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| The Basics | Blame lenders, not thieves, for identity theft
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The thief who stole Tom Richards identity got Sears to issue two MasterCards -- and to send them to a different address than the one listed on Richards credit report.
Richard, a Huntington Beach, Calif., resident, said Sears told him the application was taken over the phone and that enough information on the application matched his credit report for the company to issue the card. Sears sent a letter to Richards correct address advising him the card had been issued, which allowed him to call and report the fraud. But he was amazed that the company had granted the credit in the first place.
I know that it is impossible to stop fraud, he said, but under these circumstances, shouldnt Sears require the perpetrator to present in-person positive identification . . . if they cannot verify the mailing address?
Ignoring fraud alerts
Consumers have the right to ask credit bureaus to put fraud or security alerts on their credit reports. These alerts signal lenders that the consumer wants to be contacted by phone before credit is granted. Typically, theyre placed by consumers who have already been the victims of identity theft.
Incredibly enough, lenders frequently ignore these alerts.
Lenders say its too expensive for them to verify every credit application by phoning the consumer, Foley said. Lenders are now required to make a "reasonable effort" to contact consumers before opening new accounts, but there's been little guidance about what that might constitute.
Unsolicited credit-card offers and convenience checks
You can add your name to the credit bureaus opt out list, which removes you from the mailing lists the bureaus sell to credit card issuers. (The number to use is 888 5-OPT OUT or 1-888-567-8688.)
But as anyone who has signed up with the service can attest, the credit-card solicitations keep coming, since not all lenders subscribe to the opt-out service. By ignoring consumers expressed wishes, these credit-card issuers give thieves a relatively easy way to set up a bogus account.
Its even harder to convince your current credit-card issuers to stop sending those convenience checks -- which can be far more dangerous than a credit-card application. All the thief has to do is fill out the check and sign it to have instant access to cash.
Continuing to report disputed accounts
This is one of the reasons that cleaning up identity theft takes so long. A victim reports identity theft to a merchant or lender, who promises to remove the fraudulent charges or account from the consumers credit report. A few months later, however, the bogus charges surface again.
Its a bookkeeping or recordkeeping issue, Foley said. You think you have it cleared up, but its not properly noted in the file, so its reported again or sent to collections.
Financial planner Eileen Freiburger said shes spent years getting fraudulent accounts taken off of her credit report, but they keep reappearing. Her recent mortgage refinancing nearly was derailed by an old, fraudulent charge for $4,000 that she thought had been deleted from her report.
Lenders and merchants just dont want to clear it up, Freiburger said. The ball gets dropped.
Refusing to cooperate with police
Law-enforcement agents say that one of the biggest frustrations they face in investigating ID theft, besides a lack of resources, is lender stonewalling.
Investigators interviewed by CalPIRG said they regularly encountered lenders who failed to return police calls, refused to provide copies of credit applications and even ignored some search warrants.
Companies dont have to honor search warrants issued by out-of-state courts, Blackledge said, and many dont.
Of course, some companies, stung by fraud losses too large to ignore, have taken steps to curb the trend. Theyre requiring more identification, honoring fraud alerts and refusing to send goods or credit cards to addresses other than the ones listed on applicants credit reports. Some employ sophisticated software that analyzes applications for possible fraud.
But many companies still are refusing to change their procedures, and so identity theft continues to grow at an exponential pace.
Unless some major changes are made in the way . . . credit issuers verify applications and grant credit, Foley warned, then we may very well all become victims of identity theft in our lifetime. Its more of a reality now than a threat.
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