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Identity Crisis

With Easy Access to Personal Information and Little to Legally Stop Them, Thieves Can Ruin Your Good Credit History


If you remember the dead-eyed aliens taking over in "Invasion of the Body Snatchers," you may have a glimpse into how it feels to be among the 2,000 people every day who contact credit bureaus to report that someone has stolen their identity.

For some, it is a descent into cyberhell. "Your identity is virtually taken over," says Sean Healy, a spokesman for MasterCard International. "It has a very traumatic impact on our customers." The American Banker News calls identity theft "the fastest-growing type of fraud, and one of the most difficult to combat."

Unlike the alien pod people who stole the bodies of humans while they slept, crooks probing the weak links in the computerized credit economy may provide a wake-up call to how frail our grasp on identity can become when too much sensitive data is floating around too loosely in too many places.

Thieves pluck profitable info-morsels from pillaged mailboxes and garbage cans. They buy account numbers from clerks; get Social Security numbers from government files, college transcripts, medical records, office cleaning crews and old-fashioned burglaries. Thirty members of the Porter Valley Country Club in Northridge became identity theft victims when a receptionist siphoned data from office files. The commercial database called P-TRAK produced by LEXIS-NEXIS sells all the information a con man needs to steal your identity over the Internet, including maiden name and past addresses, birth date and--until recently, when the practice was criticized--Social Security numbers.

"Ten years ago a thief would steal a wallet for your money and throw everything else away. Today they steal it for your information," says Diane Terry-Paulo, president of the Southern California chapter of the International Assn. of Financial Crimes Investigators.

With just a few key information coordinates, a crook can start phone service in your name, open charge cards, take over your existing credit lines and change the address on hijacked accounts so statements go to a mail drop. By the time you notice a problem, it may be too late.

Consider the case of Linda, a Westside woman who notified her credit card companies and bank as soon as her wallet was stolen, but suddenly received a thank-you note from an auto dealer for the purchase of a new $20,000 car. When she went to police, they explained she'd only lost a wallet, a petty theft. Her hard-earned credit doesn't count as property under today's law.

The officer suggested the car dealer open a felony investigation, but the dealer refused, according to police. For Linda it was an abrupt bump against the surreal logic victims encounter when they try to fight identity fraud. The dealer was glad to have sold the car no matter who walked away with the keys.

Several businesses had already made money on the transaction. He'd deposited a $1,000 manufacturer's rebate, paid the salesman's commission and sold the purchase contract to a finance company. The leasing company had received two months of payments. None of them wanted to give the money back.

Why should they? When the thief stops making payments, the finance company will try to collect from Linda--not the car dealer. To have your credit hijacked by a gang that drains your credit line but pays the monthly minimum for several months "is like being tied to the tracks watching the train come toward you," says Edward Howard, executive director of the Center for Law in the Public Interest. The scam collapses on the consumer, who is left to untangle the mess.

Pre-approved instant credit offers in the mail present an irresistible opportunity for pirates. "You have to show two kinds of ID to cash a $50 check, but you need no photo ID to get instant credit for $50,000," says Thomas A. Papageorge, head of the L.A. district attorney's consumer protection division.

"A criminal would be crazy to rob a bank anymore," Howard adds. "Your good credit is too easy to steal and too hard to get back. Under current law, your credit isn't treated as valuable property; nobody prosecutes most of these cases."

Joel Lisker, in charge of MasterCard International's security and risk management, doesn't dispute that most identity theft goes unprosecuted, but he is proud that the percentage of fraud loss per dollar of credit sales has dropped since 1994.

The actual number of consumers affected and volume of loss have increased, however, as the industry surges toward $2 trillion a year in transactions. Incidents of identity fraud--the kind that leaves consumers most helpless--were reported at one major company to have risen 540% in the U.S. during the first half of 1995, and industrywide it is estimated to account for as much as $90 million of the $1.5 billion written off as card fraud losses, according to various industry sources.

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