Synthetic Identity Fraud: A New Kind of Costly ID Theft You’ve Never Heard Of

— -- Identity theft has been an ever-growing problem, but authorities say there is a new twist on an old problem for us to worry about: Synthetic identity fraud.

“Synthetic identity fraud is when the fraudster uses one true piece of your identity… and then combines it with fake information, so perhaps a different name, a different date of birth,” said Eva Velasquez, the CEO of Identity Theft Resource Center.

By some reports, synthetic identity fraud now accounts for 85 percent of all identity fraud in the United States, costing an estimated $2 billion a year, according to investigators.

“The scope can vary and there are some very large fraud rings,” Velasquez said. “Particularly when they’re using online platforms, they can affect tens of thousands if not hundreds of thousands of people.”

Investigators say that one form of synthetic identity fraud started with the sale of CPNs, or Credit Profile Numbers, by credit repair companies.

“A CPN is a multi-digit number that looks very similar to a social security number,” said Major Don Woodruff of the Duluth Police Department in Duluth, Georgia. “And it what's given to people by these credit card repair companies for them to go out and open up new accounts.”

ABC News' "Nightline" found out about one man who was offering CPN numbers named Donald Batiste operating out of Baton Rouge, Louisiana. Batiste advertised his services to customers all over the country, reaching Pastor Giles Foster in Cleveland, Ohio. Foster was trying to grow his small church and bought a CPN to improve his credit. He later ended up shelling out $4,000 to Batiste to obtain a line of credit that he said he never received.

"Donald Batiste is a wolf in sheep's clothing," Foster told "Nightline." "He is not a man of God. He is not a true apostle."

Foster said he first heard Batiste talk about making a fresh start and getting a credit profile in order to grow businesses, and he said he was intrigued.

"He was selling this nine digit number, credit profile number," Foster said.

To see how CPN sales works, two “Nightline” producers visited Batiste's credit repair company in Baton Rouge undercover posing as consumers, while they secretly filmed the meeting on hidden camera.

Batiste offered to sell our producers a CPN, and said it was a replacement for a social security number. He also told them they could use it to open up new credit cards, after advising them to alter their addresses. This then creates a new profile in the eyes of credit card companies, now unable to link the customer with their old social security number and, presumably, bad credit.

The Electronic Transactions Association, a trade group made up of companies within the payments technology industry, says "consumers that choose to place one of these CPNs ... (or another fake nine-digit number) on a credit application will be committing a federal crime, “ adding that “Our member companies detect and deter crime everyday through security technology built to prevent fraud and insulate consumers from liability.”

When asked about CPNs, Batiste told our producers, “We build them.”

“We go into the system, we apply for this new credit profile through the Social Security Administration,” he said.

For a fee of $350, he told our producers he would sell them a CPN, but there was a catch, saying, “You use an address that you’ve never stayed at before, because any address you’ve stayed at is associated to your personal credit.”

“It’s 100 percent legal, we go to the FBI,” Batiste continued. “I always tell people to go and do your research, go do your research. Some people say CPNs are illegal. The only reason they say they’re illegal because a lot of stuff comes up as fraud because a lot of people don’t know how to use them.”

But the Social Security Administration told ABC News that under no circumstances do they issue CPNs. Robert Feldt, an agent with the SSA also added that “despite what many of these credit repair websites imply… CPNs are not legal.”

The FBI also confirmed to “Nightline” that they do not issue CPNs and know of no government agencies that do, which leads to questions about what so-called “CPNs” actually are.

“CPNS are basically just numbers that are sometimes made up,” said Major Don Woodruff. “It could be that they give you a CPN that is actually is a social security number of someone that's not you.”

Authorities say social security numbers that have not yet been issued to anyone can be found through flaws in certain government websites, and that synthetic identity fraud can go undetected because credit card companies rarely investigate to see if the number and the person’s name match when someone goes to open new credit.

“When the credit card companies are assuming the liability of these fraudulent charges, they do have to recoup that money in some way,” Eva Velasquez said. “That generally translates into higher fees and higher interest rates.”

When “Nightline” confronted Batiste, he told us he gets the CPNs legally from an independent agency and has done nothing wrong.

Now, a little more than a month after "Nightline's" original piece aired, Batiste was arrested by Louisiana authorities on Tuesday in Baton Rouge, after turning himself in. He is accused of orchestrating a national financial fraud scheme that has resulted in the theft of more than 300 identities and more than $5 million in fraud. His official charges are felony racketeering and one count of criminal conspiracy. If convicted, he faces up to 75 years in prison. He has not yet entered into a formal plea and his lawyer has not responded to requests for comment.

Many of those CPNs that he allegedly issued were actually social security numbers of children, authorities said.

“Through our investigation, we found that many of the Social Security numbers were stolen from children. When we reached out to the victims’ parents, they had absolutely no clue that their kid’s identity had been stolen,” Louisiana Attorney General David Caldwell said.

He is accused of defrauding hundreds of individuals, through selling fraudulent CPNs and taking fees for unsecured lines of credit which authorities say he didn’t deliver.

When Foster heard the news, he said his eyes welled with tears. “It’s such a sense of relief and joy but my heart goes out to him [Batiste]. He deserves what he’s getting but I hope that he’ll bring his soul closer to Jesus and get it together,” Foster said.

To prevent falling prey to synthetic identity fraud, Velasquez said people should be on the lookout for red flags.

“When they are looking to do business with a company, they should do their homework, and look to third party verification services, such as the Better Business Bureau,” she said. “We always say anybody that’s offering an immediate clean up and immediate fix, that’s a big red flag."