Consumer's quest for refund shines a light on ID theft

February 28, 2010|By Eileen Ambrose Personal finance

Deborah Tewey unwillingly joined a large and fast-growing club: victims of identity fraud.

The Baltimore County elementary school teacher discovered this when checking her bank account online before heading out on a shopping trip this month. The $700 she had in the account had been cleaned out.

At that point, Tewey began a two-week odyssey of alerting her card issuer, merchants and the police that a stranger had used her debit card. And what she found is that even though identity theft is now a well-known problem, some companies seem to take it more seriously than others.

More than 11 million U.S. adults were victims of identity theft last year, a 12 percent rise from the year before, according to Javelin Strategy & Research. Identity thieves got away with $54 billion, or $6 billion more than the year before.

Javelin blames the surge on the weak economy.

"ID theft is being taken more seriously, but one problem is it's not being taken seriously enough," says James Van Dyke, Javelin's president. "Some companies are much better than others, no question."

Some banks and online retailers, for instance, use sophisticated analyzers to match callers' voice prints with those known to engage in the fraud, says Scott Mitic, chief executive of TrustedID.

But other businesses still mail statements revealing customers' Social Security numbers or toss documents with personal information in trash bins for anyone to steal, says Linda Foley, founder of the Identity Theft Resource Center.

Companies weigh the cost of new safety measures against the cost of fraud and the loss of customer trust, Foley says.

"Whichever is lower is the one they go with," she says. "It's a bean-counter issue."

That's because businesses end up bearing the brunt of fraud costs. The typical amount lost last year to ID fraud was $4,841 per victim, with consumers on average picking up $373, Javelin reported.

That doesn't mean consumers aren't put out by fraud. Tewey, for instance, was the victim of one of the most common forms of ID fraud, and there are lessons in her tale.

First, victims should call the card issuer if they suspect fraud. Tewey couldn't because her credit union delayed its opening because of the recent snowstorms. She called Visa, which put a freeze on her card and told her about recent account activity.

Tewey then contacted Netflix, where someone had tried to open an account with her card. Netflix said the application was rejected because the ZIP code given didn't match the ZIP code for the billing address.

Her next call was to Hewlett-Packard, where Tewey says the thief ordered a $620 laptop. The computer hadn't been shipped, but Tewey says Hewlett told her the order couldn't be stopped. The customized laptop was being assembled in China, and the company would have to wait until it arrived in this country before it could reimburse her, she says.

Adding to her frustration, Tewey says, Hewlett didn't ask for the card's security code when the order was made, a step that's supposed to thwart fraud. Hewlett said it asked for other verifying information.

Tewey notified her credit union of the theft when it opened the next day, and upon its suggestion, filed a police report.

Reporting the theft to the police should be the next step after notifying the card issuer.

"That is the holy grail that says, 'I am a victim,' " Foley says. Some consumers say they are victims of ID fraud, but the only way some companies trust those claims is if there is a police report, Foley says.

After taking these steps, Tewey wasn't sure when she would see her money again.

The day after The Sun inquired about Tewey's case, Hewlett returned her money - something the company said had been in the works already. Hewlett said its usual practice is to have fraud victims call the card issuer first, and then it works with the financial institution to resolve the problem.

Card issuers have 10 business days to investigate a claim of theft and must put the missing funds back into the account on the 11th day, Foley says. The inquiry can continue and if it turns out not to be theft, the issuer can withdraw the money again, she says.

With ID fraud on the rise, here are ways to protect yourself:

• Use a credit card Interest-free debit cards help with budgeting, but credit cards offer more protections.

You generally won't be held liable for unauthorized charges on a credit card if you report a theft in a timely manner. Some card issuers now extend this protection to debit cards, too.

Legally, if you wait a few weeks to report a stolen debit card, you could be on the hook for up to $500. Wait 60 or more days, and you could lose everything in your account.

• Freeze credit reports This prevents creditors from viewing your report, which means they are unlikely to extend new lines of credit under your name. A freeze will prevent you from getting new credit, too, unless you request to temporarily lift it.

The rules on freezing reports vary among states. Check the details on the Web sites of the three major credit bureaus, Experian, Equifax and TransUnion. Marylanders, for instance, must submit the request in writing to each credit bureau and pay $5 to freeze the report and another $5 to lift the freeze. Fees are waived for identity theft victims who submit a police report.

• Clean out your wallet Don't carry checks, Social Security cards and passwords in wallets or purses that can be easily pilfered, says Javelin's Van Dyke. And don't leave financial information out in the open on your desk at work.

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