Retirement Watch Lighthouse Logo

New ID Theft Protections

Last update on: Oct 17 2017

A new law was enacted fairly quietly at the end of 2003. It promises greater protection against identity thieves and more help for victims of the crime.

Identity theft is believed to be the fastest growing crime of recent years. The Federal Trade Commission estimates that in 2002 there were 9.9 million victims of ID theft with losses of $5 billion. It took 297 million hours to resolve related problems.

To reduce the growth of the crime and to help its victims, the Fair and Accurate Credit Transactions Act of 2003 made the following changes:

n By Jan. 1, 2005, consumers will be able to obtain one free credit report annually from each of the three major credit bureaus. Currently, free reports are available only when credit is denied or if you live in one of seven states. In other states, there are service charges for obtaining the reports, or they are included in packages for other services.

In addition, under the law the Federal Trade Commission will set a reasonable fee (probably $4) that will give consumers access to their credit scores at any time. Mortgage lenders also will be required to disclose credit scores to loan applicants at no charge.

Free reports might make people more likely to check their credit reports more frequently so they can tell more quickly if someone else is applying for or incurring debt under their names.

  • Consumers will be notified when merchants report missed payments to credit bureaus. 
  • Businesses also will need to verify that an individual actually incurred a debt before turning it over to a collection agency. 
  • A business also will not be able to report to a credit agency any information that it knows to be a result of identity theft. 
  • Financial institutions will have to verify a consumer’s identity before complying with a change of address request. 
  • A consumer who suspects ID theft can make an “initial alert” that must be placed in the consumer’s file for 90 days. A consumer with a police report about ID theft can get an “extended alert” that will stay in the file for seven years. The consumer also will get the right to two free credit reports over 12 months. In addition, the credit agencies must exclude for five years the consumer’s name from lists used by companies to make pre-screened offers of credit or insurance. The file also must include the consumer’s telephone number or another reasonable contact method designated by the consumer. 
  • Members of the military can get an active duty alert that stays in the file for one year and excludes the consumer from pre-screened credit and insurance offers for two years. 
  • Consumers also can demand that businesses provide them with records of any charges incurred in their names. If the consumer presents a copy of a police report, the business must comply with the request. 
  • A new fraud alert system will allow consumers to report fraudulent activity with just one telephone call.
    There are some potential disadvantages to the new law. 

    The federal law supercedes all state laws. This means states cannot enact stronger protections for consumers. In addition, the new law gives the credit-reporting agencies an opening to market credit monitoring and other services. I reported in past visits that I don’t believe these services offer much value for the fees they charge, and I expect any new services will be the same. If the extra layer of protection makes you more comfortable, there is no harm in buying the services.

Businesses can take until the beginning of 2005 to put all these protections in place. Until then, and even after, protect your identity. Shred all financial documents, especially pre-approved credit card offers, before throwing them away. Keep your Social Security number from anyone who doesn’t need it.



Log In

Forgot Password