Identity Theft

In her article in a recent issue of Banking, Amy Borrus provides an excellent overview of identity theft, its causes and cures. Consumer carelessness with personal financial information will always provide an opening for ID thieves. Some simple precautions can effectively minimize theft on that front. But, even when consumers exercise all due caution with their personal financial information, they can still become victims of ID theft. Computer hackers and store clerks on the take account for much of the problem. Examples of both abound. In the early part of this year, hackers at the University of Texas stole the social security numbers of 55,000 faculty, students and alumni. In about the same period, clerks at pharmacies and shoe stores in New York, New Jersey and Connecticut sold the credit card numbers of their customers. Numbers were sold for $50 each to a crime ring that churned out 1,500 phony credit cards. Apparently, these were not unusual events. Last year, the Federal Trade Commission received about 162,000 complaints—a five-fold increase from the level in 2000. Financial Insights, an industry research firm, estimates that identity theft cost the industry $3.4 billion last year and could reach $8.2 billion by 2006,

The Bush Administration has assigned Wayne A. Abernathy, Assistant Treasury Secretary, to address the growing problem. His 12-point plan could include stiffer penalties for identity theft procedures to make identity more difficult. A top priority is to renew expiring provisions of the Fair Credit Reporting Act that permits credit grantors and their affiliates to exchange credit information about consumers. At the time a consumer applies for credit, lenders need to demand some form of identification to assure that the borrower is who he says he is. Another proposal would permit bank examiners to audit financial firms' procedures for identifying potential fraud by recent address changes. Finally, having longer sentences for offenders and allowing the victims of the fraud to sue for damages could reduce identity theft.