FULL STORY

Identity theft creates credit nightmare

By LISA SMITH Medill News Service
Posted on Thursday, September 6, 2001

While shopping for furniture three years ago at Marshall Field's, Gold Coast resident Toni Wasserman was quite surprised when the store clerk told her she had been turned down for an in-store credit card. The Field's employee couldn't give Wasserman a reason for the denial, but advised her to order a copy of her credit report. "I was clueless," said Wasserman, a promotions coordinator at Tribune Interactive. "I thought maybe (the store's) computers were down, that there was a mistake." But her credit report showed more than 20 different active credit accounts that Wasserman knew nothing about. Most were credit card accounts that had been opened at department and jewelry stores. The report also listed her as having an Omaha, Neb. address. Wasserman had never been anywhere near the city.

Remembering that she lost her wallet a few months earlier, Wasserman thought she might be the victim of identity theft. She filled out a stolen wallet report at a Chicago police station -- she now believes she might have been pickpocketed -- and looked up consumer help organizations on the Internet to figure out where to turn next. She alerted the three major credit bureaus (Equifax, Experian and TransUnion), but they told her to take up the matter directly with the merchants.

"I wasn't really sure what to do," said Wasserman, now 25. "It took me a while to find out." Little by little, Wasserman got merchants to cancel charges in her name, but new charges continued to show up on her credit reports. The fact that several months passed before she learned that she should put a "fraud alert" on her credit reports may have contributed to the problem.

Three years later, Wasserman is still trying to clear up her credit. She has spent numerous Saturdays calling the companies that granted accounts in her name and sending them copies of the police report and other documents to try to prove she did not authorize the charges on the accounts. The process has been long and arduous.

"It just got to the point where it was too overwhelming. I just gave up," Wasserman said. "I now just wait for the companies to contact me." And they do. A collection agency representing J.C. Penney Co. recently demanded $450.

Although Wasserman has not so far had to pay for the charges made in her name, she estimates that she has spent more than $200 on long distance phone calls, certified mail and document notarizations to correct her credit report, and she still has not been able to open a credit account for herself. She said it has been frustrating to find the right people to contact. She still does not know if more charges will be made in her name.

Fraudulent credit and utility accounts are the most common types of identify theft reported to a special Federal Trade Commission fraud hotline, according to a 2000 report by the FTC. Illegally obtaining cellular phone service is a particularly easy scam because of how quickly thieves can ring up huge charges before they are detected, said Jay Foley, assistant director of the not-for-profit Identity Theft Resource Center, an organization that works with identity theft victims.

Even as the thieves are piling up the bills, it sometimes can take victims months to realize anything is happening. According to reports filed with the FTC, it took victims an average of 14 months to realize they had become victims of identity fraud. "(A thief) can go through eight or nine cell phone companies in that time, charging $2,000 each time," Foley said. "It won't be long before you're pulling your hair out."

Federal law limits a consumer's liability for charges rung up in a fraudulent account. If someone uses your identity to buy cell phone service or make other purchases, you can not be held responsible for more than $50 if you can prove you did not authorize the charges.

The new face of identity theft

What happened to Wasserman is the old-fashioned form of identity theft: a stranger, who has gotten hold of someone else's drivers license and social security card, uses them to open an account or buy expensive services in the victim's name.

More common these days are large-scale identity fraud rings, made up of thieves who steal or purchase information from employees with access to such data in their workplaces. Even some organized crime groups, traditionally involved in the drug business, are getting into the lucrative business of identity theft. Identity theft has become big business as our personal information increasingly can be found in electronic form in countless databases, which often share it with other databases. Victims don't lose anything, such as a wallet, and have no idea that the crime is under way. Law enforcement officials, in turn, have no easy way to identify how the information was stolen in the first place.

"It used to be so simple. That's not the case anymore," said Jackie Thursby, deputy supervisor of the consumer fraud division of the Cook County state's attorney's office. Thursby said her division, which specializes in cases involving repeat offenders or multiple victims, prosecutes hundreds of these ca

ses each year.

In many ways, technology has made it easier for identity thieves to steal vast amounts of data. "When a person is committing identity theft, they are looking for information," said Foley, the identity theft victims' advocate. "If they're computer-savvy, they can crack into a company or university database and get information from thousands of people."

From 1992 to 1997, there was a 15-fold increase in the number of such inquiries at TransUnion Corp., one of the three major credit reporting agencies. Based on these statistics, one victim's advocate recently estimated that approximately 700,000 people become victims of this crime every year.

As identity fraud increases, other reporting agencies are feeling the effects. When the FTC opened its identity fraud hotline nearly two years ago, it received an average of 400 calls every week. That number has since risen to 2,000 calls per week, said FTC spokeswoman Claudia Bourne Farrell. More than 3,000 of the calls have been from Illinois victims.

"We're having difficulty keeping up with the calls," Farrell said, adding that she expects the number to keep rising. Among the reasons for the increase are a growing consumer awareness of this type of crime, and the near-universal use of personal identifiers in electronic transactions.

The numbers game

In complaints per capita, Illinois ranks 12th in identity theft reports.

Washington, D.C. is in first place. During a recent six-month period, the Social Security Administration received almost 29,000 reports of Social Security number misuse, an average of 1,200 every week, according to the latest report from the Office of the Inspector General. Most of these misuses involve some aspect of identity theft.

Today you might use your ATM card to withdraw cash, pay for lunch with your credit card and write a check at the grocery store. Maybe you use the Internet to manage your investments online, pay bills or shop for gifts.

Your identity information is so readily available, you could have two or three pre-approved credit card applications waiting in your mailbox when you get home.

Throughout the course of a day, you've probably punched in your personal identifiers, such as passwords or access codes, so many times you don't think about who might be receiving the information. "Now we're using numbers to identify ourselves," Thursby said. "We've kind of de-personalized everything. We're no longer looking at someone's face."

As an increasing amount of personal information is available electronically in numerous locations, sophisticated thieves have started to access private databases to obtain this data. Sometimes, they cooperate with someone working "on the inside," an employee of a large organization like a car dealership, department store or hospital. The employee has access to sensitive information and shares it with identity thieves, who assume other individuals' identities -- sometimes the identities of several people at a time -- and establish credit, open checking accounts and purchase luxury items such as cars, boats and homes.

That was the case earlier this summer when seven people were indicted in a $2 million identity theft and credit card fraud ring -- one of the largest such cases ever brought before federal authorities in Chicago. The defendants, among them four Nigerian citizens, allegedly obtained the identity information of 2,800 people from an employee of LifeSource Blood Services, a Chicago-based blood testing and transfusion company. The stolen information contained the names, social security numbers, addresses, phone numbers and other personal data of blood donors who lived in the Chicago area.

The defendants allegedly used this information to create drivers licenses and identification and credit cards in the victims' names. They used these cards to open bank accounts, obtain cash advances, travel and go on shopping sprees. The case is pending before the U.S. District Court.

Lawyers and prosecutors currently are in the midst of plea negotiations, said Assistant U.S. Attorney Markus Funk.

Attacking identity theft

The federal government has taken aggressive steps to combat identity theft.

Three years ago, Congress created the first identity theft statute, making it a federal crime and giving victims the right to receive compensation. In March, the Treasury Department and the Secret Service held a two-day national hearing on the issue. This summer, the Bush administration appointed a Justice Department official to the newly created post of chief privacy officer to consider proposed privacy bills and evaluate the department's adherence to privacy laws already on the books.

Earlier this month, federal and local law enforcement officials and other experts discussed identity theft at a crime conference sponsored by the city of Chicago and the Chicago Police Department.

Since identity theft became a federal crime, most of the financial fraud cases the U.S. Secret Service's Chicago office investigates also involve some aspect of identity theft, said Arnette Heintze, special agent in charge of the Chicago office.

"Every day we have an identity theft case that we're working on," Heintze said.

Some of the come-ons are all too obvious. Last year, fliers were circulating in the Midwest and other areas promising elderly blacks $5,000 in social security reimbursements as part of a slave reparations act. The fliers asked people to provide their name, address, phone number, date of birth and Social Security number.

"I could see it leading up to identity theft," Heintze said of the scam.

Heintze said the scheme prompted him to introduce the issue of identity theft at a meeting with other law enforcement heads. Officials from the Chicago Police Department, the Cook County prosecutor's office, the U.S. attorney's office, the FBI, U.S. Customs, Secret Service, Postal Inspector's office, and the State Department formed what Heintze called a "working group" to promote awareness of the problem.

The group produced three public service videos dealing with identity theft.

One is designed for businesses that are susceptible to the crime because they control large volumes of personal data. The video describes different ways thieves can gain access to such information.

A second video is designed for law enforcement officials. The video reminds police that they could come across evidence of an identity fraud crime in the midst of another investigation, such as a traffic stop, and tells police officials where to turn if they find this information.

A third video gives citizens tips on how to avoid becoming victims. This video will likely be shown at the beat community meetings held throughout Chicago neighborhoods as part of the Chicago Alternative Policing Strategy program, Heintze said.

Because the problem of identity theft is so widespread, both the state and federal courts handle cases. Illinois has a state identity theft statute that went into effect two years ago. In Illinois, it is a felony to commit financial identity theft in excess of $300.

"There's no way in the world the federal government could address this problem on their own," Thursby said. "They need local agencies."

However, the state's attorney's office cannot prosecute a case of identity theft if the fraudulent financial activity occurred in another state.

"If the victim lives here and the identifiers are used in different states, we have no jurisdiction," Thursby said.

Such cases can be handled by federal courts, but Thursby estimated that federal court in Chicago handles approximately 15 percent of area identity theft cases, while the Cook County state's attorney's office brings in the remaining 85 percent.

"It's such an easy way to steal, nobody really can stay on top of it," Thursby said, referring to the state and federal courts. "There's so much of it."

Not only law enforcement agencies, but also private businesses must take steps to combat identity theft.

Robert Douglas, head of American Privacy Consultants, a consulting service and privacy advocacy group, works as a consultant to organizations that want to tighten up their security systems. Using his experience as a Washington, D.C. detective, Douglas advises companies to develop privacy policies, compartmentalize sensitive information, properly destroy personal documents, develop telephone authentication by requiring customers to have personal identification numbers or passwords, and protect access to personnel records and customer lists more carefully.

"Many banks haven't taken steps to safeguard against that," Douglas said. "This is highly valuable information."