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Financial Identity Theft

Who's In Your Wallet?


Financial Identity Theft
Getty/Shawn Miller
Say "identity theft" loudly enough in a group of people, and someone will come forward with a story. Statistically speaking, one-in-four Americans have had to deal with identity theft personally or know someone who has. Most of the stories have some dealings with a "financial institution" (bank, credit card company, etc.)

New versus Old

"Existing" accounts are bank/credit accounts you already have a card for, accounts that you personally opened. When your wallet gets stolen, existing accounts are often hit quickly, within a matter of hours. The thief knows as soon as you notice the cards missing, you'll report them and they'll no longer work. More importantly, thieves also know if they use the card after it's reported stolen, they run a higher risk of getting caught.

Banks have had to deal with identity theft for a while now, and they have clear-cut guidelines on how to handle a "hijacked" account. Most often damage is negligible, a few hundred dollars and the inconvenience of wasted time. Sometimes your money is tied up while the bank investigates the problem, but even then, you're only looking at a couple of months.

Credit card companies, too, have dealt with identity theft for several years. The difference between your ATM card that has the VISA logo on it, your VISA credit card is that the ATM card takes money directly out of your personal account. But money spent on the credit card is essentially a loan. So while the identity thief takes your money with an ATM card, they are taking a loan in your name when they use your credit card. In other words, the credit card company is out the money, not you. They've called it "credit card fraud" for a long time, but this is still generally accepted as one of the main forms of identity theft.

Today, there's intricate software that watches your "buying habits", and odd purchases "flag" your account for review. That's why they call you on vacation to make sure it's really you using your card in New Mexico. Opinions on this practice vary. Some people feel it's an invasion of privacy, but most of us are glad "they" are watching our backs.

When an identity thief gets a new account using your information, it goes undetected far longer – often months or even years. Identity thieves have even been known to make payments on fraudulent accounts opened in their victims' name, improving the victim's credit score. Clearing up this mess can be much more time consuming, because the credit card company obviously does not want to write off the account.

Do You Know Where You Live?

If an identity thief wants to get new accounts in your name, they need to intercept the mail. Typically, they will give the address for a vacant property, or someplace they know they will be able to safely receive it. The postal service does their best to keep addresses from being changed fraudulently, but every system has holes. If the creditor has a false address, though, the only way you'll find out is by receiving collection notices and calls. (Collection agencies often search through a credit report to find previous addresses in their efforts to locate the debtor.)

The biggest problem here is the way laws are written. For example, in Take Charge: Fighting Back Against Identity Theft (the official FTC's guide, see More information below) the FTC blankly states that you must

"… send your letter so that it reaches the creditor within 60 days after the first bill containing the error was mailed to you. If an identity thief changed the address on your account and you didn’t receive the bill, your dispute letter still must reach the creditor within 60 days of when the creditor would have mailed the bill. This is one reason it’s essential to keep track of your billing statements, and follow up quickly if your bills don’t arrive on time."
Although most reputable creditors work with identity theft victims, though, keep in mind that they don't have to.

Crossing Over

Victims of other forms of identity theft will often feel the impact in the wallet. For example, a victim of medical identity theft might first find out about the problem when they notice medical collections on their credit report, or receive a bill for medical equipment/services that they never received. A mother may try to get a few hours at Wal-Mart to help make ends meet, only to find out that she already works there. To add insult to injury, the IRS wants the unpaid taxes on her "income" from all those jobs. A DUI conviction on your driver's license will cost you probation fees and court costs, and you may find the state wants that paid off until you resolve your "situation".

Since financial institutions have been dealing directly with the costs of identity theft for so long, you'll find they are the most prepared to help you when you talk with them. It will not be painless, but financial identity theft is one of the easier problems to resolve.

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