Group says ID theft victims seldom freeze credit reports

Beacon Hill lawmakers this week passed bills that would require credit-reporting agencies to offer to lock down, or "freeze," consumer credit files as a way to minimize harm from identity theft.

But consumers in states that allow freezes are not taking advantage of them, industry figures show.

Since 2003 a majority of states have passed similar laws that make freezes available to about 165 million consumers, according to industry estimates.

So far only about 50,000 people have requested freezes, according to the Consumer Data Industry Association, a trade group in Washington that represents credit reporting companies, a statistic executives say shows many people may prefer other tools to protect their credit.

"Relative to the potential population, that's not a big number," said Stuart K. Pratt, president of the association, whose members include the three consumer-reporting agencies: Equifax Inc. of Atlanta, Experian of California, and TransUnion LLC of Chicago.

A credit freeze prohibits these firms from providing a consumer's credit report for transactions such as an application for a credit card or loan, usually meaning they cannot be completed.

Freezes aren't meant to interfere with the normal use of a credit card, however.

Pratt cited two possible reasons for the low usage rate. First, people may not know of their new rights to freeze their credit reports. Also, people might prefer to avoid using a freeze and to keep their credit reports easily accessible when they apply for new credit cards, car loans or other products.

"We don't know how many consumers really want the credit freeze," he said. Pratt said the trade group doesn't take a position on the proposed law in Massachusetts but hopes and expects it will resemble similar legislation elsewhere.

Bill sponsors say their new rules would allow consumers to temporarily lift, or "thaw," the restrictions on their credit information and address any concerns about convenience.

Either way, exactly how much power individuals should have over their credit information has been hotly debated in the wake of growing threats from data thieves. More than 154 million personal records have been compromised since the start of 2005 by one count, creating headaches for banks, credit-card companies, and retailers who are struggling to maintain confidence in their systems.

Just this year retailing giant TJX Cos. of Framingham disclosed more than 45 million consumer records had been compromised, the largest breach on record and motivating the state legislature to pass legislation that had failed in previous sessions.

In addition to the freeze provisions, the bills passed by the House and Senate would require companies that had compromised data to promptly notify regulators and consumers, and sets limits on the fees that companies could charge consumers to restrict or allow access to credit information. The bills must now be reconciled, but Governor Deval Patrick has indicated his support for the basic concepts.

Pratt said the ability to freeze data may not be as useful as proponents hope. Said Rod Griffin, spokesman for Experian, "the concern is mainly that it would give a false sense of security."

Some supporters say the low number of people who have sought a freeze mainly indicates that people don't know their new rights rather than lack of interest. Edward A. Adams, chief executive of Wilmington consulting firm Security Innovation Inc. said any law should also include money to advertise the changes.

Eric Bourassa, financial policy analyst for MassPIRG, a nonprofit consumer group, said that in place of a freeze, credit-reporting companies would rather charge consumers $15 a month or so for credit-monitoring services that track things like changes to account information.

He said if the ability to freeze a credit file were free, as some on Beacon Hill are urging, the numbers of people using it would soar.

Technically, each of the three credit-reporting companies has told the trade group they have received freeze requests from 50,000 people, Pratt said.

It is likely that most consumers seeking freezes have contacted all three credit bureaus but it may be that a few did not in which case the total number of freeze requests could be tens of thousands of people higher.

Ross Kerber can be reached at kerber@globe.com.