[Infowarrior] - Œ Protection ¹ Act Would Strip Consumers of Credit Safeguards

[Richard Forno]

ŒProtection¹ Act Would Strip Consumers of Credit Safeguards

>From New Standard, July 24, 2006
By Jessica Azulay
http://www.freepress.net/news/16671

The US House of Representatives is poised to consider a bill that would make
it more difficult for consumers to protect their credit from identity
thieves.

Backed by the lucrative financial-services industry, the Financial Data
Protection Act of 2005 would narrow the circumstances in which consumers
could restrict their credit activity to prevent fraudulent borrowing, and it
would undermine stronger state-based reporting rules for companies that hold
and sell consumer data.

³It¹s shocking that at a time when data breaches are in the headlines daily
and consumers are at greater risk than ever [of] identity theft, Congress
would choose to vote on a bill that would strip consumers of their existing
identity-theft protections,² Susanna Montezemolo, policy analyst with
Consumers Union, said in a press statement. Consumers Union publishes
Consumer Reports magazine.

Companies that stand to gain from the legislation have spent a small fortune
on campaign contributions and lobbying.

In the last two election cycles, finance and credit companies have donated
more than $12.5 million to political campaigns, and in 2005 alone, the
industry spent almost $30 million on lobbying, according to the Center for
Responsive Politics, which tracks money¹s influence on government.

Two of the Act¹s four co-sponsors are on the industry¹s top-ten recipient
list for the House: Michael Castle (R­Delaware) took in a total of $116,616,
and Dennis Moore (D­Kansas) got $67,729. Another co-sponsor, Deborah Pryce
(R­Ohio), received $22,500 from the industry.

One of the most controversial provisions of the bill would make it much more
difficult for consumers to ³freeze² their credit, a process that enables
consumers to make it nearly impossible for anyone ­ including the consumer
him or herself ­ to open new credit cards without first going through extra
security precautions.

Currently, a handful of states allow consumers to freeze their credit at
will in order to protect themselves against fraud. But the bill would change
the rules so that consumers in all states would have to supply evidence that
identity theft has occurred before obtaining a freeze.

Since their business models rely on consumers having easy access to credit
and creditors having easy access to individuals¹ financial information,
finance and credit companies stand to gain from this provision. But
opponents of the bill say those seeking to protect their credit have a lot
to lose.

³It¹s like telling someone you can¹t put a deadbolt on your front door until
after you¹ve been burglarized,² Washington state Attorney General Rob
McKenna told the Washington Post.

Another provision that has consumer advocates protesting would set federal
rules for when companies that hold and sell personal financial data must
investigate and report security breaches.

The most notorious of such companies is ChoicePoint, which came to the
national spotlight in early 2005 when it announced that potential identity
thieves had posed as fake businesses and gained access to the files of tens
of thousands of consumers.

Opponents of the Financial Data Protection Act suggest that the ChoicePoint
debacle may never have come to light if not for California¹s relatively
strong consumer-protection law that required the firm to notify consumers in
that state whose data may have been breached.

The Financial Data Protection Act would pre-empt California¹s law as well as
those in dozens of states that have stronger protection regulations than the
ones being proposed at the national level.

The Act under consideration by the House would leave it up to companies to
investigate security breaches and determine whether there is a ³likelihood
that such information has been, or will be, misused in a manner that may
cause harm or inconvenience to the related consumer² before having to tell
government agencies or notify consumers that their information may have been
compromised.

To Montezemolo of Consumers Union, Congress is putting the decision in the
wrong hands. ³Consumers are the greatest protectors of their own personal
information,² she said, ³yet the bill moving forward would let companies
decide whether they would notify consumers about security breaches.²

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