The Identity Theft Protection Act was passed in response to the growing incidence of identity theft and computer fraud in the US. The law gives consumers the right to file a police report and have control over their credit file, while also imposing higher security standards for companies’ use of personal data. Credit freezes are also an important component of the act. The federal Identity Theft Protection Act gives consumers access to free copies of their credit reports and the right to ask credit reporting agencies to flag their credit files. Model legislation developed by PIRG and CU serves as a guideline for various states.
The Identity Theft Protection Act is the short title of legislation passed in the United States in most states in response to the growing incidence of computer fraud, privacy violations and identity theft. Based on model legislation developed by the Public Interest Research Group (PIRG) and the Consumers’ Union (CU), the law gives consumers the right to file a police report if they become victims of identity theft and to have their their credit file at their own discretion, preventing the unauthorized issuance of new credit. The act also imposes higher security standards for companies’ use of consumers’ personal data, including Social Security numbers, and requires companies to destroy files containing personal information when they are no longer needed.
As identity theft has emerged as a significant problem for American consumers, it has also posed a serious problem for law enforcement. For various reasons, many law enforcement agencies have refused to even issue a police report when citizens have complained, arguing that they could not be certain that a crime had actually been committed and, if so, that it had occurred within of their jurisdiction. Credit card issuers, however, have refused to take any action in the absence of a police report, and credit reporting companies have also refused to acknowledge that a theft had occurred without a police report. Consumers, victims of identity thieves who raided their bank and credit accounts, have been unable to seek satisfaction because they have been unable to obtain a police report, despite documented proof of theft on their bank statements. The Identity Theft Protection Act eliminated this problem.
Credit freezes are another important component of the Identity Theft Protection Act. Before granting credit, lenders review an applicant’s records with one or more of three credit reporting agencies in the United States, generally extending credit if the report is favorable. Using stolen personal data, identity thieves file fraudulent credit applications and then use established credit to steal. Creditors expected victims of identity theft to pay the bills incurred by the thieves. A credit freeze prohibits credit reporting agencies from revealing anything about a consumer, thus providing absolute protection for potential victims. Credit freezes can be lifted temporarily when a consumer legitimately applies for credit.
Companies whose databases held files on literally millions of consumers, meanwhile, have continually experienced security breaches, losing sensitive consumer data to theft or incompetence. Security measures to safeguard such data were often minimal or non-existent; some sensitive files were lost when laptops containing the data were left in taxis and on restaurant tables. Some companies also treated their customers’ confidential data as an asset to be exploited, making a profit by selling it to third parties or sharing it with affiliates. Identity thieves posing as merchants were sometimes able to purchase customer files from large companies, often with enough information to make fraudulent credit applications.
Attempts by the US Congress to address identity theft have been mostly ineffective, partly due to jurisdiction issues, and partly due to opposition from banks and credit interests. The federal Identity Theft Protection Act essentially gives consumers access to free copies of their credit reports and the right to ask credit reporting agencies to flag their credit files. These flags are supposed to warn potential lenders to require direct contact with the consumer and positive identification before granting credit, but are often ignored by lenders.
To address perceived shortcomings in federal legislation, PIRG and CU developed the Identity Theft Protection Act, formally titled the State Clean Credit and Identity Theft Protection Act. Model legislation like this is often written as a guideline for various states when they share goals common on matters that fall outside federal jurisdiction and ease the operations of businesses that do business in multiple states because they don’t have to contend with a host of different and sometimes contradictory regulations.
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