Consumer Education & Personal Finance

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Identity Theft

By: Dr. Bernice Wilson

Identity (ID) theft occurs when someone fraudulently uses your name and other identification to obtain credit, open services, or buy merchandise. No one is immune from ID theft ­ it affects all ages, incomes, and races.

In this electronic era, your identification most often begins with your Social Security number. Usually people who are creditworthy and who have good incomes are the individuals who are most at risk. Other individuals who are at risk are people who have common names, juniors and seniors and mothers and daughters with the same name

According to the Federal Bureau of Investigations, ID theft is the fastest growing white-collar crime in the United States (US). ID theft is at the top of the government's list of most frequent consumer complaints for the last three years. It occurs when someone uses your personal information to benefit oneself. If this sensitive information gets in the hands of a crook, they may use it to steal your financial identity.

The Federal Trade Commission (FTC) also lists it as a major consumer complaint within the past three years. In 2002, seven million individuals in the US were victims of ID theft according to a recent survey by Privacy and American Business, a publication of the Center for Social and legal Research (Consumer Reports, 2003).

Alabama ranks 38 among the states with the highest reported cases of ID theft. The number of victims per 100,000 individuals is 28.7; the number of victims per state is 1,276; and victims per city: top city is Birmingham with 189 cases. The District of Columbia ranks the highest and North Dakota ranks the lowest.

Many states have passed laws related to ID theft. Where specific laws do not exist, the practices may be prohibited under other laws. The Alabama State Attorney General's office can provide additional information on ID theft. Alabama's ID theft law was enacted in Alabama in 2001 under state law 2001 Al. Pub. Act 312; 2001 A1. SB 144. ID theft information can be obtained at the state attorney general's website at www.ago.state.al.us.

The federal government and numerous states have passed laws that address the problem of ID theft. The Identity Theft and Assumption Deterrence Act, enacted by Congress in October 1998 and codified, in part, at 18 U.S.C. section 1028, is the federal law directed at ID theft. Violations of the Act are investigated by federal law enforcement agencies, including the Secret Service, FBI, the United States Postal Inspection Service and the Social Security Administration's (SSA) Office of the Inspector General. Federal ID theft cases are prosecuted by the Department of Justice. In most instances a conviction for ID theft carries a maximum penalty of 15 years imprisonment, a fine, and forfeiture of any personal property used or intended to be used to commit the crime. The Act also directs the United States Sentencing Commission to review and amend the federal sentencing guidelines to provide appropriate penalties for those persons convicted of ID theft. Schemes to commit ID theft or fraud may also involve violations of other statues such as credit card fraud, wire fraud, and financial institution fraud. Each of these federal offenses is a felony and carries substantial penalties in some cases as high as 30 years in prison, fines, and criminal forfeiture. The Identity Theft and Assumption Deterrence Act makes it a federal crime when someone knowingly transfers or uses, without lawful authority, identification of another person with the intent to commit, or to aid or abet an unlawful activity that is considered a felony under any applicable state or local law. Under the Act, a name or Social Security number is considered a means of identification. A credit card number, a cellular telephone's electronic serial number, and any other piece of information that may be used alone or in conjunction with other information to identify a specific individual meets this criterion.

ID theft converges in many configurations and types such as stealing information from mailboxes, trash containers, a Social Security number, driver's license, or easily retrievable public information about you, mother's maiden name etc. With this kind of information in the hands of thieves, ID theft venues are unlimited, including applying for a driver's license, passport, or other form of picture identification in your name. Additionally, phony documents can also be generated by the ID theft using your personal information. This kind of information can then be used to secure personal loans or credit cards that will be used to assist the ID theft with a shopping spree in your name. In effect the fraudulent person take on your identity and commit fraud and crimes using your name.

Often this crime remains undetected until you go to use your line of credit, apply for a mortgage, or unpaid or delinquent bills begin to accumulate that you realize your credit record has been seriously damaged. Some of the resulting impacts of ID theft could be a denial on getting an apartment, job, loan or other opportunities that hinge upon a good credit record. Victims of ID theft should order a copy of their credit reports every few months. The credit bureaus must provide persons who have been victims of identity fraud with one free report per year. Call 1-888-567-8688 or 1-888-5OPT-OUT to have your name removed from the prescreened lists of all three national credit-reporting agencies.

Congress passed legislation in October of 1998 to enact the Identity Theft and Assumption Deterrence Act. The Act gives victims a weapon against identity thieves and a single place where they can file a complaint and get consumer information. Anyone who steals another person's identity and gains $1,000 within one year from misusing that identity, is subject to a fine and imprisonment of up to 20 years (Myvesta 2003). Under this law you can notify the Federal Trade Commission that keeps a database of all complaints. Call 1-877-IDTHEFT (1-877-438-4338) to get information and referrals to the appropriate organization that can help you.

Here are some tactics you can use to fight ID theft.

• Do not provide financial and other personal information in response to unsolicited telephone calls, letter, fax or e-mail. These could be from an ID theft posing as a representative from a legitimate agency, business, employer, or government official.
• Carry only the credit cards you plan to use.
• If you have credit cards you do not use, store them in a safe place. Also, cancel the accounts if you plan to use them again.
• It is unwise to print your Social Security number on your driver's license if it's not state mandated. If it is, then try to negotiate using another number.
• Keep sensitive documents in a safe place at home and shred them if or when discarding.
• Choose passwords that are hard to figure out. Passwords like your birthday or home address is not a good idea.
• Patronize businesses that have a proven record of reputable dealings.
• Get information in writing before agreeing to any business transactions.
• Be caution about deals that require money to be paid upfront.
• Do not provide personal information over the telephone or Internet unless you know the party on the other end of the telephone or Internet is legitimate.
• Carefully monitor your incoming and outgoing mail.
• Shred your trash.
• Limit the confidential information that you carry to what is needed in the event it is lost or stolen.
• Keep a close watch over your credit bills and bank statements. Inspect them as soon as they arrive.
• Unless you have a secure mailbox, mail your payments at the post office and pick up new checks at your bank. Additionally, promptly remove mail from your mailbox after it is delivered to your house.
• If you believe your investment or brokerage accounts have been tampered with, do report it to your investment or brokerage accounts manager and to the Securities and Exchange Commission (SEC). You can file a complaint with the SEC by visiting the Complaint Center at www.sec.gov/compliant.shtml or write them.
• Check on your credit report often and be sure to look for signs of fraud.
• Decrease the number of unsolicited credit card applications you receive. The fewer credit card applications you receive, the less likely it is that one will be stolen. Call 1-888-567-8688 to have your name removed from the marketing list sold by the major credit bureaus for two years or permanently.
• Build a firewall or purchase virus-detection software on your home computers to discourage hackers (Consumer Reports, 2003).
• Quit your browser and log-off after using public Internet-access computers in libraries, at Internet cafes, and the like. Don't pay bills or conduct other financial transactions on public computers. If you have a high-speed Internet connection at home, unplug the computer's cable or telephone line when you are not using it to discourage hackers. (Consumer Reports, 2003)
• Deal only with reputable Web sites. Check privacy and security policies of Web sites before making purchases, trading stocks, or banking online. A professional-looking Web site is no guarantee of security. Don't respond to unsolicited e-mail requests for personal information (Consumer Reports, 2003).
• Check your workplace. Ask how your employer safeguards employee records. Request that Social Security numbers not be used as employee ID numbers (Consumer Reports, 2003).

One approach to safeguard against ID theft is to get in the practice of checking your credit report often. This can be done by securing a copy of the credit report alternatively from each credit reporting agencies on a quarterly basis. By doing this it is possible to detect if any new credit card accounts have been opened in your name.

Also, ID theft insurance is not insurance and it gives a false sense of security. The apparent cost is $25-$60 for a policy is not a good value relative to the risk. The primary danger is damage to your credit rating and there is no insurance against that and the grief it causes. ID theft insurance does not fix your credit standing or clean up a criminal record acquired in your name; it only pays for expenses associated with the time-consuming and often frustrating tasks of doing that yourself. The FTC pegs the average out-of- pocket cost at $1,000 to cover incidentals such as certified mail, notary seals, and telephone calls. Privacy Rights Clearinghouse estimates that victims on average spend the equivalent of 22 workdays cleaning up credit.

If you are a victim of ID theft, the FTC collects consumer ID theft complaints; however, it does not have the authority to file criminal charges. The FTC can assist victims by providing information to help resolve financial and other problems as a result of this crime. The FTC also refers victim complaints to other appropriate government agencies and private organizations for further action. For further assistance, contact the FTC ID Theft Hotline toll free at 1-877-IDTheft (438-433338); TDD: 202-326-2502; or by mail: ID Theft Clearinghouse, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20555. Or reach them online at www.consumer.gov/idtheft.

When someone mishandles your personal information without your knowledge, it is a crime, pure and simple.

Consumer Reports. (October 2003). Stop thieves from stealing you. ConsumerReports.org. Retrieved September 2003.

Federal Deposit Insurance Corporation (FDIC). (Spring 2003). Common cons and how to avoid FDIC Consumer News. Retrieved September 29, 2003.

Forbes. (February 29, 2003). ID theft insurance isn't insurance. Double Take. Retrieved September 29, 2003.

MsMoney.com. How identity thieves operate. Retrieved November 17, 2003.

Myvesta. (2003). Identity theft: how to protect yourself and what to do if you are a victim. Retrieved September 29, 2003.