Time For A Financial Fire Drill

A law has just come into effect in the States which allows American consumers to freeze and unfreeze their credit without paying a fee. Signed in May by Donald Trump, the Economic Growth, Regulatory Relief and Consumer Protection Act amongst other things, abolishes the not inconsiderable fees which were previously associated with freezing and unfreezing credit.

Will they do it? I’m not so sure given that, according to various surveys, only 8% to 20% of customers have enacted one in the last 12 months.

Surprising maybe, but what I found even more surprising is that whilst freezing credit is a key tool for consumers to use to safeguard their identity, it is not widely understood.

I was talking about this with friends this week. Friends who are professional people but not financial professionals. Their assumption was that a credit freeze was a freeze on the use of their credit cards.

Why would they not? It’s not exactly crystal clear is it? And they’re not alone. Researchers at the University of Michigan School of Information in Ann Arbor, also found plenty of consumers who thought that a credit freeze stops them from using their own credit cards, rather than restricting access to their credit files and stopping crooks opening credit reports in their name.

So with an apparent level of inertia in the States on credit freezing and unfreezing and a lack of understanding of the process here in the UK, it’s maybe a good time to consider our options. Time for a bit of a financial fire drill.

Putting your credit on ice, freezing it so that no-one can open an account in your name is one way to safeguard against identity theft but what else can we do as consumers to protect our credit and identity?

Lauren Lyons Cole of Business Insider compiled a thorough checklist earlier this year. And I couldn’t agree more with her recommendations. I believe now is a good time to give them another airing.

  • Monitor your current accounts daily or weekly. Use an account-aggregation app like Mint or log into your various accounts to make sure all charges were made by you. If you see something suspicious, contact your bank immediately.
  • File your taxes early. The IRS is cracking down on tax fraud, but there could be an uptick after the Equifax breach. Get your tax information organized early, and submit your return as soon as you receive your W-2 and 1099 forms. Added benefit: If you’re due a refund, you’ll get it sooner, and if you owe taxes, the amount isn’t due until April 15 regardless of when you submit your return.
  • Use secure passwords and two-step verification. Because most identity theft occurs with existing accounts, one of the best things you can do is safeguard your data online, especially for accounts that contain identifying information and credit-card or other financial data.
  • Set up alerts for new credit activity. Save yourself money and use a free credit-monitoring service, like Credit Karma or Credit Sesame. You can also set up a fraud alert or credit freeze if you’d like.
  • Check your credit reports regularly. You can access one free copy of your credit report from each of the three bureaus once a year through the government-sponsored AnnualCreditReport.com. Set a calendar alert to remind yourself to do this every year, or pull one report every four months to be extra vigilant. While you’re at it, there may be things you can do to improve your credit score, fix any errors on your credit report, and optimize your collection of credit cards.
  • Choose identity-verification questions and answers carefully. Additional identity-verification questions can help keep accounts secure, but not if you choose questions like “What street did you live on when you were growing up?” or “Where were you born?” that could easily be answered with access to your social-media account or other personal information.

Too Much Month Left at the End of the Money

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Encouraging response to the Big View pilot

“I’ve tried to get help but there’s a 10 week waiting list to see a Money Advisor.”

“I am getting so many final warning letters that I’ve simply stopped opening them.”

“Interest and charges are going up every day. I don’t even know how much I owe now.”

“I’m very anxious and my health is suffering.”

These are just some of the cries for help from people in Glasgow who are struggling with debt and have reached a point of crisis. I know that, because over the last few months we have spent a lot of time at Castlight talking to people about debt and we have listened, with real concern, to their stories.

And I’m really proud to be able to say that we channelled that concern into action and last month partnered with the Big Issue Invest (BII) and Advice Direct Scotland (ADS) to launch an affordability tool, specifically designed to empower people struggling with debt to take control of their own data and get their lives back on track.

The tool we developed is a version of our Affordability Passport, called the Big View. It’s at a pilot stage just now, accessible through the ADS helpline in Glasgow, but the initial signs are very encouraging.

360-Degree View of Finances

The way The Big View works is similar to the Affordability Passport. It uses the same open banking technology to allow users to get an in-depth, 360-degree view of their finances. In just a few clicks, the user’s financial position is set out in over 150 clear categories of income, debt, discretionary and non-discretionary spending.

If the user wishes, he or she can choose to share the Big View report with an ADS adviser who will then work with them to interpret the findings and develop solutions.

For ADS advisers the Big View is transformative. The Big View report will immediately flag up critical debt cases and therefore ensure that the people who need help the most can be helped quickest. Advisers have the data that allows them to prioritise and they also have detailed, accurate information on which to base their advice. They don’t have to rely on information given to them by the client – who may well have a pile of those unopened final warning letters on the kitchen table.

Path Out of Debt

Since the Big View launched last month, I know there are now people in my city, getting up in the morning, without the oppression of debt anxiety pressing down on them. They may not be clear of debt yet, but the path out of debt has been charted and they are now in control. That’s a very good start.

Charities and other organisations in the debt space consistently report there are currently over 8 million adults in the UK who have a problem with debt. That’s one in six adults.

I am confident that the Big View will prove to be instrumental in reducing that deeply worrying statistic. We are encouraged by the success of the Glasgow pilot so far and are looking forward to moving on to roll out the Big View throughout the UK.

For more information, visit, castlightfinancial.com or tweet @Castlight using the hashtag #TheBigView.

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