SAN FRANCISCO (KPIX 5) – Studies show that your children may be at greater risk of identity theft than you are. The good news is that there is a tool to prevent anyone from opening credit or taking out loans in their name. The bad news is that the credit bureaus won’t let you use it to protect your children!
A State Bill In California Could Open The Door To A Nationwide Child Credit Freeze, But I’ve Uncovered A Loophole That Allows The Offices To Put You And Your Children At Greater Risk .
Why children are at risk of identity theft
At 12, Corrie Vaughn was making money taking out the trash. However, the Northern California middle school student was well aware that it would take more than drudgery to pay off the debt an identity thief has accrued in his name. “I don’t know what credit is, but I know it’s not good to have bad credit,” Vaughn said.
Nelia Ellsworth doesn’t yet know if scammers have hoarded thousands of dollars on behalf of her children, but she was horrified to learn that her children couldn’t get much-needed medicine because someone another was using their social security number for insurance. “They told me that three of my four children had insurance in another state.”
They represent just a few of the growing number of child identity theft victims. A Carnegie Mellon report found more than one in ten children have been victims of identity theft and that was before millions of children were exposed last year by massive insurance and government hacks.
Federal Trade Commission consumer protection attorney David Newman points out that children’s Social Security numbers make great targets because their unused credit history provides a clean slate for scammers.
“Well, if I were to steal someone’s credit, I’d steal a kid’s credit,” Newman said. “They won’t know for a dozen years.”
Protect children from identity theft
A credit freeze, also called a security freeze, is widely considered the best tool for preventing identity theft. This essentially prevents anyone from performing a credit check using your security number.
A credit check is usually required before a scammer can take out credit card, loans, or other types of credit in a child’s name. However, it is important to note that a credit freeze does not prevent tax identity theft, insurance fraud, or other forms of identity theft.
“A credit freeze for kids is a fabulous idea because they won’t use their credit,” Newman said.
For adults, a credit freeze is a simple, secure online process. I froze my credit in about 10 minutes. However, to freeze your children’s credit, they must have a credit file to freeze, and the children will not have a credit file until they start applying for credit.
So why aren’t the credit bureaus allowing parents to proactively create a record to freeze first? “Credit bureaus make their money selling your information to potential creditors,” Newman said. “In the case of children, it’s not worth it for them.”
Recognizing the unparalleled value of a credit freeze, 23 states have now passed laws requiring bureaus to allow parents to freeze their children’s credit. California is not yet one of them.
Circumvention and security risks
In 2014, I found a solution to freeze my child’s credit.
I added my toddler as an authorized user on my credit card, which created a credit file – not a credit report or a score – but a credit file that the bureaus might be required to freeze.
But I soon discovered that the credit bureaus themselves put children and parents at risk.
From my NewsMom blog: “How I forced the bureaus to freeze my child’s credit” I outlined these security risks and described how I spent six months convincing offices to make changes.
In order to verify guardianship, parents must present social security cards, birth certificates and other sensitive documents. However, two of the three offices require you to send all such sensitive documents to a PO box.
“That would worry me,” said Newman, who pointed out that the name and address of the credit bureau on the envelope alone is enough to warn identity thieves that a child’s full identity is found inside. To make matters worse, the offices suggested parents send him the attention “Credit Freeze” or “Protected Minor Security Freeze”.
When I called to request a secure alternative to submitting these documents, I found another problem. Foreign call center reps wouldn’t even transfer me to an American supervisor until I gave them my child’s social security number. Yet the call center employees said they did not have an employee identification number to let me know to whom I was giving this sensitive information. When pressed, a rep said she was in India and her name was “Jane Smith.”
Don’t forget that my daughter did not yet have a credit report to consult.
The office response – and a how-to guide
When asked about the practice, media representatives for Transunion and Equifax both apologized and said call center employees could search for accounts using an address and other “identifiers.” . You can read their full response in this NewsMom blog entitled “You need my social security number but you don’t want to give me your employee number?”
TransUnion and Equifax also pointed out that Indian call center employees have no paper or writing utensils. “I take it they have no memory?” says Newman. “If someone sits (in a call center) and manages to memorize one name and one social security number a day, that’s probably more than they would make in a month,” he said. he warned.
Over the next six months, the offices began to make some changes. Experian now allows you to upload documents online while Transunion and Equifax will only give you a fax number. However, you should know to ask for the most secure methods.
Following my child-credit freeze odyssey, I finally created a step-by-step guide to freezing your child’s credit. To my knowledge, it is the only one of its kind. It includes detailed summaries for each bureau, hard-to-find contact information, tips, sample documents, and advice on how to avoid security issues specific to each credit bureau. There’s also a detailed description of the obstacles parents may encounter with each desk along the way.
Equifax has now voluntarily agreed to allow child credit freezes in all states, but Experian and TransUnion are still refusing. To be effective, you need to freeze a folder with all three desktops.
New legislation could force offices to allow ‘safe’ child freezes
“For California, not allowing minors to have credit freezes just doesn’t make sense,” Gatto said.
For the first time, the proposed legislation would give California parents the right to freeze their child’s credit and use the best tool to prevent financial identity theft. Gatto’s office believes the bill will meet little opposition because it is similar to laws passed in other states and the offices have already weighed in.
Gatto, Newman and many others believe the California law this year will be a precursor to federal legislation that will grant equal rights to parents across the country.
“It’s something that should be national policy,” Newman said.
“You know, if California acted, 1/10th of the population would have this protection and we would probably get a federal law on the same,” Gatto said.
However, I discovered a loophole in AB 1580 as well as similar laws in many other states. Bill requires parents to submit necessary documents to prove guardianship “at the address or other point of contact and in the manner specified by the consumer reporting agency.” Currently, the “specified manner” by two of the three credit bureaus puts sensitive information at risk.
I reported this to Assemblyman Gatto, and he agreed to change the law to ensure a safe and secure process for freezing children’s credit in addition to the right to freeze your children’s credit in the first place.
“The law should require credit bureaus to make this as easy as possible for parents,” he said.
The California law is expected to come to a vote later this year. Meanwhile, Congresswoman Jackie Speier is pushing for federal child credit freeze legislation.
“Parents should be able to freeze their child’s credit to protect them from cyber breaches,” Speier said after seeing our reports. “That’s why I’m a co-sponsor of the Protecting Children from Identity Theft Act which directs the Consumer Financial Protection Bureau to do just that, to give parents and guardians the ability to create a credit file protected and frozen for their children until they turn 18and birthday.”
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The bill is currently stalled in committee. We will follow up on this legislation later this year.