Why Lenders Overlook Warning Signs of ID Theft

Hugh Pickens writes "Despite all the new fraud alert tools and increased awareness of the perils of identity theft, incidence of the crime remains at 2003 levels, with about 10 million Americans falling victim every year. Now the NY Times reports that there may be a simple reason for the persistence of ID theft: lenders are too willing to extend credit to just about anybody, even when there are big red flags that indicate fraud. Chris Jay Hoofnagle at UC Berkeley worked with a small sample of six ID theft victims and delved into how they were defrauded. Of 16 applications presented by imposters to obtain credit or medical services, almost all were rife with errors that should have suggested fraud — yet in all 16 cases, credit or services were granted anyway. 'Identity theft remains so prevalent because it is less costly to tolerate fraud,' writes Hoofnagle. 'Adopting more aggressive and expensive anti-fraud measures is extremely costly and jeopardizes customer acquisition efforts.' Hoofnagle says business decisions leave individuals and merchants with some of the externalities of identity theft as victims spend their own money, and more often, valuable personal time dealing with the problem. Hoofnagle suggests that lenders contribute to a fund that will compensate victims for the loss of their time in resolving their ID theft problems."

Re:Here we go..

[Shakrai]

If you steal someone's identity and scam a bank out of $1,000, then there is more than one victim: namely, the person whose identity you stole, and the bank (or broadly, its shareholders)

If the ID theft involved a credit card account then you can add the merchant(s) to your list of victims. When a credit card charge is disrupted it's the merchant who winds up taking the hit.

Lenders will do nothing until it costs them money

[KDN]

Lenders will not do anything until it costs them more money to get it wrong than to get it right. I have recently been the target of a fraud. The bank has called me 4 times in the past year about this account. They have my name and my home telephone number. They have the wrong home address, nothing right except the state. They have the wrong SSN. They have the wrong birth month, day, and year. The birth year is off more than 30 years. The card has my name and some other guy (I'm not even going there). How much do you need to get wrong before you refuse this guy? How did they get my phone number? My suspicion is that the original phone number was incorrect so they just looked up anyone with my name in my state and updated it.

Twice I hung up on the bank because I thought they were a telephone phishing attack trying to get me to hand over PII (They were asking my SSN, my home address, my birthdate). The last two times I've talked to their fraud department saying that whomever this is is not me and has no PII even close to me.

Re:Here we go..

[Lumpy]

Or compared to the number of Ford F150 pickup truck fires that actually caused deaths and damage. Oh wait, let's ignore that because a pickup truck is AMERICAN!

Risk - Insurance - Investments -Investor's Risk

[sherriw]

This is why they can get away with it; Lenders sign up as many new lending accounts as possible. They have certain % that will default or are fraudulent. They buy insurance for this risk. The insurance company sells insurance policies which it says have a certain risk (low compared to the # they sell) of actually being claimed on. An insurance policy is something that keeps making money (with a certain % risk of being claimed on). These policies are sold as investment instruments (insurance bonds) to investors. Investors like you and me. They are put into people's pension funds, 401Ks, RRSPs, wrapped into various types of funds. And bingo.... it is now you and I who are carrying the risk. Magic.

Re:Here we go..

[arekusu_ou]

I do own a Toyota Camry and I love it, and thought all that sensationalism was total BS.

I was asked, well if your car suddenly accelerated out of control, what will you do!

I answered, well the first thing I would do is push my gear shift forward from D to N. I don't know if it's a safety feature, but D to N doesn't require pressing the release button on the side, just pushing it with enough force.

Then I'd tap my breaks and start slowing down as if there was bumper to bumper traffic suddenly showing up in front of me. I'd try to coast to breakdown lane if I could, even in neutral you have some momentum left. I know, my engine in a Ford Taurus and Pontiac Grand Pris cut out on me twice on the highway, leaving me with sluggish steering wheel.

My other options once I'm in neutral is yanking on my emergency brake and using my emergency blinker, because that's what they're there for, but emergency brakes aren't safe at high speeds.

Slamming on my breaks or panicing doesn't do me any good. And if I get rear ended in that situation, well the person behind me wasn't paying enough attention since I tapped my breaks as a warning before slowing down. If I ram the person in front of me, than I was tailgating them and that's my own god damn fault and not my cars.

The problem is that we dumbed down America so much, the driving skills are so abhorrent and a god damn given "right" that even the worst and dumbest of drivers can pass, and the thinking and rational skills of people are nearly non-existent. There may be a flaw in a car design that strikes 1 in millions, hundreds of millions, who knows under what conditions. That IS generally an acceptable margin of error in design because NOTHING is perfect, and to believe so would be hubris.

Re:Credit Agencies

[QuantumRiff]

They do that already, but they charge for it. Why would they want to ruin a perfectly good revenue opportunity?

However, you can put a freeze on your credit report, and people can't pull it unless you are contacted and approve.

Catching fraudulent checks, so we stopped IDng

[McDozer]

In the past few months I've had some checks stolen. All the checks were used at the same grocery store and they used the electronic scan thing where they pretty much run the check kind of like they do a debit card. I went to the grocery store ( Harvey's Supermarket....I'm outing them because of how shady this is.) the same day I noticed the check was ran and asked the manager if they still had the check because I wanted to see how it was signed. He told me they do not keep copies of the checks and explained the electronic system they use. I asked him 'So you guys don't ask to see identification when someone is writing a check?' ( I personally believe anytime a check or debit/credit transaction is made presenting an ID should be required. ) his reply was.....'Well, we use to, but then I ended up spending so much time in court because of all the people we were catching writing fraudulent checks that we quit checking IDs'. So I'm like 'So, you quit checking IDs because you were catching so many people?'....his reply...'Well, I know it sounds bad but yeah.'. So I'm like, 'Well that is just great.'. It's pretty obvious if you check someones ID and the name on the ID is not the same as the name on the check that something is up. I mean, come on....your catching people and have to go to court over it so you just stop checking? What kind of shit is that? It really sucked, they don't have a copy of the check, do not keep the original check and since they do the electronic scan I can't see a copy of the check with my online banking ( like every other check I write ) so there was no way to do anything about it. I was pretty much assed out of quite a bit of money and ended up with a couple of bounced checks which ended up costing me more money because of the fees that bounced checks incur. I ended up having to cancel quite a few of my checks just to make sure I wouldn't have more of them written fraudulently which cost me more money. It was a total let down because my bank would not reimburse me and Harvey's Supermarket were surely not going to reimburse me. I was just shocked at the logic. I'm sure there is a good car analogy for this situation but I'm not to good with car analogies....maybe something like the police saying.....'Well, we kept catching people with stolen cars when we set up a roadblock in this neighborhood, it was causing us so much paperwork and court time so we decided to just stop setting up roadblocks in that area.' What a bunch of hosers!

Re:Credit Agencies

[ptbarnett]

How about the credit agencies be required to inform me when they give out reports about me? They already know everything about me, right?

You can get this service, for a fee. Unfortunately, you have to pay for it.

Also, you can put a fraud alert on your credit file. That forces the lender to contact you directly to confirm your application. Unfortunately, you have to renew it every 60-90 days, at all 3 credit reporting agencies. Of course, you can pay a fee to have someone do it for you.

I've been paying for this service for a few years. I don't like it, but it's a necessary evil after my birth certificate was stolen during a burglary at the home of another family member.