The Rise Of Consumer Credit Freezing: Disrupting Agency Revenue

With recent data hacks like that which affected over 15 million T-Mobile customers, many consumers are looking for ways to ensure the security of sensitive personal information included in credit application processing. As even the most trusted major credit agencies like Experian find themselves susceptible to hacks, many consumers are responding to breaches in security by initiating a credit freeze.

A credit freeze differs from traditional credit monitoring services like fraud alerts by locking down a credit report, preventing a credit report or credit score from being accessed unless the consumer unlocks or thaw the credit freeze through the use of a PIN. The use of credit freezing is getting a big push from consumers and lawmakers alike, including Indiana Attorney General Greg Zoeller and Senator Sherrod Brown of Ohio—both of whom have advocated for T-Mobile customers affected by the hack to initiate a freeze from all three of the major credit agencies.

“Protection of this information is of the utmost importance,” said Brown in a letter to Experian. “Especially because the scope of the information is vast and virtually no consumer can apply for credit without entering your system.”

A credit freeze offers the consumer not just the most complete protection against fraud possible, but also prevents credit reporting agencies from selling customer information to banks and other companies. This of course could pose a disruption to the credit agencies primary source of income—and with nearly $4 billion being earned by credit agencies in 2011, a potentially costly one at that. And while agencies can make up some of the lost revenue in fees—typically $5 to $10 per credit agency with up to $12 fee each time a consumer lifts the freeze—the agencies have a reason to be uneasy with lack of consumer confidence and trust.

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