The news about identity theft isn't all bad. There have been some positive developments in recent years, including:
- Identity theft is being detected earlier, which is reducing the average losses. The cost per incident, according to the benchmark survey by Javelin Strategy & Research, fell 31% last year to $496.
- Most identity theft is still existing-account fraud (a thief gets hold of your credit card number, for example), which is much easier to fix than new-account fraud (where a thief opens up new cards or loans in your name).
- Every American now has the right to freeze his or her credit reports, locking up the data so potential lenders can't see it, which is a pretty good way to prevent new-account fraud.
- Data breaches aren't secret anymore, thanks to laws in 44 states that require companies to disclose when people's private data have been compromised.
That said, there's still plenty to worry about. Nearly 10 million Americans were victimized by identity thieves in 2008, Javelin found. That number was up 22% from a year earlier.
What's more, it's been six years since Congress passed the Fair and Accurate Credit Transactions Act (which amended the Fair Credit Reporting Act) to give identity theft victims more power to fight back. Yet many people can't get started reclaiming their identities because their police departments won't allow them to file police reports -- which is the cornerstone for getting lenders and credit bureaus to take victims seriously.
"There are 18,000 or so police departments in the U.S., and some of them won't take police reports (about identity theft)," said identity theft expert Rick Kam, "which puts the victims in a Catch-22."
Protect Your Identity Week
Without a report, it can be difficult, if not impossible, to clean up a credit report or stop a lender from collection actions, said Kam, the president of ID Experts, a database-breach prevention and mediation firm in Beaverton, Ore.
Part of the problem, Kam said, is that police department performance is often judged by the number of crimes reported versus the number of crimes solved. With identity theft, the crime is rarely solved because the thief often can't be identified, the amounts involved are small compared with other crimes or there simply aren't enough officers to pursue the cases.
Thus, when identity theft is reported, the department's metrics suffer.
"If you're taking lots of police reports for a crime you know you can't solve, it looks terrible," Kam said, "so they won't take (the reports)."
Transactions in your name -- hidden from you
Another impediment to victims is businesses' refusal to share information. Victims often aren't allowed to see applications made for credit or withdrawals in their names, even though these could help them identify and stop a thief.One particularly absurd case of this was included in a white paper authored by a financial-industry group Kam chaired, the Santa Fe Group Vendor Council, titled "Victims' Rights: Fighting Identity Crime on the Front Lines" (registration required).
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"For example, a bank customer with a personal line of credit was told that a withdrawal had been made in his name, but the bank refused to tell him how much money was advanced or to whom," the Santa Fe Group wrote. "When a recovery advocate pursued the matter on his behalf, the bank said they had investigated and concluded that the charge was legitimate but refused to share the information from their investigation, produce a receipt for the charge or explain why they thought an 80-year-old man would have chosen to borrow $2,500 on credit to buy a Web site."
Some businesses cite privacy concerns when refusing to share information. That's particularly common in cases of medical identity theft, in which the victim's identity is stolen by someone seeking medical treatment or by a scam artist determined to defraud insurance companies or government health programs. Either way, victims can face enormous bills and medical records contaminated with someone else's data.
But many medical providers cite the federal law protecting patient privacy, the Health Insurance Portability and Accountability Act, or HIPAA, in refusing to let victims see their own records if identity theft is suspected. The rationale is, basically, that the thief deserves privacy, too.
"It's another Catch-22," Kam said. Medical providers "won't share the information, which makes it really difficult to assess the situation and separate out the erroneous information."
Arrested for your identity thief's crimes
Medical and financial records aren't the only databases that can be difficult to scrub. The records kept by law-enforcement agencies can be an even worse nightmare for victims of criminal identity theft.When arrested, a criminal might offer up your identity as his own. If that works, your identity could be sold to others for similar use.
"You might have a 15-page rap sheet" attached to your identity in a relatively short period of time, Kam said. "Once you're pulled over, (the officer) has to take you to the police station to correctly identify you."
Continued: 5 things Congress can do
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