Delaware Amends Clean Credit and Identity Theft Protection Act
by: Louis Danastorg
As of November 2007 the three major credit bureaus began offering to all consumers the ability to freeze, and otherwise lock, his or her credit report in every state, regardless of any applicable state law. Since then, all states except Alabama and Michigan have passed legislation requiring the availability of security freezes, which prevent access to the information contained within a consumer credit report without the express permission from that particular consumer.
A security freeze protects consumers by making it impossible for identity thieves to open any new accounts, and stops lenders from reviewing any information with the consumer credit file. The freeze, however, does not affect the access of those the consumer holds existing accounts or any agents acting on their behalf. This facilitates account services such as: account maintenance, monitoring, upgrades, and collecting on the account; while delaying any new credit or loan service requests made without the consumer’s specific authorization.
Recently in Delaware its General Assembly amended Title 6 of the Delaware Code, the Clean Credit and Identity Theft Protection Act, which mandates the availability of security freezes for all Delaware consumers. The bill reduces the initial application fee for security freezes from twenty dollars to ten dollars, and five dollars for seniors older than 65.
Under the new provisions a consumer reporting agency may no longer charge consumers for a one-time reissue of the personal identification number; however, charges for any subsequent reissuance are considered valid. Victims of identity theft, having filed valid incident reports, may not be charged any fee for placing a security freeze on their credit reports. Consumers have the right to bring a civil action against anyone who violates his or her rights under the credit reporting laws.
Beyond application fee limits, the General Assembly mandates that whenever a consumer is due a summary of rights under Section 609 of the Federal Fair Credit Reporting Act, such summary must include a security freeze specific notice. The notice must inform the consumer of his or her right to obtain a security freeze for no more than ten dollars, the freeze will ban consumer reporting agencies from releasing any information, and the consumer must contact and pay each agency separately.
The new statutory language reflects the potential inconvenience in allowing any consumer to freely freeze his or her credit reports, as the procedural requirements may serve to delay necessary new credit, loan, utility, telephone, or insurance requests made by the consumer. The security freeze will hinder and interrupt the approval process, as creditors rarely grant new credit or loan services without an accompanying consumer credit report to determine an individual’s creditworthiness. While consumers have the capacity to lift the freeze, either permanent or temporary, they are still subject to processing limitations, as it may take up to three days for any alterations to the freeze to take effect.
In an effort to alleviate some of the inconvenience inherent with the wide availability of security freezes, the amendments provide specific types of consumer reporting agencies exempt from the requirement to place a requested security freeze. Consumer reporting agencies acting only as resellers are not required to place a freeze, but must honor any freeze executed by another agency. Such agencies may not maintain a permanent database of consumer information, but can only compile and combine information held in another credit agency’s databases or multiple agencies’ databases.
Check fraud prevention services and deposit account information companies are exempt, so long as the information is purposed for approval/processing non-cash funds transfers or to review a consumer request to open a deposit account by the inquiring financial institution. The General Assembly also provided exemption for any agency that reports information concerning and containing: criminal records, personal loss history, fraud prevention or detection, employment screening, or tenant screening.
About the Author:
Louis Danastorg, J.D., M.B.A. is Associate Counsel and Compliance Specialist at Bankers Advisory, Inc. He is a graduate of Vanderbilt University and earned his Juris Doctor and Masters of Business Administration from Suffolk University. He can be reached at Louis@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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