the way, with a law that permits consumers to freeze their credit report, effectively blocking anyone else from having access to the information contained within it.

Unfortunately, Congress, which often has an agenda all its own, may be acting to undo the tough laws of California and elsewhere. HR 3977, also known as the Financial Data Protection Act, has made its way through committee and will soon head to the floor for a formal vote. The bill, which certainly has an impressive name, is an amendment to the Fair Credit Reporting Act, the law which allows consumers to receive a free credit report each year.

Congress has a history of giving misleading names to legislation. The Bankruptcy Abuse and Consumer Protection Act, for example, was a piece of legislation that was overtly hostile to consumers and made no attempt whatsoever to protect them from anything. This law is no different.

Despite its misleading name, the Financial Data Protection Act does more to help the credit bureaus than it does to help consumers. The credit bureaus have long opposed laws that allow consumers to freeze their reports, citing the fact that it takes time and costs money to do so. Moreover, the credit bureaus lose money from frozen accounts, as they cannot sell credit reports to lenders if the information is frozen. Consumers may like the ability to freeze their valuable personal information, but the bureaus do not.

HR 3977 would permit consumers nationwide to freeze their credit reports, and the House has heralded this as a good thing for all consumers. The part that isn’t so widely reported is that consumers would only be permitted to freeze their reports after they have become victims of identity theft! Worse, the law, if passed, would supersede any existing state laws, even if the state laws were more restrictive.

Since the vast majority of consumers are not identity theft victims and will not be victims in the future, the law, in essence, protects the credit bureaus from having to engage in a practice that they have expressed no desire to do. Consumers who simply wish to freeze their information in order to prevent themselves from becoming victims will have no ability to do so. Instead, consumers will have the ability to protect their personal information, such as past credit history and Social Security number, only after someone has stolen it and made use of it.

A law that allows you to protect your assets only after they have been stolen seems rather silly, doesn’t it?

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