Identity theft is a subcategory of credit application fraud which, in turn, is a subcategory of overall credit fraud. Identity theft occurs when a thief hijacks the name, Social Security number, birthdate, and credit history of another person and uses it to steal.
Identity theft occurs when a thief hijacks the name, Social Security number, birthdate, and credit history of another person and uses it to steal.
Freddie then offers his buddy Sam $100 a month to use Sam's mailbox and telephone to receive mail and calls. The name John Doe goes up on the mailbox along with Sam's and Freddie calls the telephone company explaining that he is Sam's roommate and wants an "additional listing" in the phone book under his name. For a nominal fee the name Doe gets listed in directory assistance with the same telephone number as Sam.
Freddie now applies for a MasterCard by mail listing the name, date of birth, Social Security number, job, bank, and Doe's Visa and Texaco account numbers. But instead of Doe's address and telephone number, he uses Sam's.
MasterCard now pulls a credit report and finds that Doe is in good standing, but because the addresses are different, MasterCard calls directory assistance and gives Doe's name and new address at Sam's. The result confirms that Doe must have moved. The MasterCard is issued and the new address shows up on the credit report and the old address is deleted.
Several days after receipt of the MasterCard, Freddie receives in the mail a code to use it at automated teller machines. On twenty-five consecutive days Freddie withdraws $200 from ATMs until he exhausts the $5,000 credit limit on the MasterCard. No ID is ever needed. Meanwhile he is busy applying for many more credit cards under Doe's name.
The victim never finds out about all this until at least a couple of months have passed and unpaid credit card companies start calling him at work.
An Even Better Way
Freddie goes to Wheeling, West Virginia, and now rents his own trailer. He goes to a Mailboxes, Etc. (or similar storefront maildrop) and rents a mailbox using the business name "Acme Landscaping." Then he creates a job application and notice that Acme Landscaping is looking for high school students for part-time summer jobs. The application requests a name, Social Security number, birthdate, address, and other information. Freddie goes to a storefront speedy printer and has 1,000 copies made which he takes to the high school. He then gets the high school authorities to distribute them, or hires some student to do so. The instructions on the notice state that the application is to be returned by mail to the maildrop. In no time Freddie is in possession of dozens of fresh names and numbers of 15-year-olds who have never had credit and in which no credit reports exist.
Secured Bank Card Accounts
One of the job applications is from Richard Roe, age 15. Freddie puts Roe's name on his phone at the trailer park as an "additional listing." Roe's name goes up on the mailbox. Freddie calls Capitol One, an issuer of "secured" credit cards. These are for people with bad credit or no credit history at all and require a cash deposit. Freddie uses Roe's name and Social Security number, states he is 25, and says that he is employed at Jack's Liquor Store as a manager. Jack's son, Mickey, is a drinking buddy of Freddie's. Freddie gets Mickey, who works the day shift in his Dad's store, to "cover" for his "pal" Richard Roe. He explains that Roe has a chance at obtaining a decent job but doesn't have a good employment history. If anyone should call the liquor store asking about Roe, they should be told that Roe is the night manager and earns $43,000 per year. (Author's Note: My brother once had part ownership in a liquor store and says he had index cards near the cash register of 15-20 "phantom" managers ¾ all favors for friends.)Capitol One then pulls a credit report and because there is none, creates one. For a $99 mail-in deposit, Capitol One issues a MasterCard to Richard Roe with a $500 credit limit and mails it to Freddie's trailer park mailbox.
Domino Effect
With a genuinely issued MasterCard in hand, Freddie now starts applying for a slew of credit cards under Roe's name such as Visa, Sears, J.C. Penney, Texaco, Mobil, Shell, and TWA. Some will be issued and some won't, because the credit history is so new. The gas cards are the easiest to get, followed by the department store cards. Roe will have a credit report backing his name with a MasterCard account on it. Subsequent credit card issuers will not know that the MasterCard is a "secured card." The subsequent credit card issuers will send regular credit cards that are not secured. As for Roe, he will likely never find out that his credit identity was pirated for years, until he himself becomes old enough to apply for credit and it is denied due to a bad credit history.ID Not Needed
While it certainly is helpful to have ID that matches a credit card, it is usually not necessary. ATMs dispense cash. Gasoline is sold all over the country with nothing but a swipe of a credit card through the pump's card reader. Retail stores hardly ever ask for ID unless it is a major purchase. And goods can be ordered by telephone. No ID is needed to obtain the credit cards because it is all done by mail.Cash From Department Store Cards
Freddie uses credit cards to buy things from stores that simply cannot be shoplifted such as electronics from locked display cases and clothing that has sophisticated plastic anti-theft tags. Two days later he returns the articles for a refund explaining that he lost the sales receipt. Most stores will give the refund, knowing that it is highly unlikely that the item was shoplifted or that the person is a "shoplifter refund artist."Freddie also purchases gift certificates from the department store's service desk. The gift certificates are then used to buy merchandise. The change from the gift certificate is given in cash and the merchandise comes with a cash sales receipt. Two days later that merchandise goes back for a refund with a cash receipt.
Cash From Gas Cards
Freddie discovers that most gas credit cards such as Mobil have no specific credit limit. Many small purchases can be made in a short period of time, each purchase approved by the computer at the cash register. Thus Freddie one day spends fourteen hours going from one Mobil-Mart to another across his state and winds up purchasing a total of 310 cartons of cigarettes. At the end of the day he has a 2-inch high stack of Mobil receipts in the glove box and sells his cigarettes to a variety store proprietor for $10 a carton. In one day's time he makes $3,100 in cash from one Mobil credit card. Halfway through the next day the Mobil card is cancelled and dies. At the end of the month a bill from Mobil arrives and is trashed. Freddie repeats this scheme with other Mobil cards, using a different identity.Most Identity Theft Frauds Not Prosecuted
Identity theft is the investigative responsibility of the U.S. Secret Service, but only a very small percentage are investigated or prosecuted. The U.S. Secret Service, like most other federal law enforcement agencies, is very selective as to which cases it takes on. It will usually go after only the major operators taking down six figures or better.Identity theft is the investigative responsibility of the U.S. Secret Service, but only a very small percentage of these crimes are investigated or prosecuted.
The credit card companies rarely do anything but send bills, collection letters, make phone calls, and sometimes refer the debt to a collection agency, which does the same.
States are beginning to recognize identity theft as a crime after well publicized horror stories of victims spending months, even years, trying to get their credit histories fixed.
Protecting Yourself
There is only one fool-proof way to detect identity-theft and even that occurs after the fact: Acquire a copy of your credit report every two months or so and check it for accuracy. If there are new accounts on it that you didn't open, then it's likely you are a victim of a scheme.There is only one foolproof way to detect identity theft and even that occurs after the fact: Acquire a copy of your credit report every two months or so and check it for accuracy.
A New Social Security Number
The Social Security Administration has regulations providing new Social Security numbers when victims can show that they have been disadvantaged through no fault of their own. Identity theft is such a case.The Social Security Administration has regulations providing new Social Security numbers when victims can show that they have been disadvantaged through no fault of their own. Identity theft is such a case.
Conclusion
Identity theft is not new. It's just been well publicized lately. There is no absolute way to prevent it. Even if you don't throw your discarded bills and bank statements in plastic bags at the curbside, there are many computer hackers around who can electronically invade databases for personal information. Identity theft will always be with us, until such time as every transaction in America requires infallible identification such as fingerprints or retina scanners.