A new state law gives Rhode Island consumers the legal authority to place a freeze on their credit report by making a request to a consumer credit reporting agency by certified mail.
Once the request is made, the agency has five business days to place a security freeze on the consumer’s credit report. The agency must provide a personal identification number, or password, the consumer can use to unfreeze the credit report when necessary.
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The law, called “The Consumer Empowerment and Identity Theft Prevention Act of 2006,” was passed by the General Assembly near the end of the session and signed by Gov. Donald L. Carcieri on June 29.
Rhode Island is the 24th state to pass this type of legislation, according to Matt Auten, and advocate for the Rhode Island Public Interest Research Group (RIPIRG), which supported the bill.
‘‘We think it’s a really good tool for consumers to have,’’ he said. ‘‘In Rhode Island there are thousands of cases of identity theft each year. A lot of the cases are not reported to the proper authorities.’’
Auten said he estimates about 12,500 state residents fell victim to identity theft last year.
Sen. Beatrice Lanzi, D-Cranston, said she sponsored the bill because one of her constituents requested it.
“From what he explained to me, identity theft damaged his relative’s life,’’ Lanzi said. ‘‘It took years to get that person’s life back on track.”
A security freeze allows prevents businesses from accessing consumers’ credit reports, which prevents identity thieves from opening an account using a consumer’s stolen personal information.
But handling credit-report freezes costs time and money for the credit reporting agencies.
“We, from the very beginning, have argued against it,” said Maxine Sweet, vice president of public education for Experian, one of the three largest credit reporting agencies in the country. “It is a very labor-intensive, hands-on process for us.”
In addition, some states are offering the freezes to consumers free of charge, which Sweet said is unfair because of the costs associated with providing the service.
‘‘We spent many millions developing the system to process these,’’ she said, but few consumers have used the service. ‘‘It’s very low volume.’’
Rhode Island’s legislation requires consumers to pay a $10 fee for the service, unless they are 65 or older or have been victims of identity theft. The consumer must provide proof of age or an incident report from a law-enforcement agency in order to waive the fee.
AARP Rhode Island asked for the waiver for people 65 and older, said Stephen Jennings, associate state director for the organization. The request was made on behalf of AARP’s 130,000 members in Rhode Island.
‘‘We get contacted by our members having problems along those lines,’’ Jennings said. ‘‘When we hear from them on problems that could be solved, we pursue those if we think they could pass.’’
Lanzi said there were no opponents to the bill.
The National Credit Reporting Association takes no position on the topic. ‘‘We see pros and cons to both sides of it,’’ said Terry Clemans, executive director of the association, which represents 130 of the country’s 170 mortgage credit reporting agencies. ‘‘When a consumer has the ability to freeze their credit report at will, it can stop identity theft, but it can also prevent consumers from getting the [loan] rates they want.’’
The problem, he said, is that many times consumers misplace their PINs, or they forget how to unfreeze their report. When that happens, it takes days or weeks to straighten it out.
‘‘By the time it takes them to unfreeze the report, the interest rate they applied for is gone,’’ Clemans said. ‘‘I’ve seen people lose access to homes.’’
Sweet said handling the different requirements from different states poses a challenge for credit reporting agencies. Some states require the freeze to be applied within 15 minutes of the request; some allow the freeze request to be made by phone or e-mail.
Experian’s system allows consumers to freeze and unfreeze their credit reports using a password, Sweet said. They can unfreeze a report within 15 minutes. And consumers can choose the length of time for which they wish it to remain unfrozen – if, for example, they will be purchasing a car or home.
But many people do forget their passwords, she said, and that does become problematic for the consumer.
‘‘If the consumer uses this properly, they’ll be all right,’’ Clemans said. ‘‘A consumer shouldn’t just go out and place a freeze on their account just for any reason.’’
