BOSTON—Identity theft
is the fastest growing crime in America according to the Federal Trade Commission,
and states are taking action following numerous breakdowns in security of consumers'
personal information by some of the nation's leading financial institutions.
Most recently, MasterCard announced that 40 million of its customers had account
information breached by identity thieves. Across the nation, state legislatures
are taking action to prevent identity theft by requiring businesses to notify
consumers when their personal information is lost or stolen, and are allowing
consumers to block access to their credit reports, preventing would-be thieves
from opening credit in the consumers' name.
On Beacon Hill, the Joint Committee on Consumer Protection and Professional
Licensure held a public hearing on several bills to increase consumer protections
against identity theft, including "security freeze" and "security
breach" notification laws.
Several victims of identity theft testified before the committee.
Sandra Pochapin of Southborough became a victim of identity theft when a pet
sitter stole a pre-approved credit card out of her mail, activated it, and racked
up thousands in her name. The thief used the credit card to open other accounts
at retail stores and to get a cell phone. It took her years to clear up these
accounts.
"I spent hours on the
phone with credit card companies, constantly on hold," she said. "No
one believes you. These people make you wait forever to get any action. You
need a police report, too, but local police aren't much help."
Bill Loesch of Dorchester
had a tenant who would get home before him and go through his mail. The ID thief
opened a credit account in his name using his stolen Social Security number
that she found on documents in the mail. She racked up $5,000 in computer store
charges and $1,000 in cell phone bills. It took him five years to clear up the
mess, and he still fears his credit has been ruined. The crooks also stole his
daughter's information and ruined her credit as well.
"I still have problems,"
Loesch said. "I got rid of all my credit cards and I have my mail sent
to a drop box now, but I bet if I was looking for a loan I'd be denied."
Karen Leonard of Charlestown
had an identity thief obtain her Social Security number and open several credit
accounts in her name. Using Sears, Home Depot and other department credit cards,
the thief racked up over $10,000 in charges. She spent more than a year trying
to solve the situation. As a result, she was denied an apartment because her
credit report was so bad, had numerous collection agencies hounding her to pay
up, and was denied financing to purchase a home.
"I felt that I had
taken on a full-time job while trying to finish law school and study for the
bar."
Since 36 perecent of identity theft complaints in Massachusetts are a direct
result of credit card fraud, the single most effective way to prevent identity
theft is to adopt the "security freeze," which would prevent new credit
from being issued to a consumer without their permission.
These scams would have been prevented if these consumers had been allowed to
freeze their credit reports. A "security freeze" bars lenders and
others from reviewing an individual's credit report. Because few lenders will
issue credit without first seeing a credit report, identity thieves can't open
fraudulent accounts using the name of someone who has frozen his or her credit
reports.
"With a security freeze the consumer is in control of their own credit
information," said Eric Bourassa, a consumer advocate with MASSPIRG. "Unfortunately
in most cases, businesses have easier access to our credit reports than we do."
At the beginning of the year, only four states - California, Vermont, Texas
and Louisiana - had adopted credit-freeze laws. Since then, security breaches
at ChoicePoint, LexisNexis and other businesses have prompted Colorado, Washington,
Maine, Connecticut, Illinois, New Jersey and Nevada to adopt credit-freeze laws.
An additional 22 states are considering bills that would allow residents to
bar lenders and other businesses from reviewing their credit reports.
In addition to the "security freeze," MASSPIRG and other consumer
groups are urging the Commonwealth to adopt proposals aimed at preventing identity
theft. All these measures are comprehensively found in Senate Bill 184 sponsored
by Sen. Jarrett Barrios and Rep. Michael Costello. These measures include:
Breach Notification - Require businesses to notify their customers when
a security breach puts them at risk of identity theft.
Close Credit Header Loophole - Restrict the invasion of financial privacy
by eliminating the "credit header" loophole that allows credit bureaus
to share consumers' personal identifying information, including social security
numbers, to marketers and others.
Affordable Credit Monitoring - Provide consumers with low-cost monthly
access to their credit reports so they may monitor them for fraudulent activity.
Limit Social Security Number Usage - Prohibit businesses from using consumers'
Social Security numbers on identification cards.
Proper Disposal - Require businesses to meet minimum standards for the
proper disposal of documents that contain consumers' private financial information,
and extend this standard to any third-party vendors that businesses use to destroy
records.
Penalties - Increase criminal penalties for identity theft.
