Do Lenders Have Some Responsibility for Identity Theft?Yes. They Do
Identity theft is a crime that has not decreased across america since 2003.
Amazon products related to identity theft
Despite all of the technology available at our fingertips such as fraud alert tools and increased consumer awareness about identity theft, the incidence of identity theft has not decreased in the last eight years. Nearly 10 million Americans are victims each year.
Identity theft experts and politicians are blaming the easy availability of personal data that is accessible such as social security numbers. There may possibly be a much simpler reason for the persistence of ID theft than many would like to admit. Numerous experts are blaming lenders instead of consumers.
A University of California at Berkley lecturer Chris Jay Hoofnagle published in a report “Internalizing Identity Theft” with a thesis that outlines lenders are more to blame than any other source for ID theft in America today.
An amendment to the 2003 Fair Credit Reporting Act permits victims of ID theft to request creditors for the fraudulent applications submitted in their names. Mr. Hoofnagle worked with a small number of six ID theft victims and researched how they were defrauded after they requested their fraudulent applications.
Of the nearly 16 applications submitted by imposters posing as the victims to get credit or medical services, nearly all were full of errors that should have raised a red flag indicating fraud was taking place. However, in all of the 16 cases the credit or medical services were provided anyway.
In the assortment of cases Mr. Hoofnagle described in his thesis paper, which was published in The UCLA Journal of Law and Technology, one victim that was defrauded found four of the six fraudulent applications presented in her name contained the wrong address, phone number and one even contained a date of birth that didn’t match.
Another victim that was part of Mr. Hoofnagle’s researchfound his imposter was 70 pounds heavier than his victim, but effectively imitated as him with what appeared to be his stolen driver’s license and in one case even botched the social security number. The social security number the imposter presented didn’t match the social security number on the driver’s license.
One participant in the study, a New York Law Professor, had over $500 that was charged in 2007 for purchases made at Kohl’s department store. The charges were made with a fraudulent application made for a credit card through the store. Amazingly he application misspelled is name in two different ways and addition to putting his last name where his first name should have been on the application. Even with this misinformation on the credit application the card was approved anyway. This should have been an enormous warning sign for investigation and possible fraud, but the signs were ignored and credit was extended. The store later removed the charges.
Possible solutions for the ID theft problem have been increasing criminal penalties for violators and more education for consumers. Mr. Hoofnagle has presented evidence and advises we need to focus more on the lenders. Do the lenders have a perverse incentive to continue or ignore the problem because of a motivation to increase customers and extend credit to as many consumers as possible? Lenders must be central to the solution. He advises that ID theft prevails because it is less costly to tolerate fraud.
In an effort to move some of the cost back to the lender would be to make lenders contribute to a fund for fraud to help compensate victims for the loss of their time in resolving their ID problems has been suggested by Mr. Hoofnagle.
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