State legislators around the country, are considering a "security freeze" on credit reports for consumers whose personal information has been exposed through security breaches. A freeze would lock down a consumer's credit report, preventing anyone--including the consumer--from instantly opening new credit cards or taking out loans.
Until recently, only Californians had the right to implement such a freeze, but the idea has spread quickly in recent months. (Texas allows only victims of identity theft to freeze their credit accounts.) About 20 states now have pending legislation that would force credit bureaus to give consumers the right to freeze their accounts.
Advocates say a credit freeze would be a valuable identity theft prevention tool for consumers. With a freeze in place, credit files cannot be accessed, and instant credit--such as retail credit cards or on-the-spot car loans--cannot be granted. Only after a consumer provides additional evidence of their identity--which can take up to three days--can credit be granted. Freezes also prevent identity thieves from making quick credit purchases and opening new accounts.
The retail industry and credit bureaus, however, contend that freezes would mean more hassles for consumers. They say freezes would eliminate any point-of-sale-type of credit transaction, and consumers who implement freezes will find it hard to apply for new credit.
Everyone agrees that the system for using a security" freeze is complicated. In the current system, files are unlocked by PIN numbers that consumers must...