Identity Theft

Identity Theft
Research Paper

On a Saturday morning last month, a woman woke up after a good night’s rest. Feeling rejuvenated after a hard week at the office, she decided that you’d catch up on some housecleaning in the morning and then went shopping in the afternoon. When the mail arrived around 10:30 a.m., she casually leafed through it, taking out only those letters which looked important. Near the bottom of the pile was a letter from her bank. Immediately opening it, she discovered that there had been an error in her favor, and the bank credited her account for $200 dollars. In this moment of excitement, the last envelope, a credit card offer, was tossed into the trashcan without being given a second glance.

Today she received another letter from her bank, explaining that her account is overdrawn, and several new letters from credit card companies she had never done business with arrived, stating that she owed max-out balances totaling $25,000. Whatever ran through her mind on that Saturday morning a month ago is now completely opposite of her feelings now. “How could this have possibly happened?” She continues asking herself this question over and over, tears building behind her eyes, until her son walks into the room. “Mommy, what’s wrong?”

Identity theft victims like the woman in this scenario are not alone. Between 1992 and 2001, the number of identity theft incidents reported to credit agencies and law enforcement increased by more than 600,000 per year. The cost of thefts to consumers is more than $745 million dollars per year compared to the loss of billions of dollars to businesses in 2001 (approximately $17,000 dollars per victim). The average victim spends over 175 hours to clear their name and this costs on average $500 to $1,000 dollars. Identity theft, according to the Federal Trade Commission, is the fastest growing crime in America (Facts and Statistics).

In light of these startling statistics, one may cringe at the thought of ever stepping out of the house to do business. A current television commercial shown periodically where a man or woman sits at home and speaks with the voice of the person who has stolen his or her identity tells how the theft was used to exploit credit and purchase merchandise. The most popular and comical scenario is a voice of the opposite sex telling how the money attained was used to do something stereotypical of the thief’s gender while the person whose identity has been stolen acts out this verbal performance. An example like this has much validity, regardless of how obscene it may appear. Society needs to be aware of how these thefts can occur and how to prevent them.

In examining identity theft and fraud, it is prudent to know what they are, ways to commit theft and cases of each, how a person can be at risk, prevention, how victims should respond and what the government can do to help them, and the value of insurance in order to best gain a comprehension of the dangers of this growing problem.

The Social Security Administration defines identity theft as occurring “when a criminal uses another person’s personal information to take on that person’s identity” (United). Personal information is most often used for monetary gains, property gains, and redistribution of information to “potential customers,” people who purchase identity information and use it for personal gains. To protect Americans from these activities, Congress passed the "Identity Theft and Assumption Deterrence Act" (amendment to 18 U.S.C. § 1028) in October of 1998, which made it illegal to use or distribute personal information of other people without consent. Any acts committed to aid or abet persons using illegally acquired information, and in violation of state/federal laws, are illegal. Branching from this amendment, the "Identity Theft Penalty Enhancement Act" establishes specific penalties for criminals who commit identity theft (Identity).

A criminal can acquire personal information and commit identity theft and fraud without risking entering a victim’s home. The most common are “shoulder surfing,” “dumpster diving,” and internet solicitation. Shoulder surfing occurs when a criminal observes his or her victim from a distance as they relay personal information, which could include, but is not limited to, telephone calling card numbers, bank card numbers, and verbal recitation of credit card numbers. With these types of information, criminals can use purchased telephone time, draw from banks accounts, and max out credit cards, as well as use credit accounts to acquire enough personal data to open new accounts with other agencies and businesses. Additionally, criminals (as ridiculous and disgusting as it sounds) dumpster dive to acquire personal information thrown away just outside a victim’s home or in public garbage disposals. By rooting through garbage, thieves can find social security numbers, phone numbers, bank accounts, and credit offers that personally reflect a victim, as well as other documents that bear personal information. This information, as above, is used in criminal activities for illegal gains. Mail could also be intercepted in areas open to the public and redirected without a victim’s knowledge. The third way of acquiring and using information is through the internet. Internet solicitations, pop-up ads, are dangerous. Rapidly becoming available to every person in the United States, and being utilized to conduct all forms of business, the internet is a haven for criminals who want the least risk of being caught. Unsuspecting victims respond to spam mail (unsolicited mail requesting personal data for a return benefit) or false bank inquiries and job advertisements, inadvertently supplying thieves with enough information to steal their lives away (Fraud Section).

Examples like the one at the beginning of this paper are a bit extreme, but the threat is there nonetheless. In a real case, a woman from a southern district in Florida was arrested and charged with stealing a victim’s driver’s license and using it to withdraw and spend more than $15,000 from the victim’s bank account and on credit cards (Fraud Section). It is a fact that in some states, thankfully not in Pennsylvania, the driver’s license number is the same as the driver’s social security number. In another case, a man responded to an internet job advertisement which requested that he complete a very detailed form of personal information in order to speed up the process of a background check and reduce the time it would take to finally hire the victim. After the victim supplied all of this information, he never heard from the company human resources director again. His identity had been stolen, and it took most of a year to regain his credit (Fisher 162).

A person can tell if he or she has become a victim like one in these last two cases. Americans should first and foremost arm themselves with the rights given to them by law. The three leading credit bureaus in the United States: Equifax, Experian, and Trans Union are required by law to offer every American at least one credit report at least once every year (Fraud Section). These reports show what a person’s credit is like to date. Credit reports can help a person to detect theft by showing bad credit when the victim knows that he or she has good credit. Such an event may occur if the thief redirects all financial statements and fraudulent accounts to a mailing address other than the victim’s. In addition to credit reports, persons should thoroughly review bank statements and credit card statements to make sure that all transactions are accurate and legitimate (Fraud Section).

The best authoritative government agency is the Federal Trade Commission [FTC]. The FTC had constructed an entire site on identity theft and fraud. For the best information on how to detect identity theft and fraud, concerned persons can visit the commission’s website at http://www.consumer.gov/idtheft/.

If people want to avoid being paranoid until the next bank statement arrives, or the next time one of the credit agencies are required to give a free handout, precautionary steps can be taken to prevent their identity and personal information from being stolen. The United States Department of Justice suggests a few good ideas in an online article titled “Identity Theft and Fraud.” To help a person remember what to do, they should think SCAM. S stands for being stingy with the amount of information a person should give to people. C stands for check financial records for what should and shouldn’t be there. A stands for ask periodically for a credit report, and M stands for maintain accurate financial and banking records. In addition, the article suggests that persons should properly discard mail, financial records, and any other documents bearing personal information at home by shredding them and distributing them within a person’s trash over a period of time. In addition, travelers should make sure the post office holds all mail and that if a traveler has to use any credit card, calling card, or bank card numbers, they should do it in an enclosed, private area where no one can easily eavesdrop. Buyers should be keen observers of online solicitation. Personal information should not be given to any alleged employer or potential employer online. If the bank requests personal information online, one should be sure to first receive a formal request in writing before submit anything. Sometimes, thieves pose as human resource directors of companies or as bank officials, employing official signatures and company logos of businesses to fool their victims. Although it is difficult to stop companies from buying and selling personal information in legal transactions, a person can demand to be removed from credit offer lists once contacted by a business (Fraud Section).

There is no way for a person to completely protect himself from identity thieves. In a society driven by the necessities of unlimited internet access, online business (shopping, banking, etc.), little time for careful home observation, along with the conveniences of companies buying, trading, and selling personal information so as to make background checks faster and, therefore, credit more readily available to consumers, there are simply too many sources of information for crooks to pick from. So, in the event that one does become a victim of identity theft, as many Americans do, steps can be implemented on how to slow down if not stop the continuing use of one’s identity by another person and to then correct bad credit.

First, and foremost, a victim should never panic. Based on a 2004 survey conducted by the Identity Theft Resource Center, 30 percent to 80 percent of victims surveyed felt denial, disbelief, anger, isolation, and defilement (Foley table 21). Though these are natural reactions, they can delay the reaction time of the victim. Returning to the United States Justice Department article, victims are instructed to begin a recovery as soon as possible in order to minimize damages. Using guidelines provided by the California Public Interest Research Group and the Privacy Rights Clearhouse, the Justice Department suggests that people do the following: (1) Report their situation to the Federal Trade Commission [FTC], (2) contact their local post office, (3) contact the Social Security Administration [SSA], (4) contact the Internal Revenue Service [IRS], (5) notify the three federal credit agencies, and (6) notify all financial institutions they conduct business with (Fraud Section).

The FTC must know about a victim’s situation because it serves as the information forum on the national level. It is the commission’s job to contact all three major credit agencies and law enforcement bodies such as the Federal Bureau of Investigation. Victims of identity theft can contact the FTC online at the site listed above, by phone at 1.877.438.4338, or by mail to Consumer Response Center, FTC, 600 Pennsylvania Avenue, N.W., Washington, DC 20580 (Fraud Section).

Identity theft victims should contact their local office of the Postal Inspection Service within their post office to check for change-of-address slips recently completed and submitted under the victim’s name. In addition, the SSA should be contacted if the theft of one’s social security number is suspected. This contact is especially important if the victim is close to the age of 18, since his or her identity was probably stolen as a child and likely sold. Not responding quickly could cause complications in acquiring credit for college loans, purchasing a vehicle, and securing future employment. The SSA administration can be reached by calling 1.800.269.0271 (Fraud Section).

The FTC does contact the IRS and the three credit agencies but, the amount of time this takes could be longer than desired. Victims should contact the IRS if they suspect that fraudulent tax activities have occurred under their identity. Victims concerned can call1.800.829.0433. It is crucial that the three credit agencies have a report as soon as possible so that victims’ reports do not inaccurately reflect their credit. Credit reports can denote “Fraud Alert” under a person’s identity from 90 days to 7 years after a report of theft is filed and confirmed. To contact Equifax, call 1.800.525.6285, or write to P.O. Box 740250, Atlanta, GA 303740250. To request a report or to dispute one, go to the agency website at www.equifax.com for more information. To contact Experian, call 1.888.397.3742, or write to P.O. Box 1017, Allen, TX 75013. For more information, a person can visit the agency website at www.experian.com. To contact Trans Union, call 1.800.680.7289, or write to P.O. Box 6790, Fullerton, CA 92634. For more information, visit the agency website at www.transunion.com. Finally, victims should contact all financial agencies and credit card companies they do business with and report that there is a possibility of fraudulent use (Fraud Section). When these things are completed, it never hurts a victim to call the police.

The government obviously has much concern for identity theft victims, but what are agencies doing to assist in preventing identity theft? The answer is ambiguous. Most of these government sources and websites reveal little on “control” policy. In my personal research, I have found little indication of initiatives to reduce the number of cases each year. This conclusion would sound bad to most Americans. So, I submit that where there’s a panic stricken crowd, there’s a marketing scheme to be profited from.

According to a September 2005 article from Money magazine, “The ID Theft Protection Racket,” theft of one’s identity is not the only way a person can be taken advantage of; consumers be warned that everyone should carefully watch his or her wallets. “Safety for Sale” is a large subheading in the article. A middle school student proficient in mathematics could tell calculate that credit card companies and other financial institutions are out to get people’s money after evaluating a simple credit contract. However, because of the identity theft phenomenon, new elements have been added to most of those contracts. They are identity theft insurance and 24 hour credit monitoring services, safety that is worthless (Regnier 112-116).

Identity theft insurance policies cost between $25 dollars and $115 plus dollars each year, depending upon which company a person does business with, but the worst part is that these policies only cover some “out of pocket” expenses. Credit monitoring services cost $24 dollars to $60 dollars a year, and most only monitor any reports at the three major credit bureaus for new and obscure activity. These services do not watch monitor bank accounts, where the heaviest liabilities to the victims exist if identity is stolen. The real threat, reads the article, is new accounts fraud, thieves opening new credit card accounts under a victim’s name. Even so, only about 20 percent of the one out of every one hundred people who are affected by this activity spend more than $500 dollars and costly time in fixing their credit (Regnier 112-116).

The obvious solution, if concerned persons don’t want to pay extra for services that won’t do them much good, is prevention. Information listed above explains how to be cautious, but for some Americans, simply being cautious isn’t the most effective way to prevent high liabilities. In these cases, purchasing insurances and credit monitoring services would be appropriate. Small businesses, heavy buyers of products from the internet, and persons who travel much may need services to secure prevention.

The Money article mentioned previously has done this research as well. A chart illustrated at the end of this article describes what insurance is, how much it costs, who should buy it, and what the free alternative is. Identity theft insurance pays minimum expenses of legal fees and lost wages to a victim, in return costing $25 dollars to $70 dollars a year, being most valuable to people who run small businesses or who bill by the hour for services. Insurance doesn’t usually pay when theft is committed by a family member. The free alternative is to check homeowner’s insurance policies; some automatically cover identity theft. Credit monitoring services, as mentioned earlier, only monitor credit reports for abnormal activity, addressee changes, and inquiries. They cost $24 dollars to $60 dollars a year and they should be used only by people who own small businesses, are already victims of identity theft, or real estate buyers who need a steady supply of credit. The free alternative to credit monitoring is the reports you are entitled to three times a year from the credit bureaus. The last type of service is deluxe monitoring, with daily credit reports and counseling. This service can cost $100 dollars to $155 dollars a year and should be used only by people with bad credit and those who need to have it fixed in a hurry (e.g.: the realtor). The concerned person should not forget that it’s still free to shred all loose personal documents and take prevention precautions (Regnier 116).

There is another free alternative in the banking world. Identity theft victims whose identities are stolen and bank account information used are automatically not liable for a single cent. This is possible through the services of credit card companies like Visa and MasterCard, who offer free policies of no-liability for fraudulent charges. People should check with the bank they do business with. If it doesn’t use Visa or MasterCard for debit, credit, and check transactions, a person could be wasting a free protection in the banking world. Some financial institutions in Pennsylvania that do use these services are PNC Bank Corporation, M&T Bank [Manufacturers and Traders Trust Company], and Sovereign Bank Corporation.

Identity theft is one of the fastest growing and most diverse crimes in America. Many Americans never think about identity theft, or believe “it could never happen to me” until it finally does. Most people do not want to be like the person in the example at the beginning of this paper. People should take proper precautions to protect themselves. They should know their rights as individuals, for the law can be a powerful tool, but costly one if lawyers get involved. The government is always there to help. Victims should not be hesitant to file a report of theft.

Most “criminals” are the thieves who steal victims’ identity. An informed and educated person on this matter should not get caught up in marketing schemes and insurances designed to steal his or her money in the moments of panic. The key to conquering this battle is to be safe and to be smart.

For additional sources of information, the following websites may be useful:

Http://www.fbi.gov/. The Federal Bureau of Investigation’s site contains many congressional sources on identity theft. A simple search for “identity theft” is required.

Http://www.ssa.gov/. The Social Security Administration, search: identity theft.

Http://www.usps.com/websites/depart/inspect/. The United States Postal Inspection Service website provides a way to report suspicions of mail theft online.

Http://www.idtheftcenter.org/index.shtml. The identity theft resource center is a non-government website geared toward providing information on identity theft.

Http://www.bbbonline.org/idtheft/. This is the website of the Better Business Bureau.
Http://www.privacyrights.org/. Privacy Rights ClearingHouse.



Works Cited

“Facts and Statistics.” Identity Theft Resource Center. 23 Jan. 2003. 28 Sept. 2005 <http://www.idtheftcenter.org/html/facts_and_statistics.htm>.

Fisher, Anne. “Job Offer or Identity Theft Scam?” Fortune 152.5 (5 Sept. 2005):162. Master File Premier Online. EBSCO host. Jersey Shore Senior High Library, Jersey Shore, PA. 8 Sept. 2005 <http://search.epnet.com>.

Foley, Linda, and Jay Foley. “Identity Theft: The Aftermath 2004.” Identity Theft Resource Center. Sept. 2005. 17 Oct. 2005 <http://www.idtheftcenter.org/index.shtml>. Path: What's New.

Fraud Section, Criminal Division, U. S. Department of Justice. “Identity Theft and Fraud.” U. S. Department of Justice. 14 Mar. 2000. 7 Sept. 2005 <http://www.usdoj.gov/criminal/fraud/text/idtheft.html>.

“Identity Theft and Assumption Deterrence Act.” Consumer.gov. Federal Trade Commission. 16 Oct. 2005 <http://www.consumer.gov/idtheft/law_laws_criminal.htm>.

Regnier, Pat, and Amanda Gengler. “The ID Theft Protection Racket.” Money Sept. 2005: 112-116. Master File Premier Online. EBSCO host. Jersey Shore Senior High Library, Jersey Shore, PA. 8 Sept. 2005 <http://search.epnet.com>.

United States Social Security Administration. “Identity Theft.” Social Security Online. Aug. 2002. 7 Sept. 2005 <http://www.saa.gov/pubs/idtheft.htm>.