The fastest growing financial crimes in America today are check fraud and identity theft. The Nilson Report estimates check fraud losses to be about $20 billion a year. The American Bankers Association has stated that check fraud is growing 25 percent per year.
According to the Federal Trade Commission (FTC), 500,000 Americans a year are victims of identity theft. At $5 billion, identity theft is a smaller crime when compared to check fraud. But, it already surpasses credit card fraud. Because it is so simple to commit, I believe identity theft will become one of the most profitable criminal activities in history.
The FTC lists the following most common types of identity theft:
- Using or opening a credit card account fraudulently
- Opening telecommunications or utility accounts fraudulently
- Passing bad checks or opening a new bank account
- Getting loans in another person’s nameWorking in another person’s name
Getting Your Personal Information
Stealing wallets or purses was once the primary method to obtain another person’s personal information. Today, there are endless opportunities for a criminal to obtain the necessary information to commit identity theft. Let me illustrate a few, beginning with a visit to the doctor.
As a new patient, the receptionist asks you to complete a form that asks for your name, address, phone number, and your employer’s name, address and phone, and your health history. Then, they make a copy of your insurance card, which includes your social security number. You have just provided enough information for someone with access to those records to become you.
Another example. You walk into an upscale department store to make a purchase. You take your selection to the cashier and write a check. On that check is your name, address, and home phone number, the name of your bank and its address, and your bank account number. The cashier asks for your driver’s license. In nineteen states, the license number is your social security number, which is written on the check. The cashier memorizes the birth date on your license, and then asks for your work phone number, which will lead them to the name and address of your employer. Once again, a thief has sufficient information to apply for credit in your name.
Identity thieves have also gone high tech. Skimming devices about the size of a pager can be used in restaurants and bars where credit cards are briefly out of the customer’s sight. The dishonest waiter or waitress simply swipes the card once through the point-of-sale device and a second time through the
skimmer, collecting the credit card data contained on the magnetic stripe.
USA Today recently reported that computer-savvy thieves are using bogus web sites and creating identity-stealing computer viruses. The fraudulent web sites, sometimes claiming to be affiliated with legitimate retailers, often offer significant discounts in order to attract purchasers. When the on-line consumer makes what he thinks is a purchase, the credit card and personal information passes to the thief while the merchandise, of course, is never shipped.
My Days as a Thief
As a teenager, I did things that today, as a husband and father, an educator, and consultant, I am not proud of. But, recounting one youthful experience may be illustrative.
In my old days, when I wanted to establish a new identity so that I could open a bank account and pass bad checks, I would go to the Department of Vital Records in whatever city I was in. I would ask to see the death records for 1948, the year I was born. Every fifth or sixth entry was an infant who had died at birth. I would write down the death information and later apply for a birth certificate in that name. I would fill out a form, pay $10, and obtain a legitimate birth certificate. I would go to the Department of Motor Vehicles and get a license with my picture, my description, and somebody else’s name. I had fifty legitimate driver’s licenses.
Now, 35 years later, you can buy a CD-ROM with birth and death records, and can apply for a new birth certificate by mail. There are also websites that sell social security numbers for as little as $49.95. Their advertisements claim that they can tell you anything about anybody. I researched these companies—all you have to provide is someone’s name and address—and they will tell you everything you want to know, including spouse and children’s names.
Criminals have many other ways to obtain personal information.
- They gain access to individuals’ credit reports by posing as potential landlords, employers, or loan officers.
- They “shoulder surf ” at checkout lines and videotape transactions at ATM machines to capture PIN numbers.
- They steal mail from mailboxes for bank or credit card statements and newly issued credit cards.
- And they “dumpster dive” in trash bins for credit card and loan applications that have not been shredded.
The Cost to the Victim
No matter how the information is obtained, for the identity theft victim, the nightmare has just begun. After combining key pieces of individuals’ identities, the thieves are able to impersonate their victims and obtain loans and spend money as fast as possible. Generally, victims of banking and credit card fraud will be liable for no more than the first $50 of the loss. However, the victim must notify financial institutions within two days of learning of the loss to avoid being responsible for the fraudulent activity.
Even though victims are usually not responsible for paying their imposters’ bills, their credit report is always left in shambles. It takes months or even years to regain their financial health. In the meantime, they have difficulty writing checks, obtaining loans and housing, and even getting hired. Victims of identity theft seldom find help from the legal authorities as they attempt to untangle the web of deception created by their imposter.
On average, it costs a victim $1,173 and 175 man-hours to get their credit report straightened out. Fixing the problem is not as simple as saying “…that wasn’t me.” You must prove you did not apply for that auto loan. To fix things, you must first convince the credit card or finance company. Then, you must convince all three credit bureaus. In most cases, the credit bureaus refuse to delete the dispute from your credit files. Instead, they put an asterisk and say, “Customer disputes this Visa charge, claims they were a victim of identity theft.” The result is that anyone accessing your credit report, whether a potential employer or a company considering granting you credit, may question whether you were really a victim or if you were just ripping somebody off.
I have been personally concerned about identity theft. A few years ago, I subscribed to a service that notifies me each time my credit report is accessed. Privacy Guard (www.privacyguard.com) provides me with the contact information of the company that obtained my credit report, as well as a means to correct false reports. I consider their annual fee money well spent.
Ways to Prevent Identity Theft
Consider the following recommendations to help reduce your potential risk of identity theft.
Guard your social security number zealously. It is the key to your credit report and banking accounts and is the prime target of criminals.
Monitor your credit report. It contains your social security number, present and prior employers, a listing of all account numbers, including those that have been closed, and your overall credit score. After applying for a loan, credit card, rental, or anything else that requires a credit report, request that your social security number on the application be truncated or completely obliterated, and your original credit report be shredded before your eyes or returned to you once a decision has been made. A lender or rental manager needs to retain only your name and credit score to justify his decision. 
Shred all old bank and credit card statements and credit card offers before trashing them. Use a crosscut shredder. Crosscut shredders cost more than regular shredders, but are superior. When Iranian students in Tehran stormed the U.S. embassy in 1979, the embassy staff had shredded the most important documents. However, they used a regular shredder. The enterprising students hired carpet weavers and reconstructed the shredded documents.
Remove your name from marketing lists of the three credit reporting bureaus to reduce the number of preapproved credit offers you receive.
Add your name to the name deletion lists of the Direct Marketing Association’s Mail Preference Service and the Telephone Preference Service used by banks and other marketers.
Do not carry extra credit cards or other important identity documents except when needed.
Copy the contents of your wallet Photocopy both sides of each license and credit card so you have all the account numbers, expiration dates, and phone numbers if your wallet or purse is stolen.
Do not mail bill payments and checks from home. They can be stolen from your mailbox and washed clean in chemicals. Take them to the post office.
Do not print your social security number on your checks.
Order your Social Security Earnings and Benefits Statement once a year to check for fraud.
Examine the charges on your credit card statements before paying them.
Cancel unused credit card accounts.
Never give your credit card number or personal information over the phone unless you have initiated the call and trust that business.
Subscribe to Privacy Guard or another similar service.
If You Are a Victim
Even though one may take every possible precaution, identity theft may still happen. Take the following actions:
- Report the crime to the police immediately and get a police report number.
- Keep a log of all conversations with authorities and financial institutions, including names, dates, and time.
- Call your credit card issuers immediately, and follow up with a letter and the police report.
- Notify your bank immediately.
- Call the fraud units of credit reporting companies to place a fraud alert on your name and social security number.
