All Sectors Describe FCRA as Important to Identity Theft Prevention and Detection

WASHINGTON-Debate on the reauthorization of the Fair Credit Reporting Act has heated up as congressional hearings wind down and rumors fly about the administration’s position on the law. The House Financial Institutions and Consumer Credit Subcommittee held its fifth hearing last week on FCRA, entitled “Fighting Identity Theft – The Role of FCRA.” The Senate Banking Committee held a similar hearing on June 19. Also, the Banking Committee scheduled a hearing for June 26, after press time, called, “Affiliate Sharing Practices and Their Relationship to the Fair Credit Reporting Act.” Representatives from Wells Fargo, U.S. Public Interest Research Group, and others were lined up to testify. During the House subcommittee hearing last week, identity theft victims provided compelling stories demonstrating that more needs to be done to prevent identity theft. One such victim, Maureen Mitchell, a realtor in Ohio, conveyed the harrowing story of how her family was victimized not once, but twice. Her husband’s name and Social Security number were used to purchase a Ford Expedition, which the fraudulent purchasers eventually torched and filed a fraudulent insurance claim against. Mitchell was astounded to discover all the red flags that should have gone off with the dealership and lenders, but did not. For example the two men who purchased the car said they lived at the same residence, but provided slightly varying addresses; the area code (300) for the phone number provided by the applicants was not valid in the continental United States; instead of a driver’s license the imposter provided a janitorial services photo identification card on which the signature did not match the applicants; and `Mitchell’ was misspelled on the loan application and the fax from the lender approving the loan. “Had this transaction been processed using due diligence and an iota of common sense these blatant discrepancies would have been caught,” Mitchell’s written testimony read. Other loans were taken out using Mitchell’s identity. Finally, after hundreds of hours of work, calls to the Federal Trade Commission, lawmakers, local and federal law enforcement, and contacting all the businesses where credit applications had been submitted, Mitchell thought the battle was over. However, when she and her husband went to apply for a mortgage for a second home, they were nearly declined because of a derogatory report with Experian from Firstar Bank on that Ford Expedition. Mitchell said a friend commented, “You know, Maureen, you should have had the criminals apply for the mortgage loan; they would have gotten it with no problem!” Then another criminal used Mitchell’s identity and took more than $34,000 out of their savings accounts. When the problem was discovered, all of the Mitchell’s accounts were frozen, including their checking account for daily needs. “The scales of justice are tipped in the wrong direction when an identity theft criminal is sentenced to serve a shorter period of incarceration than the length of time it takes the identity theft victim to clear their credit report and restore their good financial reputation! The jail sentences imposed on ID theft criminals by state and federal courts need to be of sufficient duration to serve not only as a deterrent, but to truly reflect the egregiousness of these crimes,” Mitchell’s statement read. She added that it was ironic that the criminals could fill out fraudulent applications changing their address, yet the Mitchell’s were “inundated with paperwork requiring us to `prove’ our identity and address.” Mitchell testified that she and her husband were knowledgeable consumers and never gave out their social security numbers over the phone or lost their wallets or banked online. Protecting Yourself So what is a consumer to do? U.S. Postal Inspection Service Congressional & Public Affairs Inspector in Charge Daniel Mihalko explained in his written testimony that there are several steps that consumers can take to help protect against identity theft. Some simple steps include: * Depositing outgoing mail into a blue Postal Service collection box and remove mail from your mailbox as soon as possible; * Shredding unneeded documents with personal information; * Ordering credit reports each year from all three major credit reporting agencies; * Never giving personal or financial information over the phone or the Internet unless you initiated the contact and trust the recipient; * Reporting lost or stolen credit cards immediately; * Calling lenders when you have applied for a credit card and not received it when expected; and * Signing new credit cards immediately, among other things. Consumers Union Legislative and Regulatory Counsel Janell Mayo Duncan laid some of the blame of identity theft with sloppy industry practices, rather than consumers’ handling of their own information. She cited a six-year old article in Consumer Reports regarding identity theft. “The similarity of victims’ stories today evidences continuing industry practices that make committing these crimes possible,” she stated. The article highlighted flaws in the credit granting system, Duncan explained, including lax identification verification standards; too-convenient credit like “quick credit” and convenience checks; carelessness with credit reports (only a name and social security number is needed to obtain a credit report); inadequate fraud detection; ignored fraud warnings; and unfair correction practices. Duncan made several suggestions to amend the current system such as allowing the federal preemption to expire; banning the commercial use of Social Security numbers; requiring credit card number truncation; restricting affiliate information sharing, providing free monitoring for fraudulent activity; requiring creditors to follow fraud alerts, and requiring at least four identifiers before granting a credit report request, among other changes. She added that increasing punishments for identity thieves is not enough and that industry practices must be addressed. However, MasterCard Senior Vice President and Assistant General Counsel Joshua Peirez disagreed in his written testimony, stating that information sharing may actually aid the fight against identity thieves and that the FCRA preemptions allow consumer credit reports with a federal standard to be available regardless of where they live. “A single standard with respect to the contents of consumer reports is critically important to ensure that the ability to properly identify customers, and therefore to provide financial products and services to them, is uniform across the country.” his testimony stated. “Financial institutions seeking to provide consumers with financial products or services across the country must be able to rely on a uniform standard for credit reports.” Peirez also said that a card issuer could have access to more information to prevent identity theft if they can receive information from an affiliated lender that the true person may have used. He added that consumers have the right to opt out of credit report information sharing. “The availability of affiliate sharing as an identity theft prevention tool would be significantly undermined if states were free to impose their own restrictions on affiliate sharing activities,” he said. [email protected]