Identity Fraud - Is It on Your Radar?

Is identity fraud on your radar? If not, it should be. Once you’ve been victimized by identity fraud it can be expensive and time consuming to resolve. But the good news is that a little knowledge can help protect you from identity fraudsters

The first step towards protecting yourself from identity fraud is to know what you are up against. The next step is to take precautions and practice good online habits. Two of the most reported types of fraud are new account fraud and account takeover fraud. Traditionally new account fraud and account takeover fraud have hit a lower proportion of fraud victims, but these two types of fraud consistently produce the highest average fraud amounts and cost the consumers more. So while there are fewer victims of this type of fraud, they typically feel the most pain.

So what exactly is involved in these two types of fraud?

New account fraud is the use of a victim’s personal information to open fraudulent new accounts in the victim’s name. Stolen Social Security numbers are often used to commit new account fraud. The thief typically submits a different mailing address when applying for new accounts, so the victim may not be aware of their existence. Bills and statements are sent to the fraudulent mailing address, debt accumulates in the victim’s name, and eventually creditors come seeking payment when bills remain unpaid.

Variations on new account fraud include:

  • Utility fraud – Identity thieves open new utility accounts such as gas, electric, phone or cable in the victim’s name. Utility fraud accounts for as much as 20% of all instances of identity theft.
  • Loan fraud – Loans are granted to fraudulent applicants by using the victim’s Social Security number. Loan fraud accounts for approximately 10% of identity theft.
  • Credit card fraud – This is the most lucrative and prevalent type of new account fraud, accounting for almost half of all identity theft cases. Credit cards are the easiest accounts to open and can quickly be turned into cash, making this type of fraud popular among identity thieves. The availability of instant credit can result in instant identity fraud. This is because, often times, only the victim’s personal identification information is needed to open an account.

Account takeover fraud can happen when a fraudster poses as a genuine customer, gains control of an account, and then makes unauthorized transactions. The fraudster steals a victim’s personal information to take control of existing bank accounts or credit card accounts. Fraudsters use a variety of techniques to obtain personal and financial information needed to take control of existing accounts, including:

  • Phishing – This is the most common type of online fraud where criminals send out mass emails to random consumers. The emails instruct consumers to click on a link to a fake website and enter personal information, which includes bank account information, Social Security numbers, user IDs, and passwords.
  • Cold calling – A simple method to obtain personal information where thieves pose as a representative of a bank, credit card company or other establishment, and request the victim verify their identity by providing an account number, Social Security number, user ID and password, and other personal information.
  • Dumpster diving – Thieves physically go through an individual’s or company’s trash, searching for anything that can provide personal information such as bank and credit card statements.
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