We've all heard the scary statistics of identity theft. In the last year:
An estimated 16.7 million people were victims Identity theft cost Americans $17 billion (compared to a whopping $21.8 billion in 2012) The Federal Trade Commission took 371,061 reports of identity theft in the U.S., including 133,015 reports of credit card fraudBehind all of these numbers are living, breathing identity theft victims. Each victim now has trouble convincing people that he is who he says he is… and that various nefarious crooks aren't him! This is one such story of an educated, computer-savvy victim, along with tips on how you can protect your identity from this digital epidemic.
Greg's Story
In 2011, Greg Scott's credit card was compromised. The IT professional discovered the problem when his card was unexpectedly declined while ordering equipment for a customer over the phone.Turns out, the decline was because there were fraudulent transactions on his card. The Minnesota native immediately took action:
"I called U.S. Bank, and the automation sent me right over to the fraud department. And we spent an hour chasing down every detail of every transaction. There was like $14,000 worth of stuff somebody tried to steal on this credit card. None of the charges went through – none of them. So I had names and dates and transaction IDs. We even called the merchants and talked to the store clerks that waited on this clown. That's how far we took it. I packaged all that up, and I sent it to a contact I knew in the FBI here in the Twin Cities. He sent it to Florida, and then nothing happened. I'm still waiting on a call back from the FBI." It's been seven years!
Greg believes that because he ultimately didn't lose any money as a result of this fraud, the FBI wasn't interested in helping him. "If you're an identity theft victim, law enforcement, they might be sympathetic, but they're not gonna lift a finger to help you. They're just not."
The worst part
Greg says the worst part about this experience was not what actually happened to him – the charges were reversed and he wasn't held liable for the fraudulent transactions. The worst part was that nothing was ever done about it:
"The really terrible part is, they're still out there doing it because nobody tried to catch them."
Of his experience, the grandfather says, "I'm one bald guy who called a bank fraud department and found out lots of information.Imagine what an agency with legal power, such as the United States Federal Bureau of Investigation, could do if they would only lift a finger.We can stop identity theft in five minutes when we decide we want to."
A System That's Fundamentally Flawed
Greg maintains that the credit system needs to be revamped. "If you really, really, really want to solve this problem, the whole system is fundamentally flawed. And anything we do within that system is gonna be a Band-Aid."
Right now, everything is linked to your Social Security number. If someone gets that, it's pretty easy to impersonate you. Says Greg, "We need to get rid of Social Security numbers as an authenticator."
The solution he proposes involves consumers having private keys that are required in order for credit to be opened in their name. This would put responsibility on consumers to protect and understand their private key, but it would also make identity theft much more difficult. You can learn about his proposal on his website.
Greg's not holding his breath on the credit system changing, though. "I don't think this reform is going to happen anytime soon, because the only way reform ever happens is when the pain to maintain the status quo is bigger than the pain to do the change."
In the meantime, Greg says there are a few things consumers can do to help protect themselves from identity theft.
How to Protect Yourself from Identity Theft
Use credit cards instead of debit cards
Greg recommends using credit cards instead of debit cards whenever possible – especially for online purchases.
Debit transactions come out of your checking account immediately, whereas credit card transactions often take a couple of days to post. This means it's more likely that you'll notice a fraudulent transaction before the money is actually gone.
Additionally, the credit card issuer assumes liability for fraudulent transactions – not you. While your bank will investigate claims of fraudulent transactions on your checking account too, the process might take longer. In the meantime, you're short of the cash.
Credit monitoring
Greg says that credit monitoring is a good idea, although it is ultimately a reactive solution. "The problem with credit monitoring is that it happens after the fact. So, somebody charges up a bazillion dollars on my credit card and then buys a plane ticket to South America where we can't extradite them and string them up by their thumbs. Well, I find out about it after it's already done and over with. It's too late, it's already happened. I can call and scramble and react, but I'm reacting, I'm not proacting."
Even so, he recommends reviewing your credit card transactions online on a regular basis – don't just wait for your monthly statement. The sooner you identify an unauthorized charge, the sooner you can take action.
If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, join MoneyTips and check out our Identity Protector tool.
Freeze your credit
One option Greg mentions that's a little more proactive is freezing your credit. "You contact all the credit reporting agencies and you ask them to freeze your credit. Now nobody can do a credit event without the credit being unfrozen. So, if you want to borrow money or take out a mortgage or buy a car or something like that, you have to unfreeze your credit, and the credit reporting agency OKs it. Then you can take out the loan, then you freeze your credit again."
The downside of this option used to be that it cost money and required the consumer to invest some time and effort. However, credit freezes have been free as of September 21st, 2018.
There's no substitute for vigilance
Greg maintains that there's no simple solution for avoiding identity fraud. At the end of the day, people need to be careful and do what they can. "Be alert," emphasizes Greg. "Pay attention to all your account balances. Get rid of credit cards you don't use. Keep life as simple as you can keep it. There is no perfect answer. The awful thing is, you can do everything right and still get hammered."
Wrapping Up
If there's one thing you take away from his story, Greg Scott hopes it will be this six-word rhyme:
"Care and share to be prepared."
What does it mean? Well, it means that if you're the victim of credit card fraud or identity theft, take steps to address it, and then share your experience.
Greg maintains that there's power in awareness and we can help educate each other by talking about the risks. He says, "Care enough to do something about it, and then share what you learned with everybody, liberally." Greg certainly practices what he preaches: based on his personal experiences, he wrote Bullseye Breach, an internet security book disguised as a novel about how mobsters steal millions of credit card numbers.
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