Federal Credit Freeze Override Currently Making Way through House

In a move that is difficult not to see as anything other than governing by lobbyists, a bill that would override state credit freeze measures is currently being considered in the U.S. House of Representatives.

The Financial Data Protection Act of 2005, backed by the fat-walleted financial-services industry, would severely narrow the circumstances in which consumers could restrict their credit activity to prevent fraudulent borrowing. The bill also has a hidden weapon as well, as it would critically undermine stronger state-based reporting rules for companies that hold and sell consumer data.

The past few months have seen many reports of compromised consumer data ? everything from full names and dates of birth to account numbers and social security numbers ? so it seems almost counter-intuitive that the House would be considering legislation that would strip consumers of credit protection.

As Susanna Montezemolo, policy analyst with Consumers Union, said in a press statement covered by the New Standard: ?It’s shocking that at a time when data breaches are in the headlines daily and consumers are at greater risk than ever [of] identity theft, Congress would choose to vote on a bill that would strip consumers of their existing identity-theft protections.?

Getting this bill to the House hasn?t been cheap. Lobbyists for the financial-services industry have spent upwards of $12.5 million contributing to political campaigns and almost $30 million on lobbying activities.

The New Standard article reveals that two of the Act’s four co-sponsors are on the industry’s top-ten recipient list for the House: Michael Castle (R?Delaware) took in a total of $116,616, and Dennis Moore (D?Kansas) got $67,729. Another co-sponsor, Deborah Pryce (R?Ohio), received $22,500 from the industry.

One reason the financial-services industry might not be keen on consumers controlling the integrity of their credit might be that their business models rely on consumers having easy access to credit and creditors having easy access to individuals’ financial information. Finance and credit companies stand to gain from this provision.

The bill, rather than allowing consumers to be the protector of their credit information, instead puts that power into the hands of companies, who can, if they choose, notify consumers about security breaches. Which, all in all, makes little sense. As Washington state Attorney General Rob McKenna said, “It’s like telling someone you can’t put a deadbolt on your front door until after you’ve been burglarized.”

Take a moment to share your own insight and feelings about this story on our message board. (Free registration required.)