Freezing your credit report has long been regarded as one of the best steps to take to make sure identity thieves cannot obtain loans or credit cards in your name.
And consumer advocates continue to recommend freezes despite recent revelations that TransUnion, one of the three major credit bureaus, botched “tens of thousands” of freeze requests over a period of years.
“It’s still a good idea to freeze your credit,” said Mike Litt, director of the consumer campaign at PIRG, a network of public interest advocacy groups.
The Consumer Financial Protection Bureau earlier this month ordered TransUnion to pay $8 million for misleading consumers who believed they were protected by freezes but were not because the company’s computer systems were overwhelmed by requests and failed to activate them, according to an administrative settlement between the bureau and TransUnion and two subsidiaries. The total includes a $5 million penalty and $3 million to compensate customers.
Some freezes went unprocessed for just a few days, the bureau said, but in other instances, thousands languished for months or years. “These consumers did not know about this failure,” the settlement said, “and some were told that their requests had been honored when they had not.”
The consumer bureau, in a statement, described TransUnion as “lying” to consumers about the status of their freezes as well as about their requests to temporarily lift the freezes when they applied for credit.
TransUnion neither admitted nor denied wrongdoing, according to a settlement document. In an emailed statement, the company said it corrected “associated system issues” in 2020. “TransUnion is committed to helping consumers manage their credit information, and we enacted enhancements to ensure timely placement and removal of security freezes and locks,” the statement said. (A credit “lock” is similar to a freeze but is typically part of a bundle of services offered to customers, sometimes for a fee.)
The consumer bureau declined to comment on whether freeze problems had also occurred at the other two credit bureaus, Equifax and Experian, or whether it was looking at their practices. Equifax and Experian didn’t respond to requests for comment.
A credit freeze, also called a security freeze, restricts access to your credit report. Those reports detail your borrowing and payment history and are used by lenders to determine whether you qualify for credit and what interest rate you’ll pay. They’re also used for other purposes, like background checks by prospective employers and landlords. Consumers need to freeze their reports at each of the three major credit bureaus. If you want to apply for new credit, you can temporarily “thaw” or lift the freeze over the phone, online or by mail.
Starting in 2018, the federal government required the big credit bureaus to offer freezes at no charge. (Previously, the bureaus charged a fee, except in some states that mandated that the freezes be provided free). Credit bureaus were also given strict timelines for enacting a requested freeze or lift: one day for freeze requests and one hour for lift requests when made online or by phone, and three business days if made by mail. (Until then, the timing requirements for freeze requests were set by states and varied, the bureau said.)
TransUnion’s databases have struggled to process “timely” requests for consumer freezes and lifts at least since 2003, the consumer bureau said, leading the company to handle some requests manually to keep up. Then, after a major data breach at Equifax in 2017, consumers’ concerns about identity theft caused demand for credit freezes to surge. Just before the breach was announced, in July and August of 2017, TransUnion received about 33,000 freeze requests, the bureau said. In the two months after, September and October 2017, it received more than two million. As a result, TransUnion’s backlog of unprocessed freezes “steadily accumulated and were left unresolved for years,” the consumer bureau found. The backlog reached nearly 30,000 by the end of 2019.
The absence of a freeze left some consumers potentially vulnerable to fraud, although a bureau spokesperson said it was unclear if anyone was financially victimized because of a delayed freeze. And many people who thought they had lifted a freeze didn’t learn that one remained on their TransUnion report until they were applying for credit, the bureau said. People complained that they were denied credit, or were at risk of being denied, because of the snafu, the bureau said.
TransUnion began fixing its system problems, the bureau said, only after it was notified in early 2020 that the bureau would begin scrutinizing the company’s freeze practices.
Separately, the consumer bureau and the Federal Trade Commission together reached a settlement this month in a civil complaint filed in Federal District Court in Colorado against TransUnion and its tenant-screening unit for failing to make sure that background checks done for landlords were accurate. Tenant-background screenings typically include a traditional credit report as well as a search of public records for evictions and criminal convictions.
In some cases, the agencies said, screening reports rendered the multiple steps of a single eviction process as separate evictions, making the record appear worse than it was. In others, reports failed to say if an eviction case was dismissed.
TransUnion agreed to pay $11 million to consumers and a $4 million penalty as well as to make sure it properly reports eviction data. TransUnion again admitted no wrongdoing, and said it has worked with the F.T.C. and the consumer bureau to “enhance” its rental screening practices, including with changes to how eviction records are reported. “We believe these changes will soon become industry standard,” it said in an emailed statement.
Here are some questions and answers about credit freezes and tenant screening:
How do I freeze my credit report?
You should place a freeze at each of the three big credit bureaus by contacting each one separately. You can do it online by creating an account, by calling or by mail. The federal government provides links to each bureau at usa.gov. Even if you have a freeze, it’s still a good idea to continue checking your credit report regularly to make sure nothing is amiss, said Chi Chi Wu, a senior attorney at the National Consumer Law Center. You can check your reports weekly at no cost at www.annualcreditreport.com.
Should I check my tenant screening report before applying for housing?
There are many tenant screening companies, and most won’t have information on you ahead of time, the consumer bureau said. But if you apply for rental housing and are rejected because of information in a screening report — or if the landlord imposes special conditions, like paying a higher deposit or using a co-signer — the landlord must notify you and provide the name of the screening company it used. You can contact the screener to check your information and dispute any errors. You should, however, check your credit report before applying, the bureau said, since companies typically do a credit check as part of the tenant screening process. The bureau maintains a list of screening companies on its website and offers advice on how to check a screening report.
Where can I complain if I have problems with a credit freeze or a tenant screening?
You can complain to the consumer bureau at https://www.consumerfinance.gov/complaint/.