Battle Against ID Theft Continues

Big name financial institutions and research services have decided to confront the problem of identity theft head on, but critics of their efforts say those advocating the latest stopgap measures are the same ones contributing to the problem.

LexisNexis (search) and the Economic Crime Institute (search) at Utica College have recently unveiled recommendations for a national strategy for combating identity fraud that calls for coordinating information on tracking down the misuse of false identification documents like passports, drivers licenses and birth certificates and making it easier for people to report crimes.

"The growing crime of identity fraud is a national crisis with global implications," said Norm Willox, chief privacy officer for LexisNexis, which provides research services to legal, corporate, government and academic markets.

The Financial Services Roundtable (search), which represents 100 institutions that handle 70 percent of the U.S. economy's financial transactions, has launched a pilot program that would enable victims to make one phone call to report a theft that would be entered it into a central database.

But some privacy advocates say such systems are already in place at the Federal Trade Commission and credit bureaus, and the real problem originates with the very groups who claim they are trying to help prevent identity crimes.

"The real problem is that the Financial Services Roundtable is proposing a reactive solution to a problem that they themselves are causing — the problem of identity theft is caused by instant credit," said Chris Hoofnagle, associate director of the Electronic Privacy Information Center (search).

"It's these same companies that are so vigorously selling personal information in the market," Hoofnagle added. "It makes it very difficult to trust Lexis or Experion or any of these other companies because they really are selling everything they possibly can."

Identity fraud occurs when someone's stolen identification documents are used to obtain other ID cards, effectively creating a new identity for criminals or even terrorists who seek to access credit cards, employment records, bank accounts, secure facilities and computer systems, among other things.

Identity theft usually refers to the act of someone stealing another person's personal identifiers, like a driver's license, passport or credit card, to commit crimes. Almost 10 million Americans fell victim to identity theft last year and the crime costs businesses and individuals billions of dollars each year.

"With a real person's identity being stolen, a person actually finds out they have a problem and they can report it — with ID fraud, there's nobody to report," said Gary Gordon, executive director of the Economic Crime Institute.

LexisNexis and the Economic Crime Institute envision the creation of a national classification system and central database to report identity-fraud incidents. They are calling for an information-based authentication system that confirms the identity of a person via alternative identifiers such as banking history.

"We really want to tackle the problem at the initial enrollment … building a credibly identity can occur and it's very difficult to determine if it's a real person or not," Gordon said. "Once [criminals] get a breeder document, such as a driver's license … they can make this look like a very credible identity."

The Financial Services Roundtable's Identity Theft Assistance Center (search) now being pilot tested would allow people who think they've fallen prey to identity thieves to phone their bank to report the crime. The bank would then contact the ITAC, which would then send the victim an affidavit to mail to credit-card companies, law enforcement, financial institutions and credit bureaus.

When a financial institution receives an application for credit or loan, it could then run the applicant's name through the database to make sure it doesn't match up to someone's who has claimed identity theft.

The pilot is scheduled to begin May 1, 2004, and will be conducted primarily by Wells Fargo & Company.

Hoofnagle said if these groups really wanted to help, they would not oppose most types of common-sense legislation aimed at cracking down on instant credit, where much fraud occurs.

For example, California recently passed a law requiring businesses, such as Sears, to use three identifiers to match a credit applicant's personal information with that on record at a credit-reporting agency. Congress is considering legislation that would upend that law with a federal program that opponents say doesn't go far enough to protect privacy.

"[These are] very simple laws that ensure that you're not issuing credit to imposters that can prevent identity theft," Hoofnagle said. "These companies have really been lobbying against these laws in favor of these reactive measures."

But a national strategy is needed, say advocates. To date, comprehensive identity theft measures have been passed at the state level. Congress has sat back and merely strengthened the penalties against the thieves.

"We've been taking that kind of patchwork approach to it, trying to solve the problem from various vantage points," Willox said. "We need a commitment from the highest levels of the federal government to lead and fund a national strategy to combat the problem."