PCI Says N.Y. Credit Freeze Won’t Cool Identity Theft Problem

While property/casualty insurers share New York legislators’ concerns about the problem of identity theft, one industry trade group believes that so-called “credit freeze” legislation is an ineffective way to address the issue.

Kristina Baldwin, regional manager for the Property Casualty Insurers Association of America (PCI), told a joint meeting of the New York Senate Consumer Protection Committee and the Assembly Consumer Affairs and Protection Committee that “enacting credit freeze provisions in New York would most likely result in increased costs, burden and inconvenience both for the consumer and for businesses
operating in New York State with only minimal resulting consumer benefits.”

Credit freeze legislation allows consumers to prohibit businesses and credit reporting agencies from accessing their individual credit histories. However, by denying access to such information, consumers may also be faced with significant inconveniences, according to PCI.

“Credit information is widely used in today’s society,” said Baldwin. “Once a consumer freezes his file, applying for a home or car loan; applying for a job, an apartment, or an insurance policy; or even buying a cell phone can become difficult as the consumer must specifically ‘lift’ the freeze with a waiting period each time the information must be accessed.”

According to PCI, federal law currently contains significant protections for consumers who believe that they have been, or are about to become, a victim of identity theft without completely blocking access to credit information. “Federal law allows a consumer to request that a consumer reporting agency mark the consumer’s file with a fraud alert for a period of not less than 90 days when identity theft is suspected and block fraudulent items from appearing on a credit report,” said Baldwin.

PCI contends that utilizing the federal law’s protections would be far more helpful to the consumer than placing a blanket freeze on their credit information.

“Legislators must consider the unnecessary consumer aggravation, inconvenience and confusion which would likely result from the enactment of security freeze provisions,” said Baldwin.

She added that if legislators moved forward with credit freeze legislation that it contain an exemption for property/casualty insurers.

“It is highly unlikely that illegally procured information would be used to purchase insurance,” said Baldwin. “In fact, according to a Federal Trade Commission study issued on January 25, of the 17,387 identity theft complaints made by New York consumers in 2005, only 69
related to insurance. Therefore, if insurers are included in security freeze provisions, the consumer would obtain almost no benefit, but both the insurer and the consumer would suffer increased burdens and inconveniences.”