Watching Out For Identity Theft

Aug. 30, 2004 -- Being victim of a theft is a painful experience, and as millions of Americans have discovered, that includes identity theft.

While ID theft may once have seemed like the stuff of movies or crime novels, it has now become a common occurrence in the United States. The Federal Trade Commission estimated in a September 2003 report that 9.9 million Americans were victims of identity theft in 2002, at a cost of $53 billion to consumers and businesses.

Moreover, victims of identity theft can spend untold stressful hours wrestling with paperwork, dealing with financial institutions and police in order to clear their names and restore their credit records.

"What we're seeing here is a tremendous number of perpetrators stealing a tremendous amount of money, and every one of us is paying for it," says Jay Foley, co-executive director of the Identity Theft Resource Center, a nonprofit consumer advocacy group in San Diego. "Being a victim of fraud is one of the costs we're paying for."

ID Crimes, From Simple to Elaborate

Identity theft, however, is not one specific crime, but an umbrella term covering a variety of crimes made possible when thieves wrongfully obtain private information, including Social Security numbers and credit card information.

Use of stolen credit card numbers is among the most common forms of identity theft, although scams vary. Some thieves will simply obtain another person's credit card information and go on a spending spree, while others will open new credit accounts, or divert the bills for existing accounts and not pay the charges.

Some identity theft schemes are more elaborate, including cases where crooks have used stolen personal information to get jobs or take out mortgages in other people's names.

Some identity theft uses electronic means. This includes the recent trend toward "phishing," the on-line scam in which thieves e-mail phony statements purporting to be from financial institutions, asking for account information. But other criminals use the old-fashioned method of "dumpster diving" to collect financial information by rooting around in trash.

Increasingly, say experts, thieves sift through garbage in business locations, rather than outside homes. "If I go out behind the insurance agent's office, or a mortgage broker's, how much info could I get?" asks Foley. "This is where the business side needs to step up. A lot of companies have good intentions they don't necessarily follow up on."

Moreover, with personal data spread around so commonly among businesses and employers, it is often hard to trace the source of the stolen data. "The victims are not always in the best position to know how their information has been obtained," notes Naomi Lefkovitz, an attorney in the FTC's anti-identity theft division.

Protecting Against ID Theft

The FTC serves as a clearinghouse for identity theft reports, and recommends you file a complaint with the bureau if you think you are the victim of such a crime — in addition to immediately contacting your financial institutions, one of the three major credit agencies and the police (see below).

In 2003, the FTC received 214,905 complaints of identity theft — up 33 percent from the 161,836 it recorded in 2002. As the numbers show, more Americans are taking action about identity theft, but the problem is not abating.

To help stem the tide, Congress passed a new anti-identity theft law this year, stiffening the potential prison sentences for these crimes. But as with many potential security issues, some preventive steps can be a wise investment. Experts recommend taking multiple measures to guard against identity theft:

Do not give out personal information on the phone, the Internet or in person unless you have initiated the contact and are sure of the other party's identity. Resist "phishing" — do not fill out official-looking (but bogus) forms arriving unsolicited over e-mail.

Use a shredder before you put financial statements or personal documents in the trash.

Do not carry around your Social Security card – you may lose it. Keep this and other important documents in a safe place in your home.

Decline to give your Social Security number to businesses asking for it. Few actually need this information. If your Social Security number appears as your driver's license identification number, ask to have a new number placed on your driver's license instead.

When picking passwords for financial accounts, avoid obvious choices, like your mother's maiden name or your birthday.

Keep regular track of the bills you expect to receive, and follow up with creditors if they do not arrive.

In short, while almost all of us could, in theory, fall victim to identity theft, common-sense safeguarding of your personal information, and consistent vigilance about your finance, can lower the odds or limit the damage.

"People need to be vigilant for early signs," says the FTC's Lefkovitz. "Review bank statements, credit card statements, check your credit report once a year. Even if something does happen, catch it early."

How to Respond to Identity Theft

Untangling a case of identity theft can be difficult — but acting quickly helps. If you believe you have been victim of an identity theft, the Federal Trade Commission recommends taking the following steps:

Contact any of the three major credit bureaus — Equifax, Experian and Trans Union — and have them place an alert on your file. The alert will be circulated among the bureaus and should halt new changes to your accounts.

File a police report. Some creditors might require one as proof that a crime has taken place.

Close accounts that have been used for suspicious activity.

File a complaint with the FTC, which keeps a central list of cases, and fill out an identity theft affidavit, for use in your future claims.