Having Your Identity Stolen

Excerpted from
Life, The Odds: And How to Improve Them
By Gregory Baer

Identity theft can take many forms. The 1998 film Face/Off presented an extreme case, when an FBI agent (John Travolta) underwent extensive plastic surgery to replicate the appearance of a comatose terrorist (Nicolas Cage) in order to penetrate his network. Once revived, the terrorist Cage underwent equally painful surgery to take on the appearance of FBI agent Travolta. As pure cinema, it is hard to beat John Travolta pretending to be Nicolas Cage pretending to be an FBI agent when he is in fact a terrorist, while Nicolas Cage is pretending to be John Travolta pretending to be a terrorist when he is in fact an FBI agent. Outrageously, Oscar took no notice.

More recently, we saw Harry Potter and his friend Ron Weasley employ a polyjuice potion in order to take on the appearance of their nemeses Crabbe and Goyle. While there are rumors that author J. K. Rowling considered having Crabbe and Goyle do the converse, she no doubt feared accusations of a "Face/Off ripoff." But those concerns aside, identity theft will no doubt remain a cinematic staple. (Not to mention the soap operas....)

For the average nonterrorist muggle, though, identity theft is likely to take a more mundane, but certainly troublesome form: a criminal impersonating you through the mails (thereby obviating the need for surgery or potions) in order to assume your identity for purposes of obtaining a credit card or other loan. What are the odds of this happening to you? Hold onto your hat.

The Odds

Identity theft is the fastest growing crime in the world. The Identity Theft Resource Center estimated that there were over seven hundred thousand cases of identity theft in 2001. The Federal Trade Commission, which sponsors a Consumer Sentinel website where consumers can file a complaint of identity theft, reports that complaints on its site alone grew from 31,117 in 2000 to 86,198 in 2001 to 161,189 in 2002. The FTC estimates that identity theft costs the financial services industry, which generally reimburses customers for losses, over SI billion per year. (Of course, much of that amount is passed back to the consumer in the form of higher fees or interest rates.) Your odds of having your identity stolen in the coming year are probably around 200 to 1.

The way identity thieves obtain your personal information has spawned numerous colorful names. "Shoulder surfing" involves watching or listening as you state or key in your telephone calling card number or credit card number over a public phone. "Dumpster diving" involves going through your garbage to obtain credit card or bank statements. More recently, "spam" email uses some pretext to ask the recipient for personal financial information.

The mother lode for any surfer, diver, or spammer is your social security number. That's because over time the SSN has grown to become a universal identifier-how everyone from your credit card company to your hospital identifies and tracks you. With your social security number and some other financial information in hand, a thief can access your existing accounts or, worse yet, establish new accounts, using a different address. That makes it harder for you to spot the theft, because you won't be able to notice unauthorized activity on your statements-you don't even know you have the account. Your first notice will come when those accounts are maxed out and overdue, the credit reporting bureaus are notified, and your existing credit lines are cut off.

There is some good news, however. First, for new accounts, since you never authorized them, you're not liable for any of the charges on those accounts. Second, for your own account, federal law caps your liability at $50 for a lost or stolen card; you have no liability for any charges incurred after you have notified the card issuer that the card is lost or stolen. To encourage on-line use of credit cards and allay concerns about identity theft, many issuers have voluntarily lowered that liability to zero.

Improving Your Odds

There are several simple steps you can take to reduce your risk of identity theft:

1. Don't feel like you need to spend a lot of money on this problem. A cottage industry has grown up to calm your fears of identity theft-for a price. Most of the work is being done by the nations credit reporting agencies, which will be the first to know if your credit suddenly suffers the high volume increases in number of accounts and ensuing charges that attend identity theft. But the odds of suffering a major loss for which you are personally responsible are still sufficiently long that you probably don't want to be paying someone an annuity to avoid it.

2. Read your monthly statements promptly upon receipt. Check to make sure that there are no unauthorized charges. This will not be difficult, as identity theft is not a subtle crime, generally involving large-screen TVs and other electronic devices. If you see "Circuit City-$8,000" or "Best Buy-$6,000," then you may have a problem.

3. Stop your mail when you're traveling. You'd be surprised how much someone can learn about your finances by reading a week's worth of mail.

4. Beware of crooked relatives. As noted above, credit card issuers and banks are legally required to remove any authorized charges from your account. Unfortunately, this law has bred another type of crime. Some cardholders will arrange for a cousin or a friend to "steal" their account information, run up a bunch of charges, and then split the goods with the cardholder. The cardholder then notifies the bank that the card has been stolen, and gets all the money refunded. The perfect crime.

This crime, despite being inherently immoral, also has an unfortunate side effect for honest victims of identity theft. Your repayments may be held up while the credit card company investigates whether your information was genuinely stolen.