New Account Fraud

The California Public Interest Research Group has released a new report on identity theft that should raise some eyebrows. Pulling together statistics from the High Technology Theft Apprehension and Prosecution program, the Federal Trade Commission, Javelin Strategy and Research, and other credible sources, CALPIRG paints an increasingly bleak picture concerning financial identity theft. Of greatest interest to your Guide was the information on new account fraud.

The focus of the survey is on technology and the increased threats that it presents to consumers, as well as recommendations for policymakers and business best-practices. The executive summary alone has some startling numbers that are deeply concerning. For example, quoting the High Technology Theft Apprehension and Prosecution data for 2011 the report indicates that the average dollar lost per victim was $786, almost 10 times the amount for 2010. CALPIRG also shows that new account fraud, represents an average of $3197 per incident, and new account fraud in 2010 showed a nearly 20% increase in frequency over 2009.

New Account Fraud

It may be good to take a moment and discuss new account fraud in more detail. New account fraud happens when somebody uses your personal information to open an account you do not know about. This is usually with a credit card company, but can be a line of credit issued by any retailer. The sticky problem with new account fraud is that you do not know about the new account until the literally thousands of dollars have been spent, the account has gone to collections, and it shows up on your credit report. And then, of course, it’s too late. According to the CALPIRG report, new account fraud made up 46% of identity theft based fraud in 1010. Your Guide is making the assumption that CALPIRG was focused primarily on financial identity theft, since this is the only type of identity theft that is addressed in the report.

The problems associated with new account fraud are compounded by the fact that the identity theft victim can legally be held accountable for the debt. Clearing up a new account fraud has often required trips to court, and access to legal counsel above and beyond legal aid. (This is one reason your Guide highly recommends identity theft programs that provide access to legal help .) New account fraud rarely goes away simply because you file a dispute with the credit reporting agency – in fact, without filing a police report and an identity theft affidavit through the FTC, new account fraud will most likely be confirmed as a valid debt by a collection agency.

The Dark Side of Technology

CALPIRG also focuses on the impact of technology in the realm of identity theft. The report examines issues related to WiFi, key loggers, ATM card skimmers, and even risks associated with Bluetooth connections. Most technically savvy people know better than to access financial accounts on public WiFi or hot spots. However the risk is still there, because noteverybody knows. This makes public places such as coffee shops, airports, and hotel lobbies prime targets for identity thieves to hang out. An identity thief doesn’t even have to be in the location, which means you may never even see a person you are about to treat to a shopping spree.

ATM card skimmers seem to be more prevalent in the Western United States, and California boasts about 10% of the population. This is one reason California is on the cutting edge of consumer protection, and why your Guide keeps a close eye on legal decisions in that state. Many privacy laws that show up in the Federal Congress look strikingly similar to laws passed in California a few years previously. Card skimmers have shown up everywhere from banks to gas stations, and some have become so sophisticated that they are actually installed inside gas pumps, hijacking card information as it is sent to the stores computer for processing. CALPIRG is right – identity thieves are becoming more and more sophisticated as technology becomes more and more available.

The release of the CALPIRG report coincides with the launch of their new resource page onlinegeared to highlight consumer risks and actions they can take to protect themselves. And of course, a good dose of common sense seems to be the key element.