People should have the right to ‘security freeze’ their credit records to stop bank accounts and new credit cards being fraudulently opened in their name, Liberal Democrat Leader Nick Clegg will say today.

On a visit to Cambridge University where he will meet credit card fraud expert Professor Ross Anderson, Nick Clegg will set out how giving individuals control over who can access their financial history would vastly reduce identity fraud.

The system, which is working successfully across the United States, would be a much more effective way of tackling identity theft than the hugely expensive and unworkable ID cards project.

Commenting, Nick Clegg said:

“People currently have no control over who accesses their credit history. Sloppy credit-granting practices have made life easy for identity thieves, who can get credit and open fake bank accounts in other people’s names.

“The Government’s preferred solution is ID cards. These are an intrusive, costly and ineffective way of attempting to curb identity fraud, with no guarantees that they will work.

“Giving people the right to ‘security freeze’ their credit records is both effective and inexpensive, and already working in the United States. Big financial companies and the State should answer to individuals, not the other way around.

 
“Ministers have this week announced plans for another huge Orwellian database logging emails, phone calls and websites visited. Rather than hoarding ever more information in Whitehall, they should be giving individuals extra rights to protect their information.”

How a “security freeze” would protect the individual

1. A ‘Security Freeze’ would prevent identity thieves from gaining credit or loans in an individual’s name, as legitimate financial institutions should always check a person’s credit report before issuing them with credit or a new account.

How does a ‘Security Freeze’ work?

• Security freezes give consumers real control over access to their credit report. A freeze prevents access to your credit report to new creditors.
• This closes the loophole that thieves have exploited, since most businesses will not issue new credit or loans to people without first reviewing their credit reports.
• At the moment, people’s credit records are perpetually ‘open’. It can be accessed by you or by companies wanting to view your record at any time.
• The Liberal Democrats are proposing to give individuals the right to ‘freeze’ or ‘lock’ their credit record.
• The vast majority of people do not need to have their credit record open all the time and this would give them back control of their own data.
• When they applied for a mortgage, credit card, car finance etc, the company they were dealing with would be able to apply to see their credit record. If you have just applied for a mortgage with Nationwide, you would be only too happy to unfreeze your credit record for them to have a look. It would then be frozen again.
•  Other companies would also have to ask you to unfreeze your record if they wanted to view it. You would have the right to refuse, for example if you had never had any dealings with that company.
• Security freezes protecting you from identity theft can be temporarily lifted, unfrozen or thawed, when you seek credit yourself.
• This would stop a common form of identity fraud, where fraudsters get hold of people’s credit records and then use them to apply for credit or loans in your name.
• Since 2001, 39 US states have passed legislation to protect consumers in this way. Experian, Equifax and other US-based credit reference agencies have voluntarily implemented credit freezes for those states which have not.

2. The UK’s fraud prevention service, Cifas, notes that identity fraud is already falling. There were 65,043 victims in 2007 compared to 67,406 in 2006, a 3.5% decrease. In the first half of this year the trend has continued, with 28,500 ID fraud victims filed by Cifas members for January to June 2008 compared with 33,466 in the same period last year. Identity fraud may well be falling but we must remain alert, and these proposals would help to reduce it even further.

3 Responses to “New protections against identity fraud needed - Clegg”

1. Light Blue Touchpaper » Blog Archive » Liberal Democrat leader visits our lab Says:
   October 17th, 2008 at 8:36 pm

   [...] used this visit to announce their new party policy on protections against identity fraud. At present, credit rating companies are exempt from aspects of the Data Protection Act and can [...]

2. Dean Procter Says:
   October 21st, 2008 at 8:57 am

   Good work Nick. It needs to be done.
   When you are looking for a non-intrusive revolution in identity using mobile phones, I’ll happily show you how to save billions of pounds per year and make happier safer citizens.
   Best regards
   Dean Procter

3. Fernando Cordeiro Says:
   November 4th, 2008 at 1:11 pm

   We all now that the Credit Crunch started in the USA. We all now that there is no Identity Cards in the USA. We all know that people can open bank accounts and get loans with false identity and then not paying their dept. In the end we all pay for that.

   How much is the Credit Crunch costing us all? Much more than an ID card scheme that would vastly reduce Identity Fraud.

   If you are looking for an alternative for the ID card that means that you recognise that there is a problem that needs sorting. Why find alternatives in the USA? Just look at our European partners where no one can open a bank account, ask for a loan, or even cash a Cheque without showing their ID card. There will still be ID fraud but in a different scale and nature.

   Your anti-ID card campaign has become a populist dogmatic obsession. Please freeze from it and engage with the government’s plan and contribute to make it a better and cheaper ID card.

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