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| How the Credit Industry Is Combating Credit Fraud |
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Credit fraud is affecting not only consumers whose credit histories are taken over and abused,
but the consumer credit industry as a whole.
The consumer credit industry--broadly defined as consumer lenders, credit grantors, and
credit bureaus--is facing increasing costs from losses, angry consumers, accusations
from legislators, and a potentially damaged image. But many organizations within the
industry--lenders, credit card issuers, and bureaus--are working together to
determine how credit fraud occurs and the most effective ways to fight it.
How Credit Fraud Occurs
Fraud experts in the credit industry believe the key to credit fraud is the consumer's credit
report. It tells criminals everything they need to know to assume a different
identity--and a new credit history. While credit report data is one source of the
problem, other types of identifying information--such as credit accounts numbers and
Social Security numbers--are extremely accessible from other sources.
According to the U.S. Public Interest Research Group, information brokers sell personal
information to anyone who can afford it, including investigators, insurers, and employers.
When this information is sold to someone who intends to commit credit fraud, the
information is abused, and victims are left to clear up the damage to their credit
reputations.
Preapproved credit cards offer criminals another opportunity to take over credit
accounts. When a piece of mail containing the offer is stolen, criminals call the
credit card issuer and request a mailing address change. Unless the issuer follows
strict phone identification practices (such as asking callers for detailed
information to verify their identity), the credit card is mailed to a new address.
The criminal has access to the card, and the consumer is unaware that a new credit
account has been issued.
Other more common events that can result in credit fraud occur when wallets, purses,
briefcases--or any other personal item that contains your credit cards--are stolen or
lost.
Strategies for Combating Credit Fraud
Incidents of credit fraud have increased over the past two years, and the issue has taken on
increased urgency. Major players in the credit industry are working together,
discussing defensive strategies for combating credit fraud.
Although credit reports are considered one major source of credit fraud, in many
cases, employees for credit card issuers, banks, or retail stores may be authorized
to pull credit reports on thousands of consumers a month to determine their
creditworthiness or potential risk. Credit fraud occurs when the information gets
into the wrong hands, and the Associated Credit Bureaus, Inc., a trade association
based in Washington, D.C., is examining ways to limit access to credit reports.
The three major credit bureaus--Equifax, Experian, and Trans Union, are also looking at ways of controlling access to credit information. Some
of the ideas they are considering include:
- Frequently changing the passwords employees use to access consumer credit reports.
- Dedicating computer terminals to specific employees who are authorized to access reports.
Other measures credit bureaus
have taken to prevent fraud include:
- Suppressing Social
Security numbers. When credit grantors in specific industries request a credit
report from Experian, the information on the report will tell them whether the
Social Security number entered during the inquiry was correct, similar, or incorrect. But the number itself will not be printed on the credit report.
- Dropping several
digits from credit account numbers--or eliminating the numbers entirely--from
credit reports provided to credit grantors.
- Preventing criminals
from fraudulently accessing consumer credit information from other credit bureaus.
When one credit bureau discovers fraudulent credit activities, they immediately
notify the other credit bureaus.
- Requiring businesses
to meet the following requirements before they are allowed to access credit
information:
- Proof of a permissible purpose under federal law
- A background check and on-site inspection of the business
- A current business license
- A signed contract requiring the business to use the data properly
- Placing a security
alert on your credit report when you have been a victim of fraud. This alert
warns potential credit grantors that your identification has been used fraudulently,
and stays on your report for 60 days.
- Placing a fraud alert
statement on your credit report that will stay there for up to 7 years, asking credit
grantors not to approve any new accounts without calling you first. This will prevent
you from getting instant credit--but it will also prevent criminals from obtaining
unauthorized credit in your name.
Credit card issuers are also taking
extensive steps to help protect consumers from fraud, such as:
- Adding your photograph,
special characters, or holograms to your card to reduce counterfeiting.
- Requiring you to call
an 800 number to verify your identity before using your card.
- Comparing all new
credit applications against credit bureau and in-house databases containing
fraudulent criminals, addresses, and other fraud-related information.
- Verifying your
identity if you or an impostor attempts to change your address when returning a
preapproved credit offer.
- Notifying you that
your card has been sent. If you receive the notification but not the card, you
should contact the card issuer immediately.
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