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Guest Commentary: September 6, 2001
Consumers Need Help Protecting Their
Good Name from Identity Theft
The Honorable Dianne Feinstein
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What is identity theft? Identity theft occurs when one person uses another person's Social Security number, birth date, driver's license number, or other identifying information to obtain credit cards, car loans, phone plans or other services in the victim's name. The criminal literally assumes the identity of the victim for illicit gain.
Identity theft is one of the fastest growing crimes in the new economy. The Federal Bureau of Investigation estimates 350,000 cases of identify theft occur annually.
If recent trends continue, reports of identity theft to the Federal Trade Commission will double between 2000 and 2001, to over 60,000 cases.
Fully 40 percent of all consumer fraud complaints received by the FTC in the first three months of 2001 involved identity theft.
Consider some of the following cases: my constituent, Kim Bradbury of Castro Valley, reported that an identity thief obtained a credit card in her name through the Internet in just 10 seconds. The false application only had her Social Security number and birth date correct.
A man's drivers license was stolen at a night club in Florida. The thief opened a checking account in the man's name at multiple banks and used the accounts to engage in financial fraud. The police, in pursuit of the identity thief, mistakenly arrested the victim five times for crimes committed by the identity thief. One of the arrests caused him to miss his honeymoon.
Three youths robbed a young woman on a San Francisco MUNI bus. The thieves stole her driver's license and Social Security card.
While the victim was traveling over the Christmas holiday, the thieves represented themselves as her and drained her bank accounts, and applied for cell phones and credit cards in her name.
[The Identity Theft Prevention Act of 2001] attempts to stem the tide of identity theft by requiring banks, credit bureaus, and other financial institutions to take some practical steps to protect sensitive personal information.
- The Identity Theft Prevention Act of 2001 would require all new credit-card machines to truncate any credit card number printed on a customer receipt. Thus, when a store gives a customer a receipt from a credit card purchase, only the last five digits of the credit card number will show. This prevents identity thieves from stealing credit card numbers by retrieving discarded receipts. Existing machines would have to be reprogrammed to truncate credit card numbers on receipts by 2006. Given that most credit machines have a working life of approximately five years, this reprogramming requirement will put a minimal burden on businesses.
- The bill requires a credit card company to notify consumers when an additional credit card is requested on an existing credit account within 30 days of an address change request.
- The bill would require credit bureaus to alert credit issuers of discrepancies between the consumer's address in the bureau's records and the address in the consumer's application for credit. Thus, credit card issuers would be alerted to possible fraud.
- This bill codifies the industry practice of placing fraud alerts on a consumer's credit file and gives the Federal Trade Commission the authority to impose fines against credit issuers that ignore the alert.
Too many credit card issuers are granting new cards without adequately verifying the identity of the applicant. Putting some teeth into fraud alerts will curb irresponsible granting of credit. ...
Some may question why Congress needs to impose tighter information practices on banks and credit bureaus to address the identify theft crisis. After all, it is true that banks are on the hook for any personal credit losses over $50 due to fraud.
Presumably, if banks were losing excessive amounts of money due to identity theft, they would tighten their information practices. However, the problems that face identity theft victims are independent of market forces.
So much of identify theft victims' suffering comes from sources other than credit card losses.
For example, victims often face extreme difficulties clearing their damaged credit, or even a criminal record, caused by the thief. The typical victim of identity theft spends over 175 hours over two years to clear his name.
This legislation has earned the widespread support from a number of consumer and victims groups including the Identity Theft Resources Center, the Privacy Rights Clearinghouse, Consumers Union, U.S. PIRG, and Consumer Federation of America.
The Identity Theft Prevention Act of 2001 requires financial institutions to take some simple precautions to prevent identity fraud and protect a person's good name.
Verifying a credit applicant's address, complying with "fraud alerts", notifying credit card holders of unusual requests for new cards, and truncating credit numbers on receipts are all measures that will it make harder for criminals to engage in identify fraud.
It is appropriate and necessary for financial institutions to take these steps. These companies have a responsibility to prevent fraudsters from using their services to harm the good name of other citizens. Morever, in this complex, information-driven society, consumers simply can't protect their good name on their own.
Note: This commentary has been adapted from a speech Sen. Feinstein gave on the floor of the Senate, September 4, 2001.
 How to contact Senator Dianne Feinstein (D-CA)
Reading a past guest commentary? Click here for the most current one.
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