A new federal law will make it easier for families to combat child identity theft by allowing parents to make inquiries about credit files in their child’s name and freeze their file for free.
Beginning Sept. 21, all states will be required to offer free credit inquiries and credit freezes to parents, creating a uniform process across the country as part a banking law in response to the Equifax data breach last September.
As explained by the Federal Trade Commission: "Currently, some state laws allow you to freeze a child’s credit file. Starting Sept. 21st, no matter where you live, you’ll be able to get a free credit freeze for children under age 16."
"In some states there wasn't even a process," said Eva Velasquez, the president and CEO of the Identity Theft Resource Center. "This will allow for a uniform process for parents or guardians to freeze a minor’s credit regardless of what state they live in."
Velasquez said parents proactively freezing their children's credit file is one step to build a barrier around new accounts being opened using a minor's Social Security number.
“It’s going to cover a good part of [identity theft loopholes] for sure,” Al Pascual, research director of the digital and financial advisory firm Javelin Strategy & Research, told BuzzFeed News. “Anything that is credit-related is going to be much harder for fraudsters, criminals, or familiar perpetrators to get away with."
A second law, which went into effect in May, requires the Social Security Administration to accept the electronic consent of an individual who consents to allow permitted entities like banks to verify the name, date of birth, and Social Security number with Social Security. This gives banks a quick way to verify that a credit applicant is the true owner of the Social Security number.
Previously, the process required a time-consuming paper application and process. This made children born after 2011 particularly vulnerable to fraud because they are issued a randomized Social Security number, making it difficult for financial institutions to confirm their identities, according to the Government Accountability Office report (before 2011, the digits in a Social Security number were linked to the person's birthday and geography).
Children are attractive targets for fraudsters to open credit cards or take out loans because they have clean credit reports, John Krebs, an identity theft program manager with the Federal Trade Commission, told BuzzFeed News. And since parents rarely check on their credit, they often don't discover the fraud until they reach adulthood.
A Javelin Strategy & Research study published in May found that more than 1 million children were victims of identity fraud in 2017. Of those children, 66% were under 8 years old, and 20% were under 12.
For many child victims of identity fraud, the resolution process can drag out for years, according to a recent Experian survey. The credit bureau found 81% of victims still remain worried today about their ability to obtain credit in the future, and 82% said they are concerned this could happen to them or another family member again in the future.
Trina Patterson's son, KJ, is one of many children who became a victim of identity theft by a family member. In 2016, Patterson discovered that KJ's father used the toddler's Social Security number to open credit cards, one of which he used to buy his current wife an engagement ring. (You can read more about KJ's story here.)
“It was hurtful,” she told BuzzFeed News in January. “I asked [him] to buy a car seat for [KJ] and [he] wouldn’t do it.” Patterson settled her case against the credit bureaus this month, according to court documents.
"Part of the problem here is that it does not appear that the credit reporting agencies have policies in place to prevent the issuance of credit reports on minor children," Kevin Mallon, Patterson's attorney, told BuzzFeed News in January.
As the new law allows banks to quickly verify identities electronically, there could be fewer cases like this.