Legislation Could Help Protect Consumers From Credit Identity Fraud: FTC

The Federal Trade Commission today told a Senate subcommittee that legislation to combat credit identity theft could help consumers by defining identity theft as a crime and providing for consumer restitution, including the costs associated with clearing their credit history. Identity theft, a growing problem, occurs when a con artist appropriates another’s name, address, Social Security number or other identifying information and uses the information to open new credit card accounts, or take over existing accounts, obtain loans in the victim’s name or steal funds from the victim’s checking, savings, or investment accounts.

In testimony before the Subcommittee on Technology, Terrorism and Government Information of the Senate Committee on the Judiciary, David Medine, Associate Director of the FTC’s Bureau of Consumer Protection, said the legislation, "The Identity Theft and Assumption Deterrence Act of 1997," would be one way to compensate consumer victims of identify theft for the hardship of combating the theft and restoring their creditworthiness.

Medine said that historically, identity thieves have obtained the information they need to assume someone else’s credit identity by stealing from mailboxes or raiding trash dumpsters for discarded receipts and files. But increasingly, computer savvy identity thieves have been turning to fraudulently obtained credit reports or information available on the Internet. "For example, one fraud ring used such credit reports to quickly acquire fake I.D. cards, open ?instant credit’ accounts and then run up thousands of dollars in debt," he said.

Medine said victims of credit identity fraud go through a difficult and time-consuming ordeal to convince lenders and credit reporting agencies that they have been the victim of identity theft, have erroneous information removed from their credit reports and prevent future damage from the perpetrators. "Consumer victims who turn to law enforcement also report having difficulty obtaining help. Criminal laws for the most part ... do not recognize wronged consumers as victims of identity theft." He said that typically, consumers have little evidence to offer to law enforcers that they did not incur the charges of identity thieves. In addition, creditors who can write off losses and pass them on to consumers in the form of higher interest rates, fees and costs may not pursue identity thieves. "Even when creditors refer cases to law enforcement, consumer advocates and victims report that cases that do not meet significant dollar thresholds (typically $50,000) fall through the cracks."

Medine said that a vast amount of information about consumers is available through individual reference services, including "... increasing numbers of services that are available over the Internet. Gleaned from various public and proprietary sources, this information ranges from purely identifying information, such as name and phone number, to much more extensive data, such as driving records, criminal and civil court records, property records and licensing records."

He said that FTC has worked with the Individual Reference Services Group (IRSG) to develop a set of principles to better protect consumer privacy and prevent improper access to consumers’ identifying information. "[T]he IRSG principles should substantially lessen the risk that information available through individual reference services will be used to commit identity theft, and they should address most consumer concerns about the privacy of their non-public information," Medine said.

Medine said there are also steps consumers can take to protect their privacy and minimize their risk of credit identity fraud:

• Consumers should guard their personal identifying information. Before divulging it, they should find out how it will be used and whether it will be transferred to third parties. They should find out whether they have the choice of "opting out" of having the information shared with third parties;

• Consumers should ensure that items containing personal information -- such as charge receipts, insurance forms and bank statements -- are disposed of safely;

• Consumers should disclose their Social Security numbers only when absolutely necessary. They should ask to use alternate numbers as identifiers whenever possible, including on motor vehicle licenses;

• Consumers should carry with them only the credit cards and identification they actually need. Consumers who lose credit cards should notify their creditors by phone and request that a "fraud alert" be placed in their file;

• Consumers should pay attention to billing cycles. Bills that do not arrive on time may have been misdirected by identity thieves;

• Consumers should periodically check their credit report.

"In addition to the need for preventive measures, certain steps should be taken to compensate consumer victims and prevent future harm. The Commission encourages the credit card industry to pursue perpetrators of identity theft and the consumer reporting agencies to continue to work with consumer victims to ensure the accuracy of their records. The Commission also believes that consumer victims need to be formally recognized as crime victims, complete with rights of restitution. The Identity Theft and Assumption Deterrence Act of 1997 should go a long way toward lessening the harm identity theft inflicts on innocent consumers," he said.

The Commission vote to approve the testimony was 5-0.

The Federal Trade Commission has developed a privacy page on its Web site (http://www.ftc.gov) to show consumers how to protect their personal information from public access. The page explains how to protect personal information both online and offline.

The privacy page gives consumers the information they need to contact credit bureaus, state motor vehicle offices and marketing organizations via the Internet, telephone or mail. In addition, the privacy page provides hyper-links to each of the three major credit reporting bureaus and the Direct Marketing Association's (DMA) opt-out pages.

Copies of the advisory, Commission testimony and "Protecting Your Privacy" are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326- 2710.

(FTC File No. P974 806)