Property Casualty Insurers of New York Take Chicken Little Approach to Fight Credit Freeze Law

If you remember the story of Chicken Little, when walking through the woods she was hit on the head with an acorn. She immediately jumped to the conclusion that the sky was falling and ran to inform the king. She obviously overreacted and was dead wrong. But Chicken Little’s approach of jumping to the wrong conclusion still holds merit according to the Property Casualty Insurers (PCI) of New York. PCI has chosen the Chicken Little argument as a means to fight proposed credit freeze legislation in the state. And just like Chicken Little, PCI is dead wrong too!

 

Insurance Journal reported that Kristina Baldwin (a.k.a. Chicken Little) said, “enacting credit freeze provisions in New York would most likely result in increased costs, burden and inconvenience both for the consumer and for businesses operating in New York State with only minimal resulting consumer benefits." Baldwin, who is the regional manager for PCI made her comments to a joint meeting of the New York Senate Consumer Protection Committee and the Assembly Consumer Affairs and Protection Committee.

 

Baldwin argued that federal law offers enough in the way of consumer protection; allowing consumers to have their accounts flagged for 90 days using a fraud alert and to have errors removed from their credit reports. Her comments are erroneous, misleading and ignore a number of facts recently published in an FTC study.

 

Credit freeze laws are currently in place in 11 states. None of these states have experienced an economic collapse (also known as a “falling sky”) as a result. These laws are widely viewed as the only reliable way to prevent identity theft.

 

Baldwin is correct in asserting that federal law allows consumers to flag their accounts for fraud. But as if speaking in half-truths, she failed to mention that merchants are not bound to stop credit applications simply because a flag exists. Many merchants simply ignore these flags. They are not provided with that luxury when a credit freeze is in place because they can’t gain access to the consumer’s credit file unless the consumer lifts the freeze.

 

Her contention that consumers can have falsely or fraudulently reported items removed from their credit report is also true. But she failed to be completely honest and tell the entire story. When fraudulent items wind up on a person’s credit report, it is up to the consumer to prove that he or she is a victim of fraud. In cases of identity theft, victims can be hit with dozens of fraudulent purchases and forced to prove that each purchase was due to fraud. It is a process that can take more than a year to complete, and in the mean time the consumer has to deal with the consequences of bad credit.

 

Within the past month, the FTC has published 2005 identity theft statistics that indicate that the tide may be turning on identity theft. Nationwide, the increase in the number of identity thefts dropped to just 3.5%. In California, one of the few states that had a credit freeze law in place for the entire 2005 calendar year, the growth rate was held to just 3%.

 

The fact is that strong consumer legislation at the state level, allowing credit freezes and forcing companies to notify consumers when their personal data is inadvertently exposed, is having a significant impact on the growth rate of identity theft. According to the FTC, the growth rate in 2004 for this form of fraud was 15% and in 2003, it was 33%.  Unfortunately, companies and industry groups have fought virtually every one of the laws that are responsible for this reduction in the identity theft growth rate. PCI appears to be making the same mistake.

 

PCI’s position is based on the idea that consumer’s are stupid. That they will not make necessary purchases if they have to lift a credit freeze. The evidence in states that currently have such laws does not support their position. PCI’s argues that credit data is required by so many companies in order to conduct business that it should be freely available to them, doesn’t hold water either. It ignores the fact that consumer’s should be able to protect their privacy, even if companies don’t like it.

 

As New York legislators consider their positions on credit freezes, ACCESS would like them to make note of the words of Utah State Senator Sheldon Killpack as they make up their minds. He said, "My wife had her purse stolen out of her vehicle. What a treat that was. It was like a month-long root canal." Utah is also moving forward with credit freeze legislation.

 

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