Identity Theft

We've all heard horror stories about credit card fraud and identity theft. With your complete set of information, thieves can clean out your bank and investment accounts, charge on your credit card accounts, redirect financial statements, change passwords, and open new accounts. They can very quickly steal your good name.

Physical loss, including physical counterfeiting, is the biggest problem - blank checks, credit cards, your entire wallet. Computer based fraud without physical access is highly visible, and growing. The Federal Trade Commission's Consumer Credit site is excellent. California's Privacy Protection site also discusses specific California rules.

Financial institutions are increasingly not reimbursing losses. Credit card companies have historically reimbursed more than the law requires. They make more money when you use their cards, and they do not want bad publicity. Banks seem to take a harder line, possibly because of Check 21 (see below) and other rapid changes in the banking business. In either case, the trend is to blame the account holder for loss of checks or a password, and to refuse to reimburse you.

Speed is of the essence, when you suspect theft of confidential information. The Federal Trade Commission's Identity Theft Center is excellent. Here are steps you can take:

Contact the fraud specialists at your financial institutions. Hopefully, you can contact your financial institutions quickly (even while you are traveling) from the list you keep up to date. At the very least, change the compromised account, and all your passwords at that institution. Each institution will help you to understand the extent of any (potential) damage, and what specific steps that institution can take, such as a fraud alert.

Place a fraud alert with the three national credit reporting firms (listed under the fraud prevention steps, below). Some states, including California, require them to freeze your account on request and for a small payment, currently $10. If you freeze your account, most financial institutions will deny credit applications, both your's and the fraudsters'.

File a police report - in the jurisdiction where a physical theft occurs, or for online theft, where you live. A police report documents your timely diligence, and is a first step in any future investigation.

File a complaint, and maybe an Identity Theft Affidavit, with the Federal Trade Commission.

Notify anyone and everyone else, including the Social Security Administration fraud line, 800-269-0271, the Department of Motor Vehicles, utilities, department stores, lenders, and telephone companies. They might be willing to place a fraud alert on your account, even issue another account number, depending on your situation and their rules.

Make detailed notes, which will help to cut your losses, and to catch the bad guys. You will forget these details, unless you write them down.

Monitor all your accounts even more closely.

Here are some suggestions to prevent and mitigate identity theft:

Copy both sides of the important documents in your wallet: driver’s license, credit cards, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the copy in a safe place that you can quickly access, especially when you travel.

Order one free credit report each year from each of the three credit reporting firms. Under the Fair and Accurate Credit Transactions Act, effective December 1, 2004, you must start here, or call 877–322–8228. You will be surprised how often companies check with and report to these firms, such as when you apply to open a new account, approach your existing credit limit, and use your credit card in an unusual way. Beware that these profit making firms will try to sell you additional services, such as your credit score. Beware of scammers who offer to help you, if you will only tell them your confidential information.

Change your passwords and PINs often. Avoid obvious ones, and the same ones for multiple accounts. You will have alot of them, so write them down in a secure place. Avoid obvious places, as the emergency key to your house, which is too often under the front door mat, or in the flower pot. One solution is password vault software, so you only have to remember one master password.

Guard your social security number (SSAN). Don't print it on your checks. Too often, organizations identify you with your SSAN, instead of using their own unique identification numbers. Don't give it to organizations that don't need to know.

Secure your postal mail. Put outgoing envelopes directly in a secure mail box, instead of leaving them unguarded until the mail carrier collects them. Make sure you have a secure mailbox for incoming mail. Open your mail timely.

Print a minimum of information on your checks. Handwrite anything that a store requires. Tell the cashier that you object to writing on your check any more than is absolutely necessary. Print only your first and middle initials, and last name. A thief will have a harder time forging your signature. If you feel you must print your address and telephone number, use a PO Box or work, anything but your main home address and telephone. Printing your social security and/or driver’s license numbers for everybody to see just asks for trouble.

Do not write full account numbers on the ‘for’ line of your check, such as when you pay credit card bills. The credit card voucher you include in the envelope should be sufficient to identify your account. If you must write something, write an incomplete number, such as the last four digits.

Reconcile your bank account promptly. The new Check Clearing for the 21st Century Act, aka Check 21 (effective October, 28, 2004) moves banking into the digital age. Now, fraudsters can steal more easily and quickly. Receiving banks will now scan checks, destroy the paper, and send them electronically to the paying bank. Float time will decrease dramatically, as paper checks must no longer be delivered, so don't depend on float to cover your checks. Your bank account will be more vulnerable than your credit card accounts, since the fraudsters need only your bank account number, not an expiration date, password, etc. Your bank will not refund incorrect items that you do not report promptly. Another, more cumbersome, safeguard is to send a positive pay list to your bank, as you write checks.

Secure your computer. Fraudsters trick you and your computer into revealing your confidential information, such as your account numbers, social security number, mother's maiden name, passwords, etc. Never give this confidential information to anyone who contacts you. You initiate the contact with your financial institution, with the web address or telephone that you have used before. All my life I have received the Nigerian scam, by mail, then by email. A Nigerian has millions of dollars. All he needs to liberate the money is my confidential information, then I get a huge fee. Fraudsters' tricks include:
* Phishing (fishing, get it!) for confidential information. They just want to 'confirm' your account details, so you will be able to continue using your account. Their email and the web site they use are all very professional looking. They use sophisticated tricks to hide clues that they are are not really Citibank, EBay, or whomever.
* Pharming your computer's settings to divert you to the fraudsters' web sites.
* Spyware and Malware, that may merely report on your surfing for advertising purposes, or that may log your keystrokes to capture your confidential information for identity theft.

Take extra care when you you use a strange computer. Microsoft’s bCentral recently published an article about a thief who installed a virus on public computers to steal unsuspecting users' private information. When you use a strange computer, check for spy programs, erase your tracks, protect your passwords, don't rely on encryption, and use common sense.

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William M West Certified Public Accountant
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San Jose, CA 95126

Last Updated 5/30/05
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