As more and more children are having their credit ratings damaged by identity theft before they think of borrowing a dime, Maryland lawmakers have approved a first-of-its-kind measure to enable parents to take steps to protect their kids.
The Maryland Child Identity Lock bill, which a spokeswoman for Gov. Martin O'Malley said he is likely to sign, will allow parents to take the step of freezing their child's credit at any time. Supporters hope it will be a model for other states to protect not only children, but also disabled and elderly people who can be particularly vulnerable to identity theft.
"This just freezes the information to ensure that it's not used for ill purposes," said Delegate Craig Zucker, a Democrat who sponsored the bill in the House of Delegates.
Credit agencies do not knowingly create credit reports for minors under the age of 18. When credit bureaus collect data for people applying for credit from lending partners, they get a name and Social Security number, but they don't have data to double check someone's actual age due to a lack of information sharing between credit reporting agencies and the Social Security Administration.
A study released last year by ID Analytics, a California-based consumer risk management firm, found that about 140,000 identity frauds against minors occur each year. The study was based on a review of more than 172,000 children whose identities were protected through ID Analytics Consumer Notification Serve from April 1, 2010, to March 31, 2011.
Overall, children are more likely than adults to be targeted for identity theft, according to researchers at Carnegie Mellon University. The researchers worked with an identity theft protection company to comb through records of 42,000 children and found more than 10 percent showed signs of identity theft.
Under current Maryland law, credit agencies must place a security freeze on the credit of anyone who requests it. However, they can refuse to lock the credit of those who do not have a pre-existing credit report. That's a problem for children. If they have a credit report, it likely means they're already a victim of fraud.
The problem of identity theft is compounded for children, because they usually don't become aware they are victims until they are older, when they apply for a credit card or a loan to buy a car.
The measure would apply to a person younger than 16 at the time of a request or an incapacitated person who has a legal guardian. A consumer reporting agency would be required to place a security freeze after receiving the request. Parents or guardians would have to contact a credit agency and provide proof of identification for the person they are seeking to protect, such as a Social Security number or birth certificate.
While some states have created laws in recent years to address identity theft of foster children, who can be especially susceptible as they are shuffled from home to home, the Maryland measure is the first aimed at protecting all children. States including California, Colorado and Connecticut have passed laws mandating credit checks for foster children before they leave state custody.
Maryland lawmakers worked with advocates and a representative from credit rating agencies to create the legislation, which passed this legislative session with bipartisan support.
"It took a couple of months and a lot of back-and-forth, but we really worked as a team to come up with something that works for everyone," said Robin McKinney, director of the Maryland CASH (Creating Assets, Savings, and Hope) Campaign.
McKinney said she was confident the measure will create an effective deterrent, although parents will have to opt-in to take the preventive step.
"I think it's definitely going to be effective because, if nothing else, you can prevent something from happening," McKinney said.