Date published: Monday, May 02, 2011
By Gregory Taggart
Identity theft—the misuse of another person’s personal information to commit a fraudulent act—is an expensive proposition. Losses from financial ID theft alone can be as high as $54 billion annually. People who’ve experienced it report that it’s similar to experiencing violent crime, reports Steven Toporoff, an attorney with the Division of Privacy and Identity Protection at the Federal Trade Commission. “It can be devastating.”
It can also be never ending. In 1992, a thief acquired a fake driver’s license in Tom Widman’s name. Every time the crook got in trouble, he would pull out his fake driver’s license and rack up another misdemeanor in Widman’s name. “I had to go to court to defend myself against 3 different charges,” he says. Fifteen years later, the police showed up again, this time with a warrant for Widman’s arrest for methamphetamine distribution. The same person had used the same information to create another fake ID. “The stolen information was still out there. It didn’t expire,” says Widman, now president and CEO of Identity Fraud, Inc., one of the original creators of identity protection products dating back to 1997.
Here are the top ID theft threats and how to help protect yourself and your wallet.
Existing account fraud: Someone gets a hold of your credit card or bank account information and makes fraudulent charges.
Protect yourself: Monitor your credit card and bank statements at least monthly and immediately report any unusual activity. Do that and federal law caps your liability at $50 for a credit card. “With a debit card, it’s a little different,” Widman explains. “Report the fraud within 2 days, and your maximum liability is $50. Between 2 and 60 days, it’s capped at $500. Beyond that, it can be unlimited.” Widman also recommends using a bank that monitors your account for unusual activity.
New account fraud: Someone uses your personal information to set up an account in your name.
Protect yourself: Obtain 1 free credit report each year at annualcreditreport.com from each of the 3 main credit reporting agencies so you can check for suspicious activity and inaccurate information. If you suspect fraud, place a fraud alert on your credit file. The alert lasts 90 days. “Finally, you can place a credit freeze on your accounts, which basically locks them so nobody can access your credit files unless you say so,” Toporoff says. “In most states, you can place a freeze for free if you’ve been a victim. If not, there might be a small charge.”
For as little as $10 a month, companies like Identity Fraud, Inc. will monitor credit and non-credit related information sources. “Credit monitoring tools are very helpful in spotting new accounts,” Widman says. “The sooner you learn about them and close them, the better.”
Criminal fraud: Someone uses your identity when stopped by law enforcement. “It’s very serious,” Toporoff says, “because you could end up in jail.” If the local police stops you, the fallout may not be that bad. Get stopped by police in another state, and things become much more complicated.
Protect yourself: Wherever it happens, once you’ve cleared yourself, Topperoff says to ask for a letter of clearance or an identity passport, both of which attest to the fact that you’re an ID theft victim. “Unfortunately, you may have to carry it around with you.”
Commercial services also monitor criminal records, regularly scouring more than 350 million records for any mention of criminal activity tied to your identity.
Medical fraud: Someone uses your SSN, medical or health insurance records to get medical help. By doing that, they could compromise your medical records or tap out your health insurance benefits. “For example, if he gets blood work done, that will become part of your medical record,” Toporoff explains. “Consequently, the wrong blood type becomes part of your medical record. You’ll have to deal with hospitals, doctor’s offices and others to remedy that,” he continues. “And of course ask questions of any health provider you deal with—your pharmacist or doctor, for example—in order to verify that your medical information is current and correct.”
Protect yourself: “The best thing to do is monitor the statement of benefits from your health insurance provider,” says Toporoff.
The next best thing, Widman says, is to check with the Medical Information Bureau. “About 20% of us have an MIB record, much like a credit report,” he explains. “If you do, you can check it for suspicious activity at mib.com.”
Social Security fraud: This is tied to that 9-digit number assigned to you. Losing that number could lead to, among other things, tax fraud—someone using your SSN to get your tax refund—and employment fraud—someone using your SSN to get a job, which could lead to the IRS coming after you for unreported income.
How to protect yourself: Take the number out of your wallet and put it in a safe place, and be very careful who you give it to. Monitor your annual Social Security Benefits Statement and look for irregularities. “The best thing to do is to work with the IRS’s Identity Protection Specialized Unit,” Toporoff says. “They flag your account and work with you to correct that.” If you think someone has stolen your SSN, call the IRS at (800) 908-4490.
The bottom line: According to Widman, there are more than 25 different types of identity theft. “But as scary is ID theft is, you can’t stop living your life. You just have to understand what it is and put up your best defense.” In most cases, the best defense is to guard your ID as if it were gold because to a thief, it is.
Take sensible precautions:
When ID theft strikes, Widman says, “Treat the fraud like you would a fire: act fast, contact the authorities and shut down the frauds from getting worse. After that, comes the clean up. And that could take a long time.”