Financial Identity Theft

Hand of young woman inserting credit card into cash machine
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Have you heard of financial identity theft and wondered what it is? The Federal Trade Commission offers a definition that is explained below:

Financial identity theft is the outcome of identity theft instead of a type of identity theft. This theft occurs after a thief has already accessed your personal information. Once the thief has this information, he or she can use this information to open or take over an existing account, and their ultimate goal is to get paid by obtaining new credit in your name or siphoning money out of the account.

Identity theft occurs when a person uses the personal information of another - Social Security number, name, mother's maiden name - to engage in unlawful activities or to commit fraud. For instance, an identity thief may open up a credit card account under a victim's name. When the thief fails to pay the bill for this credit card, the debt is reported to the victim's credit report.

Other Forms of Identity Theft

Other forms of identity theft include when a thief takes over an existing credit card account and begins making charges on it. Generally, the identity thief will contact the issuer of the card and change the billing address to lower the chances of them being discovered. Other forms of identity theft include taking out a loan in someone else's name, writing checks using a victim's name or using personal information to access or transfer money from an account. In the most extreme cases, the thief may take over the victim's identity and in addition to opening a bank account or getting credit cards in the victim's name, will buy a car, get a mortgage or even get a job under the name of the victim.

Identity theft almost always has a financial institution in the mix, such as a holder of a bank account, lender, debit or credit card issuer. It, of course, is because this is where the money is. This type of identity theft is accomplished through many means. Historically, an identity thief had been able to get the information necessary through "low-tech" means. These include intercepting a box of new checks or going through the trash to obtain a bank account or pre-approved credit card offers. Identity thieves also may try to trick victims into giving them information by doing things such as posing as an employee at a bank.

Methods of Identity Theft

Other ways that identity thieves obtain information are more sophisticated. One method, known as "skimming," allows identity thieves to use computers to obtain and store information from the magnetic strip of a credit card or ATM when the card goes through a card reader. Once that information is obtained, it can be put on the strip of another card, which allows the thief to use the card at another ATM or credit card reader.

For people who are victims of theft, the costs and consequences can last for years and be quite significant. These thieves can very quickly run up tens of thousands of dollars in debt in the victim's name. Even when the consumer is not liable for these debts, there are still consequences such as a bad mark on their credit history that is not easy to fix. In fact, it can take months or years fixing these errors. In the meantime, the victim could be denied mortgages, loans, and employment. Furthermore, even after the bills are resolved, new charges could appear months or even years later. This is why it's important to preemptively protect yourself from identity theft.

Although the statistics of how often identity theft occurs vary, the data does suggest that the number of identity theft cases have been increasing over the past few years.