New Federal Law on Credit Freezes

A new federal law, Senate Bill 2155, effective September 21, 2018, will enable anyone to place a “security freeze” on their credit files. The security freeze aka as a credit freeze blocks lenders from pulling your credit reports. It is a way to block identity thieves from using your financial information to open credit cards and to take out loans in your name. With a freeze, the credit bureaus cannot release any information without your permission. Until this new law was passed, the ways consumers could freeze their credit varied from state to state. Some states such as California had its own laws on security freezes. Now the state laws are preempted by the new federal law.

The new law requires the credit bureaus to place the freezes at no charge to consumers. Most state laws allowed the bureaus to charge anywhere from $2 to $10 for each step of the process.

The law requires the bureaus to impose the freeze within one day after the consumer makes the request by phone or electronically or 3 days after receiving a mailed request. The bureaus must remove a freeze within one hour after receiving a phone or electronically sent request from a consumer.

Security freezes do not apply to a consumer’s current creditors, companies to whom the consumer owes money, background screening companies relating to employment or housing, insurance companies to which the consumer has applied for a policy, to law enforcement, to the tax authorities or to child-support agencies.

The credit bureaus are required to set up a webpage to make it easy for consumers to freeze their credit files.

Security freezes are not to be confused with fraud alerts, which are alerts that are notices to lenders to verify the consumer’s identity before granting credit. Alerts are not always effective and they expire after one year.

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