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Types of Identity Theft
How It Occurs

OVERVIEW
Identity theft or identity fraud is a criminal event that occurs when one person takes personal information belonging to somebody else and uses it without authority for abuse or gain. Sensitive personal information is readily accessible and can easily be abused by unscrupulous people. Social security numbers, birth certificates, drivers licenses, credit card information, and financial account numbers can be obtained via a lost wallet, "dumpster diving", the mail, your employer, your hospital, or your Internet account. The ability to obtain sensitive information about someone is far too easy, and identity thieves can pursue a variety of fraudulent schemes that can impact a victim's financial, employment, medical, tax, and even criminal status.

There are many ways to obtain information and falsify or create counterfeit documents.  Although we must allow some exchange of information to obtain the goods and services we need, seek, and to function in the Information Age, we can take steps to reduce the potential for fraud.

The number of identity fraud cases has increased dramatically over the last couple of years. The Federal Trade Commission reported that identity theft complaints were its number one consumer complaint in 2002. Current estimates suggest there are more than 750,000 victims a year; The Federal Trade Commission receives over 2,000 calls a week on its ID Theft hotline alone. Statistics are being gathered within state and federal governments, and efforts to combat and investigate fraud continue across many boundaries, including the FBI, the Federal Trade Commission, the US Postal Service, the Secret Service, the Social Security Administration, and local authorities and state agencies.

In October 1998, the US Congress passed the Identity Theft and Assumption Deterrence Act of 1998 (Identity Theft Act) to address identity fraud. However, even with the passage of laws, we can assume that identity fraud will continue as long as criminals exist.

TYPES OF IDENTITY THEFT
There are several different types of fraudulent behavior that fall into the category of identity fraud. However, we can generally categorize identity fraud into two main areas, financial fraud and criminal fraud:

1. Financial Identity Theft/Fraud:
Most people have financial relationships and some degree of established credit.  Financial identity fraud can occur within every opportunity to manipulate new or existing financial relationships. Because of the vast array for potential abuse, it is important to monitor each of your financial relationships. Credit reports provided by the three main credit bureaus is perhaps the best way to monitor existing and any newly created fraudulent relationships. Frequent areas of financial fraud include:

  • A. Credit Card Fraud
    The most common type of financial fraud is credit card fraud where you may experience charges on your existing credit cards for goods or services you did not purchase or obtain. Fortunately, the law restricts your personal liability to $50 for unauthorized charges and in some cases credit card issuers will waive this fee.  Although credit card fraud is a type of identity fraud, it differs from True Name Identity Fraud where an imposter opens new accounts in your name. In either event, credit card fraud should be a warning to you that your personal information is being abused and that criminals may certainly have other information that can cause you harm.
  • B. Debit Card Fraud
    Debit cards subtract or debit funds from your account. There are two types of debits and the types of protection and transactions differ. There are 1) on-line debits where the transaction is like using your ATM card where you are asked to enter a PIN and funds are withdrawn from your account immediately. And there are 2) off-line debits which resemble credit card transactions where you do not need to enter a PIN but you typically sign for the transaction to evidence your purchase. Off-line debits typically subtract funds from your account in 2-3 days, which makes managing your account
    funds more critical. Because on-line debits require a PIN, they are considered more secure (but don't give our your PIN to anyone). With off-line debits, the ability to falsify your signature can increase your exposure to fraud. The liability for using debit cards is different than with credit cards. You should check with your financial institution to verify what you may be liable for but the law requires debit card issuers to set a maximum liability of $50 if the debit card is reported lost or stolen within two days of discovery. Liability increases to $500 if the lost or stolen debit card is reported within 60 days and can increase to unlimited liability if reported after 60 days.
  • C. ATM Card Fraud
    ATM cards have different liability than credit cards and your liability is based on time, similar to debit cards. If you report a lost ATM card within two business days of discovering the loss, your maximum liability is limited to $50. This liability increases to $500 if you report the loss within 60 days and can increase to unlimited liability if reported after 60 days.
  • D. Check Fraud
    Checks are paper and can easily be lost, stolen, or counterfeited. Similar to ATM card fraud, if your bank checking or savings account is accessed fraudulently, you have to give prompt notice to the bank. Failure to identify the occurrence or "reasonably" protect against fraud may result in you being financially liable for loss amounts.
  • E. True Name Identity Fraud
    The most serious type of financial identity fraud is True Name Identity Fraud where the criminal assumes or co-opts your credit identity to open or close accounts, obtain loans, write checks, buy autos, enter leases, etc. By using your social security number and having other personal details, the criminal becomes a true imposter and can proceed to run away with your credit worthiness. True Name Identity Fraud requires your immediate and diligent efforts in gaining back your identity for your entire financial position is placed in jeopardy and the longer the fraud occurs the more difficult it becomes to unwind.
  • F. Other Financial Fraud / Services
    Most people have numerous accounts with suppliers of services. For example, the telephone company, energy company, and health insurer. It is important to consider all types of accounts where you have a financial relationship established. Identity fraud can occur in many different service and geographic areas that can each influence your financial credit worthiness.

2. Criminal Identity Fraud:
A significant burden of identity fraud can occur when an imposter commits a crime in your name. If the imposter has false identification, they can masquerade as you and commit felony or misdemeanor crimes.  They can present false ID in the event the authorities catch them. If the crime is serious, they may go to jail and have their fingerprints taken but if the crime is less serious or if they escape the scene, you may receive a notice to appear in court for violations you are not responsible for. A criminal record can be posted nationwide to your identity and you may not realize this until you apply for a job, apply for credit, or a warrant for your arrest is issued. In some cases, the ability to clear your record is more difficult in criminal fraud verses financial fraud.

3. Other Types of Identity Fraud

  • A. Employment
    An imposter may obtain employment in your good name. If so, your primary problem rests with the Social Security Department and the Internal Revenue Service which may believe you are underreporting income and evading taxes.
  • B. Social Security Fraud
    There are a variety of abuses that are conceivable with a fraudulent SSN. A few include:
  1. Obtaining various types of benefits, i.e., disability, workmans compensation, health benefits.
  2. Concealing income
  3. Filing for tax refunds
  4. Obtaining student loans
  5. Obtaining food stamps

Guard yourself against identity theft, protect your identity today!

HOW IT OCCURS
Identity fraud begins by accessing personally identifiable information. Think for a moment where information about you exists. Criminals can access information about you in your mail, at your employer, at your healthcare provider, your bank or your recent purchases. Basic information about you like your name and social security number is sufficient for a thief to commit identity fraud.

Unfortunately, information can be uncovered and used in simple and complex ways.  Some of the possibilities include:

Credit Card Fraud:
Simply obtaining a credit card number or the card itself can allow criminals to make unauthorized charges to your account. Numbers are found on receipts or your monthly statements in the mail or cards are lost or stolen from wallets or obtained from new cards arriving in the mail.  Credit card fraud can occur at a merchant or over the telephone or internet where you do not need to be present to purchase goods.

Skimming:
Is a type of credit card fraud which occurs in the course of a normal, legitimate transaction and involves copying the magnetic stripe from a genuine payment card and transferring the information to a substitute counterfeit card.

Dumpster Diving:
The simple process of digging through trash can uncover important personal details. It is important to shred important documents or mail that you have prior to disposing it. Most important is to shred "pre-approved" credit offers which arrive in the mail frequently and without warning.

Computer Hacking:
Todays vast databases of personal information are targets for criminals who can hack into computer systems with limited technology skills. Before you buy goods on the internet, be selective and provide your details only to reputable companies that have proper security measures in force. Similarly, information can be obtained on your home computer and you should take steps to prevent access by turning off your computer, buying a personal firewall, or storing important information off line.

Social Engineering:
Sometimes it is possible to extract information from you when you divulge information to a person who purports to be with a legitimate company, a practice also known as "pretexting".  Pretexting is the illegal practice of getting your personal information under false pretenses.  By giving personal information over the phone, you might accidentally be giving important details to a criminal. The criminals then use this information to obtain further information about you or may already have sufficient details on you to commit an identity crime.

False Identification:
After a criminal has personally identifiable information, they can obtain false drivers licenses, birth certificates, passports, medical ID cards, etc. The Federal Trade Commission maintains information at its Identity Theft Data Clearinghouse web-site
www.consumer.gov id theft that indicates types of identity fraud and their relative frequency. One interesting statistic depicts the difficulty of preventing identity fraud whereby approximately 12% of victims have a personal relationship with their assailant.

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