Consumer Fraud Alerts

Written By: Stacey Sprain, Op-Ed Writer

With so many credit-related businesses springing up everywhere, consumers are becoming more educated about the importance of maintaining good credit. They’re also becoming more educated about their rights as consumers. For these reasons, we’re starting to see more fraud alert messages on consumer credit reports we utilize for the extension of mortgage financing.

It’s important that originators, processors and underwriters have an understanding of what fraud alerts are and why they are important to the loan process. Whenever a fraud alert is reflected on a credit report, you have an obligation to verify that the applicant is indeed who they say they are and you must do your due diligence to obtain their permission to proceed with the credit application.

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Below are explanations of various forms of consumer fraud alerts you may run across when reviewing borrower’s credit reports.

Initial Fraud Alert
When a consumer suspects he or she has been or may be a victim of identity theft through a phishing scam or a missing wallet, he or she may request that an initial fraud alert be placed on his or her credit report. The initial alert remains on the consumer’s report for 90 days and requires that potential creditors use “reasonable policies and procedures” to verify the consumer’s identity before granting credit in the consumer’s name.

Extended Fraud Alert
A consumer may request an extended Fraud Alert be placed on his or her credit when identity theft has resulted in an actual police report filing. The extended alert remains for seven years and automatically adds the name to the DoNotCall list. This removes the name from marketing lists for pre-screened credit offers for five years. Potential creditors are required to contact the consumer or meet with the consumer in person to verify the identity of the applicant prior to issuing credit in the consumer’s name.

Credit Freeze
Many states allow consumers the option to “freeze” their credit – in other words, restrict access to his or her credit report. State laws may differ, however, in that some may allow any consumer the ability to request a credit freeze whereas some states only offer the option to actual identity theft victims. The cost of placing, temporarily lifting, and removing a credit freeze also varies. Many states make credit freezes free for identity theft victims, while other consumers may be required to pay a fee to request the credit freeze with each of the major bureaus. Visit to determine state-specific regulations and charges for credit freeze options.

In these situations, the only way a creditor can access the consumer’s information is if the consumer temporarily lifts the “freeze” to allow the access. Placing a credit freeze does not affect a person’s credit score – nor does it keep them from the ability to obtain their free annual credit report, or from buying their credit report or score.

Active Duty Alert
A member of the military being deployed to active duty may request that an “active duty alert” be placed on his/her credit report by contacting one of the nationwide consumer reporting companies. Only one agency needs to be contacted as they are required to report the request to the other two agencies. The alert is placed on the consumer’s report for one year but can be removed sooner when requested by the consumer. If deployment is to last longer than one year, the consumer may request another alert be added upon expiration of the initial alert. Upon the alert being added to the consumer’s report, he/she is automatically removed from marketing lists which will cease prescreened offers for credit or insurance.

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When a lender sees an active duty alert on a credit report, the lender must verify the identity of the applicant before issuing credit in the applicant’s name. Since contacting the deployed individual may not be possible, the law allows the active military person to assign a personal representative to place or remove the active duty alert.


About The Author

Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. 

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.