Freezing Credit Will Now Be Free. Here’s Why You Should Go for It.

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Consumers will soon be able to freeze their credit files without charge. So if you have not yet frozen your files — a recommended step to foil identity theft — now is a good time to take action, consumer advocates say.

Security freezes, often called credit freezes, are “absolutely” the best way to prevent criminals from using your personal information to open new accounts in your name, said Paul Stephens, director of policy and advocacy with Privacy Rights Clearinghouse, a consumer advocacy nonprofit group.

Free freezes, which will be available next Friday, were required as part of broader financial legislation signed in May by President Trump.

Free security freezes were already available in some states and in certain situations, but the federal law requires that they be made available nationally. Two of the three major credit reporting bureaus, Equifax and TransUnion, have already abandoned the fees. The third, Experian, said it would begin offering free credit freezes next Friday. To be effective, freezes must be placed at all three bureaus.

The Federal Trade Commission says that when the law takes effect, its identity theft website will provide links to each bureau’s freeze website.

A security freeze makes it harder for criminals to use stolen information to open fraudulent new accounts, or borrow money, in your name. Credit bureaus house records of your accounts and payment history, which card companies and lenders use to decide whether you are likely to pay your bills. If you freeze your file, the bureaus will not provide information to lenders unless you “thaw” the freeze first, using a special personal identification number.

Free security freezes are becoming available more than a year after a huge data breach was discovered at Equifax. The breach compromised the personal information, including Social Security numbers, birth dates and other sensitive details, of more than 145 million people — nearly half the population of the United States.

Despite the scale of that breach, and a steady stream of other incidents, security freezes have not really caught on. An AARP survey of about 2,000 adults found that just 14 percent had frozen their credit files. (The survey, conducted in July by GfK Group using a probability-based online panel, has a margin of sampling error of plus or minus two percentage points.)

In-depth interviews with 24 consumers by researchers at the University of Michigan School of Information found that many people knew about the Equifax breach, but few had taken the step of freezing their credit files as a result.

Consumers suffer from “optimism bias,” the researchers found. They realized that the breach created risk, but did not think anything would happen to them personally. “People tend to underestimate their own risk,” said Florian Schaub, an assistant professor at the school and one of the study’s authors.

Others incorrectly assumed that because they had poor credit or little wealth, they would be unattractive targets for identity thieves. “They think: ‘I don’t have much money. I have nothing to lose,’” Mr. Schaub said. “But that’s not how identity thieves operate.”

People interviewed also cited the cost of freezes as a barrier. It can cost as much as $10 per bureau to place a freeze, and a similar fee is charged to thaw it temporarily when you want to apply for credit.

Consumer advocates hope that making freezes free will spur more consumers to use them. (The new law requires that a thaw must also be free.)

But the freeze process is not as easy as it could be, said Mike Litt, consumer campaign director for U.S. PIRG, the consumer advocacy group. He would prefer credit files to be “frozen” by default, and thawed on request. As it stands, consumers must place freezes separately at all three bureaus, and keep track of three PINs.

And because it’s not always possible to know in advance what credit bureau a lender will use, consumers typically must lift the freezes at all three bureaus when they want to apply for new credit.

Brett Merfish, a lawyer in Austin, Tex., said she froze her credit at all three bureaus several years ago, after her personal information was used to open “a steady flow” of fraudulent credit card accounts. The freeze process was “tedious,” she recalled, but ultimately effective because she no longer has problems with fake accounts. “It’s worth it to do it,” she said.

One credit bureau, TransUnion, introduced a smartphone app, myTransUnion, this month that consumers can use to more easily freeze and thaw their credit. The app is available for both Apple and Android phones. Mr. Stephens, of the Privacy Rights Clearinghouse, said he had not seen the app, but cautioned consumers to tread carefully, in case it is used to market other, fee-based products and services.

The credit bureaus also offer something called a credit “lock,” which they promote as a more convenient way to protect your information. But some offerings carry fees, and consumer advocates prefer freezes because the rules are set by law, rather than by the credit bureaus.

One other less-protective option is a fraud alert, which requires credit bureaus to contact you to verify your identity when a company requests your credit file. Under the new law, initial fraud alerts must last for one year once established. Fraud alerts are free, and, unlike the freezes, an alert placed at one bureau is automatically placed at all three.

U.S. PIRG also recommends freezing your file at a lesser-known reporting agency known as the National Consumer Telecom and Utilities Exchange. The exchange provides credit information to some cellphone, pay television and utility companies. (Some consumers have reported having cellular accounts opened in their names, even though they had placed freezes on their credit reports at the main bureaus.)

The website for the utilities exchange says its database is “housed and managed” by Equifax. But the exchange is a “distinct” entity that requires its own freeze, said Craig Caesar, outside counsel to the exchange. “A separate request to N.C.T.U.E. is required because it is a separate database,” Mr. Caesar said in an email. There is no cost for a freeze, he said.

The new law also requires credit bureaus to allow parents to create and freeze credit files for their children under 16, to prevent their identities from being misused. The Federal Trade Commission offers information on what to do.

Freezes will not protect you from other types of fraud, like someone using the number of a credit card you already have, or impersonating you online to claim your Social Security benefits. To help prevent those types of theft, Mr. Litt recommends checking your credit card statements regularly for suspicious charges, and setting up and monitoring an online Social Security account, to prevent criminals from opening one first and diverting your benefit checks. A PIRG report suggests other helpful steps as well.

Checking your credit report periodically is also wise. You are entitled to one free copy each year from the big three bureaus at annualcreditreport.com. (A security freeze will not prevent you from getting your free annual report, the F.T.C. says.)

Here are the websites to visit to set up security freezes:

TransUnion: transunion.com/credit-freeze

Experian: experian.com/freeze/center.html

Equifax: www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp

National Consumer Telecom and Utilities Exchange: www.nctue.com/Consumers

Hitting the debt limit: What bills would be paid?

departures-200-netbank-cs2007WASHINGTON — In the summer of 2011, when a debt crisis like the current one loomed, President Barack Obama warned Republicans that older Americans might not get their Social Security checks unless there was a deal to raise the nation’s borrowing limit. After weeks of brinkmanship, Republicans consented and Obama agreed to a deficit-reduction plan the GOP wanted. Crisis averted, for a time. Now that there’s a fresh showdown, the possibility of Social Security cuts _and more — is back on the table.

The government could run out of cash to pay all its bills in full as early as Feb. 15, according to one authoritative estimate, and congressional Republicans want significant spending cuts in exchange for raising the borrowing limit. Obama, forced to negotiate an increase in 2011, has pledged not to negotiate again.Without an agreement, every option facing his administration would be unprecedented. It would require a degree of financial creativity that could test the law, perhaps even the Constitution.

It could shortchange Social Security recipients and other people, including veteran and the poor, who rely on government programs. It could force the Treasury to contemplate selling government assets, a step considered but rejected in 2011. In short, the Treasury would have to create its own form of triage, creating a priority list of its most crucial obligations, from interest payments to debtors to benefits to vulnerable Americans. “It may be that somewhere down the line someone will challenge what the administration did in that moment, but in the moment, who’s going to stop them?” asked Douglas Holtz-Eakin, a former director of the Congressional Budget Office. “I pray we never have to find out how imaginative they are.”

In such a debt crisis, the president would have to decide what laws he wants to break. Does he breach the borrowing limit without a congressional OK? Does he ignore spending commitments required by law? In a letter to Obama on Friday, Senate Democratic leaders urged him to consider taking any “lawful steps that ensure that America does not break its promises and trigger a global economic crisis — without congressional approval, if necessary.” The White House has resisted that path. It has rejected recommendations that it invoke a provision in the 14th Amendment to the Constitution that states that “the validity of the public debt of the United States … shall not be questioned.” “There are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default,” White House press secretary Jay Carney said. “Congress needs to do its job.”

So what’s left if Congress does not act in time? Technically, the government hit the debt ceiling at the end of December. Since then, Treasury Secretary Timothy Geithner has halted full payments into the retirement and disability fund for government workers and to the health benefits fund of Postal Service retirees. The Treasury can stop payments to a special fund that purchases or sells foreign currencies to stabilize world financial markets. >>>CONTINUE READING

Democrats to Obama: Keep Constitution on the table in debt ceiling fight

largeThe White House insists President Barack Obama can’t — and won’t — use the 14th Amendment to raise the debt ceiling. But a growing number of his congressional allies are urging Obama not to abandon a potentially powerful weapon before negotiations even begin. With Republicans promising another climactic fight over the $16.4 trillion debt limit in two months, House Minority Leader Nancy Pelosi said Friday that if she were president, she would invoke the Constitution to raise the ceiling on her own — with or without permission from the GOP. “I would do it, in a second, but I’m not the president of the United States,” Pelosi said. Like many other Democrats, Pelosi is eyeing the language in the 14th Amendment stating that the validity of U.S. public debts “shall not be questioned.” Prominent Democrats, including former President Bill Clinton, have argued that language — added in the aftermath of the Civil War — gives Obama all the authority he needs to break the ceiling.

Realistic or not, the talk underscores growing liberal concern that yet another round of brinksmanship will hobble Washington and the economy — and force Obama into a bad negotiating position — just months after Congress went over the so-called fiscal cliff and then barely averted it with a last-minute tax deal. Whether Obama could invoke the 14th Amendment to raise the debt limit is an open legal question. But that isn’t deterring some Democrats.

Sen. Tom Udall (D-N.M.) said on Friday the Constitution not only allows Obama to bypass Congress on the debt ceiling — it compels him to. “I think [the Constitution] is pretty clear. He must do something about paying the bills,” Udall said. “If Congress doesn’t give him an avenue to do that, a leader needs to take a course of action if the bills aren’t being paid. That could be devastating to our economy. It could be devastating to our reputation around the world.” The nation reached its $16.4 trillion borrowing limit on Dec. 31, and Treasury Secretary Timothy Geithner says his department is currently taking “extraordinary measures” that will only allow the nation to pay its bills for about another two months.

Read more: http://www.politico.com/story/2013/01/democrats-keep-constitution-on-the-table-85792.html#ixzz2HDo4KG7f

Fiscal Cliff: Ugh, Recession is Now More Likely

departures-200-netbank-cs2007Here is a simple way to think about the political calculus of Washington’s latest twists and turns. And — unfortunately — it suggests that economic and market dislocations may be needed to get our politicians to cooperate and govern properly. A major issue from day one was the extent to which the lack of trust between our political parties undermined Washington’s ability to govern. Hoping to resolve this problem and thus deliver consensus, party leaders opted in the summer of 2011 for a very big stick: threaten the country with a major economic setback as a way to get the rank and file of both parties to cooperate. This, of course, was the strategic underpinning of the fiscal cliff: By designing large and blunt spending cuts and tax hikes that would automatically go into effect, and thus push the country into a costly recession, political leaders hoped to impose compromise among bickering and dithering politicians — particularly among those with very different views of the past, present and future. The stick succeeded in catalyzing serious negotiations between President Obama and House Speaker Boehner. But the stick was not big enough to overcome differences and force a cooperative outcome. And with Republicans facing the bigger risk of being blamed by the country for the failure, Speaker Boehner opted for his Plan B. Now the situation has taken an even more interesting turn. The Speaker’s inability Thursday to unite Republicans behind his plan highlights the extent to which mutual trust is also seriously lacking WITHIN the political parties — and not just between them. This meaningfully complicates the cooperative solution.

How about the future?

Let us start with the obvious. In order to avoid a recession that would aggravate the country’s unemployment problem and reignite concerns about housing and household finances, Democrats and Republicans need quickly to find a way to work together. While possible, it is hard to see how this happens endogenously. There are lots of divisions, and at many levels. If an internal resolution mechanism is indeed lacking, than cooperation will need to be forced by an outside event. This is where economic and market volatility comes in. Thursday’s collapse of Speaker Boehner’s Plan B unfortunately makes it more likely that the fiscal cliff may materialize, constituting a blow to a recovering US economy. Absent some last minute messy deal that buys a few weeks at best, that would constitute stage one. The question about stage two is how much time do political parties then need to find a solution and avoid a bigger economic and financial implosion. The 2008 experience with TARP — where the market and economic dislocations that followed the initial congressional vote rejection quickly forced politicians to cooperate — suggests that there is nothing like visible turmoil to get our bickering political parties to come together properly in the national interest.

Let us hope that the political system responds in a similar fashion in the coming weeks, if not earlier. There is a lot at stake.

Cross-posted from CNBC.com.

Kill the 401(k)?

As America hurtles toward the fiscal cliff, there’s an increasingly frantic search for ways to shore up the country’s deteriorating balance sheet. Republicans want to cut spending; Democrats would prefer to raise taxes on the wealthy. But a paper released today by Harvard and Danish researchers highlights just how much room there could be to generate more government revenue without sacrificing economic efficiency—in other words, the type of policies that both parties could conceivably learn to love. The study analyzes the responses of Danish taxpayers to savings incentives—much like those that exist for American 401(k) and IRA accounts—and also behavioral “nudges” that automatically deduct retirement savings from workers’ paychecks. It turns out that savings incentives had scarcely any impact on the rate at which Danes accumulated nest eggs, while the nudges were very effective in making people save. These findings suggest that 401(k) plans and their brethren—which cost the U.S. government as much as $100 billion a year in lost revenue—don’t do much to further their stated objective of boosting retirement savings. Even if $100 billion wouldn’t go all that far toward solving America’s debt problems, it suggests that smart approaches to eliminating or improving government programs could quickly add up to fiscal solvency—and might help the two sides find common ground. The reason we have tax shelters like the 401(k) is to change the relative cost of spending money today versus saving for tomorrow. Exempting retirement investments from taxation increases the saver’s return on his investment, so a rational cost-benefit calculation should lead most people to put something away for the future. In theory, such tax shelters should go some way toward correcting Americans’ problem of undersaving. CONTINUE READING..

News Headlines 10.28.12

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