The Growing Threat of Identity Theft
Identity theft has become more advanced and harder to detect.
It can ruin your bank accounts, credit score, and reputation before you realize something’s wrong. The problem is growing fast.
In 2017, over 16.7 million people in the US were victims of identity theft, causing $16.8 billion in losses. The most common identity fraud involved employment or tax-related fraud, credit card fraud, and new account fraud.
But these numbers do not show the full extent of the issue. Many more people have had their personal information exposed due to poor security measures by companies storing data.
Some of the largest data breaches include:
- Yahoo: all 3 billion user accounts exposed in 2013-2014
- Adult Friend Finder: more than 400 million user accounts exposed in 2016
- eBay: 145 million accounts compromised in 2014
- Equifax: 148 million credit files stolen in 2017
Identity Theft: Then and Now
Only a few years ago, dumpster divers would harvest paper records to steal names, birthdates, and Social Security numbers (SSNs) to create a new identity.
But today, most identity fraud occurs online. A hacker might be able to buy your identifying data for a few dollars on the “dark web”, a corner of the internet where fraudsters have free rein.
Criminals can even steal your SSN and use it to file a false tax return and claim a refund.
The IRS Data Breach
In 2015 and 2016, lax security measures at the “Get Transcript” page on the IRS website gave hackers the opportunity to retrieve hundreds of thousands of tax return transcripts.
The “Get Transcript” page is a digital file showing most line items on your current tax return and up to three years of past returns.
With this data, hackers were able to file more than 700,000 fraudulent tax returns, claiming refunds averaging about $3,000 per return.
The First Step to Protect Yourself: A Security Freeze
The most important step to protect yourself is to place a security freeze on your credit files. This is also known as a credit freeze.
- A security freeze limits access to your credit report to only those companies that already have you as a customer.
- With a security freeze in effect, even if someone has your name, SSN, and birthdate, they will find it almost impossible to borrow money in your name.
So a security freeze will prevent most fraud attempts that rely on impersonating you to get credit. It will also protect your tax return transcripts, since the IRS now requires access to your credit report to verify your identity.
Security freezes are authorized under the laws of all 50 states. If someone fraudulently accesses your credit report, despite the freeze, you’re protected from financial liability.
How to Put a Security Freeze on Your Credit Files
You’ll need to put a security freeze into effect with each major credit agency.
Follow these links to get started:
- Equifax: www.equifax.com/personal/credit-report-services/credit-freeze
- Experian: www.experian.com/freeze/center.html
- TransUnion: www.transunion.com/credit-freeze/place-credit-freeze
- Innovis: www.innovis.com/personal/securityFreeze
The Illusion of Protection: Say No to Credit Locks
Credit bureaus hate security freezes. This is because freezing and unfreezing accounts often requires the intervention of a customer service agent. Also, they can no longer sell your data to companies that might want to offer you credit and other products or services.
Instead, credit bureaus will try to persuade you to sign up for a “credit lock” and credit monitoring services. You pay a monthly or annual fee, which is often waived, for the privilege of having the company that should be keeping your data safe notify you when they don’t.
Don’t be fooled. A credit lock is only an agreement between you and the credit bureau. You are bound by whatever restrictions are in the fine print of the agreement, rather than by your state’s security freeze law.
My Experience with Credit File Freezes
I put a security freeze on my credit files last year, the day after I learned I was one of the 148 million people whose data had been stolen from Equifax. It’s caused me a problem only once, and even then, I was glad that I had it in effect.
A few months ago, I tried to open a bank account at a local bank. An officer from the bank told me that I needed to make a personal visit to complete the opening formalities. He instructed me to bring a utility bill with my name on it and my driver’s license.
When I arrived at the bank with the required documents, the new accounts clerk informed me that he could not open the account because of the credit freeze on my account. Then he told me a whopper: he said the bank needed access to my Equifax files to ensure that I was really Mark Nestmann. He was more willing to trust what Equifax had to say about me than seeing me in person and comparing my appearance with the photo on my driver’s license.
Breaking Barriers: Congress Makes Credit Freezes Free
And now, there is a better reason to place a security freeze on your credit files. A new law passed by Congress earlier this year prohibits credit bureaus from charging you to institute a credit freeze.
The systems used to safeguard our data have failed in every conceivable way to deliver the most basic requirements for integrity. There is little incentive for banks, credit bureaus, e-mail services, and other data repositories to invest in security. Your personal data is a product to be bought and sold, and any limits to this practice cut into their profits.
The only short-term solution to defend yourself from identity theft is to put a security freeze on your credit files.
But the only permanent solution is to recognize that everyone has an ownership right to their own data. This includes data held by third parties. Ownership over your own data gives you the right, but not the obligation, to share it with others.
But until then, your only recourse is to take steps to protect yourself. And a security freeze should be at the top of your list.
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