In 2017, approximately 16.7 million individuals in the United States were impacted by identity theft, suffering a total loss of $16.8 million. The vast majority of these individuals discovered that their identity had been stolen when they applied for a loan, a rental property, or took any other action that prompted a check of their credit history.
Identity theft can create significant financial and legal consequence for victims, damaging their credit scores and creating an uphill battle to clear their names and resolve disputed debts. It is crucial for every American consumer to understand what identity theft is and how to protect themselves from it.
What is the difference between identity theft and credit card fraud?
Identity theft occurs when an individual steals your personal information and fraudulently uses this information to make purchases to open a new line of credit, open a bank account, obtain an ID with your name, apply for government benefits, or open a new credit card.
When someone uses your personal information to open a new credit card or uses your credit card number to make purchases without your authorization, they are committing credit card fraud. Typically, if your credit card company identifies a potentially fraudulent charge on your account, based on unusual activity it flags, they will decline to process subsequent charges until they are able to confirm with you that the charge was authorized.
If you see a fraudulent charge on your credit card statement, you can also contact your credit card company to dispute the charge. Most credit card companies will limit your liability for fraudulent charges to $50 and some will not hold you responsible for any amount charged fraudulently, after conducting an investigation and concluding that the charge was unauthorized by you.
What Are the Common Ways That Identity Theft is Committed?
To prevent against identity theft, you must understand how it is committed. With large amounts on personal data exchanged digitally each day, many instances of identify theft are committed with technological mechanisms like skimming, phishing, and “man-in-the-middle” (MITM) attacks.
- Skimming: Skimming refers to a method of identity theft where the thief installs a small device on an electronic machine that collects credit or debit care information like a payment card reader or an ATM machine. This device allows them to intercept the exchange of data and collect your credit card information.
- Phishing: Phishing occurs when an identity thief tricks a consumer into providing personal information like their name, date of birth, social security number, credit card number, ATM PIN, or bank account number. They may do this by sending a fraudulent email, creating a fraudulent online form to collect information, or even requesting this information from you over the telephone under false pretenses.
- Man-in-the-middle attacks: A ‘man-in-the-middle’ (MITM) attack refer to when an identity thief uses their physical proximity to a victim, a special device, and an open internet connection, in an café or another public place, to monitor the activity of a victim and steal any personal information they input or have on their computer. Identity thieves can also use this method through malicious software or malware. You can take steps to prevent these types of attacks like installing a computer security system and not using public Wi-Fi without a virtual private network (VPN).
Of course, there are also some ‘old-fashioned’ methods of identity theft that do not require master computer skills including:
- Stealing your physical credit card or ID: In our increasing swipe-and-pay society, if someone steals your credit card, it can be easy for them to quickly rack up charges. A merchant can request to see a person’s ID if they suspect credit card fraud or as a standard practice, but many establishments do not. Instead, credit card theft is often flagged by banks identifying unusual account activity or by credit card holders when they discover a fraudulent charge on their statement.
If someone steals identification documents from you, especially your social security card, they can use this to obtain loans and government assistance. This can have a devastating impact on your personal finances and even your criminal record, if the individual commits crimes when operating under your identity.
- Dumpster diving: These acts occur when somebody goes through another person’s garbage to obtain personal information from the person’s trash such as credit card bills, utility bills, medical statements, and more. Always be sure to shred documents with personal information to avoid becoming a victim of identity theft.
- Mail Theft: Mail theft can turn into identity theft if someone steals your mail and uses or sells personal information contained therein. While this is not always preventable, choosing paperless documentation options and promptly retrieving your mail, when possible, can reduce this risk.
How Do I Avoid Becoming a Victim of Identity Theft?
Identity theft affects about 1 in 7 people each year and every American should be prepared to protect their personal data from vulnerabilities that could expose them to identity theft. Here are some steps that you can take to prevent identity theft without breaking the bank:
Freeze or Lock Credit
You can limit the usage of your credit information by freezing or locking your credit. This means that your records will be restricted and that no new credit files will be opened until you provide direct authorization.
Safeguard Your SSN
You should always be vigilant about protecting your social security number (SSN). If you are asked to provide your SSN, inquire why it is needed and if your SSN will be shared with any third parties. Ask whether you can provide alternative identifying information. Keep your social security card in a safe place at home, as well as any documents that contain your SSN. If you do not need to retain a document that has your SSN printed on it, shred that document.
Use Strong Passwords
If you apply a random combination of numbers, letters, and special characters when creating a password for personal accounts, you will have stronger protection against identity thieves. Using a predictable password like your last name or your pet’s name does not provide you with strong protection against hackers because it is easy to guess these passwords and gain access to your personal information.
Limit the Amount of Personal Information You Share
You should always limit the sensitive personal data you share with others. Displaying your full name and birthday on your social media accounts can aid identity thieves, particularly if they have other sensitive data of yours. Also, if you need to have a phone conversation with your bank or another party in which you must provide sensitive personal data, you should not do so in a public place where others can hear and steal your information.
Use Caution in Stores
Always guard your purse, wallet, identification, and credit cards when shopping. If you need to enter your debt PIN, make sure no one is watching you enter the number on the pin pad.
Monitor Your Accounts and Statements
Regularly monitor the charges on your credit card and bank statements. Even if you see a small charge that does not look familiar, contact your bank. Sometimes when identify thieves use skimmer devices, they first charge a small amount to test your card and see whether you will notice the charge before making a more significant purchase later on. You should be able to account for every expense charged and if you do not recognize a charge or believe it to be fraudulent, contact your bank account so that they can investigate the charge.
Install Computer Security Software
Having computer security software installed on your computer can also protect the personal information saved on your computer from attacks through malicious software and malware.
Check Your Credit Report
At least annually, you should obtain a free credit report from one or more of the three credit reporting bureaus. By law, these credit bureaus−Experian, Equifax, and TransUnion−must each provide you with one free credit report each year. You can obtain a copy by visiting https://www.annualcreditreport.com/ and requesting your free report.
You should carefully review your report for any lines of credit or new credit cards that you did not apply for yourself or have knowledge of. Also, make sure to closely examine any accounts listed in collections. If you have unknowingly been the victim of identify theft, it is unlikely that the thief paid back the debt they incurred in your name.
What Should I Do if I am a Victim of Identity Theft?
If you see any accounts that you do not believe you are responsible for, you should file a dispute and have your claim of dispute reported to all three credit reporting bureaus.
Federal law, under the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA), protects victims of identity theft by allowing them to place fraud alerts on credit files and requiring credit bureaus to investigate claims of fraud. As a consumer, it is important to know the steps you should take in the event you become a victim of identity theft. If you find yourself in this unfortunate situation, consider taking the following steps:
Fraud Alert: A fraud alert is placed on your credit report so that credit cards and other institutions running your credit will see that you have been a victim of identity theft. When a fraud alert is placed, you will be entitled to a free copy of your credit report. From there, you can dispute accounts and activity that you did not authorize.
Contact Institution: If you are aware that your credit card or debit card was stolen or lost and there are unauthorized charges to your account, contact your bank right away to cancel the card and investigate the unauthorized charges.
Contact Federal Trade Commission: If you are a victim of identity theft, you should contact the Federal Trade Commission (FTC) to report the event and generate an Identity Theft Report, which will provide you with information about what you should do next.
File Police Report: You may also want to contact your local police department to report the identity theft. Certain creditors may request a copy of the police report and you will also need this report if you need to file for a new SSN.
Victims of Tax-Related Identity Theft: If you believe that you have been a victim of tax-related identity theft, you should complete IRS Form 14039, Identity Theft Affidavit.
Identity theft can have devastating financial and legal consequences that pour over into other areas of your life. As dealing with the aftermath of identity theft can be very stressful, it is best to take proper precautions to safeguard your personal information before you become a victim of identity theft.
Of course, even those who are prudent to do so may still fall victim of this crime. If you or a loved one have become a victim of identity theft or fraud, contact our knowledgeable and experienced team to help you navigate your legal options to reclaim your life.