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| The Basics | Blame lenders, not thieves, for identity theft
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Without lax lending policies, thieves might still get your personal data. But stealing it wouldn't be nearly as profitable.
By Liz Pulliam Weston
Now that intruders have raided a second big consumer database, we're bound to hear lots more calls for increased federal oversight of the companies that buy and sell our personal information.
What will get far less attention, unfortunately, is the fact that these incursions wouldn't be so incredibly damaging to consumers' finances if lenders didn't make that information worth stealing in the first place.
Think about it: The only reason an identity thief cares about knowing your Social Security Number or other private data is that it can be used to open accounts in your name and commit fraud. Lax verification procedures at credit card companies and other financial institutions make that possible -- even easy.
Companies are so eager to grant credit, said Linda Foley, executive director of the Identity Theft Resource Center, that they will grant it to almost anyone for any reason.
How ID theft became big business
Identity theft is now Americas leading consumer complaint, according to the Federal Trade Commission, with an estimated 10 million new victims each year. The thefts range from opportunistic one-time events to huge, organized crime rings racking up millions of dollars in fraudulent charges each year.
In the two recent cases, thieves posed as legitimate customers to gain access to databases compiled by ChoicePoint and by its rival, LexisNexis. LexisNexis' corporate parent said personal information on as many as 32,000 consumers was compromised; in the ChoicePoint raid, as many as 145,000 people had their information stolen. At least 750 so far have become the victims of fraud.
Consumers are basically helpless. They have no choice about being part of these massive databases, since the companies can legally collect and sell the information without consumers' permission.
And once their information is compromised, there's not a lot they can do to prevent the thieves from opening up accounts. But the thieves wouldn't be able to take over consumers' credit accounts, or get new credit in a victim's name, without plenty of help from careless banks, credit-card issuers and other lenders.
Some of the most common lending practices include:
- Granting credit with incomplete and inaccurate identifying information.
- Ignoring fraud alerts on consumers credit reports (a new federal law prohibits this, but consumer advocates aren't sure how well the prohibition will work in practice).
- Sending out unsolicited applications and "convenience" checks.
- Continuing to report inaccurate information to credit bureaus.
- Ignoring and thwarting law enforcement attempts to investigate ID theft.
"The industry is highly competitive, and credit issuers are still making more money signing up new customers than they are losing from fraudulent accounts," said Beth Givens, executive director of the Privacy Rights Clearinghouse .Of course, victims of identity theft are the collateral damage of this diabolical business model.
The typical identity-theft victim, according to the clearinghouse, spends about 175 hours and $800 trying to clear up his or her credit report. Even consumers who arent victims pay in the form of higher interest rates and fees, thanks to rising fraud.
Heres just a sample of how lenders aid and abet the bad guys:
Sloppy credit-granting practices
You would think that thieves would need more than one or two pieces of identifying information to steal your credit. Youd be wrong.
Lenders regularly open accounts without correct names, addresses or picture ID, identity-theft experts say.
The Social Security number might be right but the name is slightly wrong and the address is wrong, said Steve Blackledge, legislative director for the California Public Interest Research Group, known as CalPIRG, which issued a report about law-enforcement response to identity theft. Most of this (credit granting) is computerized, and the computers arent catching it.
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