Quick Note: For those of you with “Retirement Planning” on your New Year’s Resolution list, I extended the $60 discount on The Ideal Retirement Design Guide through January 31st.
I have a retired client—let’s call him Mark—who was going on a trip and he asked his neighbor to water his plants and keep an eye on his house while he was gone. A year later, Mark was making a big purchase at a home improvement store and he decided to apply for a store credit card. His application was denied. This surprised him because he only had one other credit card which he hardly ever used and always paid in full. A little investigation revealed that he actually had five credit cards—four of which he knew nothing about and that were completely maxed out.
By now I’m sure you’ve guessed that his neighbor did more than water the plants. He dug through Mark’s belongings and pieced together information like his date of birth, Social Security number and mother’s maiden name and then started firing off credit card applications (American Express: Don’t leave your neighbor’s home without it.). He had the bills sent to his office address and always made the minimum payment. This meant that the accounts weren’t delinquent, but also meant that any potential day of reckoning was years away.
Anyone can be the victim of identity theft, but retirees are particularly vulnerable. They generally have good credit and available resources (they’re retired after all), both of which can be tempting targets for thieves. Not only that, but our memory can diminish as we age, a situation that criminals are more than happy to try to exploit. So what exactly is identity theft and how can you protect yourself or a loved one? What should you do if someone steals your identity? Are you liable for any fraudulent debts? How can you clear your name?
What is identity theft?
Identity theft is when someone uses your personal information to fraudulently do things like take out a loan, obtain I.D., open a credit card or gain access to your bank accounts.
Criminals use a number of tricks in their efforts to gain access to your personal information. They steal mail, go through your personal belongings (like Mark’s neighbor), scour the Internet for personal information, send “Phishing” emails and hack into computers to name a few.
The longer a criminal is using your identity, the more damage he can do, so it’s important to keep your eyes open for certain red flags such as money missing from your accounts, calls from debt collectors about debts you know nothing about, unusual charges on your credit card statements or denial of credit. Any of those could indicate problems.
What should I do if my identity is stolen?
As I mentioned earlier, it’s important to act quickly if you find a problem. Begin by placing a fraud alert on your credit report with the different credit bureaus. This will prevent thieves from causing further damage by opening new accounts. You can do this by phone or at their websites:
Equifax
www.equifax.com
1-888-766-0008
Experian
www.experian.com
1-888-397-3742
Transunion
www.transunion.com
1-800-680-7289
Once you notify one agency, they are required to notify the others. The fraud alert will last for 90 days, but for more severe cases you can extend that to seven years by filing additional paperwork. After notifying the agencies, download a free copy of your credit report and go through it to identify any fraudulent activity or inaccurate information.
Next, file a police report and obtain a copy that you can use to verify your claims as you work to fix the problems caused by the theft. In addition to the police report, file a complaint with the Federal Trade Commission (FTC). They maintain a large identity theft database which they use to assist law enforcement and affected companies with identity theft investigations. You can file a complaint at www.consumer.gov/idtheft or by calling 1-877-438-4338. One of the forms they will have you fill out will be the Identity Theft Affidavit, which you can use with affected companies to begin fixing any problems.
Once you have filed the fraud alert, the police report, the FTC report and identified the affected accounts, contact each company holding those accounts so you can notify them of the fraud and have the accounts frozen and closed. If your bank account or credit card was affected, you will need to open new accounts. Be sure to update your passwords or personal identification numbers in case those were also compromised. Once you have the problems fixed, it’s a good idea to work with the credit bureaus to clean up your credit report by having any entries related to the fraud removed from your report.
Am I liable for the fraud?
One of the first questions people often have when it comes to identity theft is “What am I liable for?” The answer depends on what form the fraud took and how quickly it is reported. You are generally responsible for $50 per card in unauthorized credit card transactions as long as you report the fraud within 60 days of receiving the bill with the fraudulent charges. Debit cards are a bit more stringent. You have only 2 days to report unauthorized withdrawals or transfers to maintain the same $50 limit of liability. Anything between 2 and 60 days will likely mean you’re responsible for up to $500 in unauthorized transfers. Anything beyond that and you risk losing the money. Not only do debit cards have a tighter reporting window, but you will also likely be without the money that was stolen until the bank can straighten things out. For those reasons, it may be worth choosing your credit card over your debit card when making purchases.
What can you do to protect yourself from identity theft?
There are several things that you can do to make it difficult for thieves to steal your identity. First and foremost, keep a tight rein on all of your personal information (e.g. Social Security number, date of birth, etc.). If you’re making online purchases or using online banking, make sure that you use strong passwords and that your computer has all of the latest security updates downloaded and installed. Run regular scans to detect any viruses or malware.
You can also place a security freeze on your credit report which will prevent credit agencies from releasing any information when they receive requests from banks or credit cards without first getting your authorization. As a result, any unauthorized application or request for a new account gets denied because the company can’t obtain the information it needs.
Finally, you might also consider signing up for a service like LifeLock to help you monitor your credit and notify you of any suspicious activity. These companies will also help fix any damage done by identity thieves. A paid service can be a good option (and give you peace of mind) if you are ever the victim of a large breach (e.g. Target stores, the Chinese hacking breach of the Office of Personnel Management, etc.) and want to keep a an eye out for anyone trying to misuse the compromised data.