No child is too young for identity theft; it happens to kids 51 times more often than adults. Image: Flickr/Herckie's photostream CC-BY-SA

Child identity theft is becoming all the rage. New research shows that identity thieves are focusing increasingly on kids because parents don’t pay attention, and the theft can go undetected for years. But when the victim tries to get a job or credit as a teen or young adult, the damage done becomes evident.

The scourge of child identity theft

Thousands of children and their families are being victimized by identity theft and thousands more are at risk, according to a report by Carnegie Mellon University’s CyLab cybersecurity research center. The report examined the identity protection scans of 42,232 children conducted in 2009-10 by the Debix AllClear ID Protection Network after parents were notified their children’s IDs may have been compromised. The Debix AllClear ID data showed 4,311 of the children, a little more than 10 percent, had their Social Security numbers in use by identity thieves. That’s a child identity theft rate 51 times higher than the 0.2 percent of U.S. adults targeted by identity thieves, based on 663 attacks against 347,362 adults listed in Debix AllClear ID. The youngest child identity theft victim was five months old. A 17-year old girl from Arizona discovered she was $725,000 in debt with with 42 open accounts including mortgages, car loans and credit cards. Her Social Security number was linked to eight suspects. A 14-year-old boy from Kentucky had a credit report going back 10 years listing a mortgage foreclosure.

Victims of friendly fraud

Child identity theft appears to be coming to a head after the seeds were planted in early 1980s. Back then the Internal Revenue Service directed the Social Security Administration to give all children Social Security numbers. Most children become  identity theft victims at the hands of parents, family members or close friends who have access to their Social Security numbers. According to Javelin Strategy & Research, “friendly fraud” made up 30 percent of child identity theft cases in 2010. Because credit checks don’t verify age, identity thieves can freely take out loans, get credit cards and create accounts. The non-profit Identity Theft Resource Center recently helped a young man from Florida who failed a background check to become a police offer because his estranged father had stolen his identity years earlier and destroyed his credit.

How to deal with child identity theft

The Identity Theft Resource Center recommends teaching children about the importance of privacy and the danger of sharing personal information online. All personal information, including Social Security numbers and birth certificates, should be kept in a secure place. If mail arrives in the child’s name, that’s a warning sign that a credit file has been opened. Parents should contact all three credit major bureaus immediately and ask for a credit report. If no credit report exists, the child is likely in the clear. If a credit report surfaces, a security alert must be filed with all the credit bureaus including Equifax, Experian and TransUnion. File a police report using the credit reports as evidence. A police report listing the fraudulent accounts obligates the credit bureaus to remove them from the credit report within 30 days.

Sources

Forbes

Atlanta Journal Constitution

Wallet Pop

Identity theft is on the rise. (Photo: TheTruthAbout/Flickr/CC BY-SA)

Even in the light of all the warnings and mass publicity regarding scam protection, scamming has continued to be a major problem today. The more light and publicity that shines on these illegal acts in order to protect the public, the more clever these scammers get in their schemes. If you want to stay out of their clutches, be aware and do not take risks with your money and personal information.

Be careful who you trust

Recently, I received an e-mail from a friend saying she had gone on a trip to England. She had either misplaced her purse or had it stolen and was in need of funds to help her return to the United States. It all appeared very innocent, except that she couldn’t be reached by phone. I was just about to take out a bad credit loan when I decided to call her at home. To my shock and disbelief, she was there and had never gone to England! So you can see why it is very important you take precautions before making a last-minute jump.

Safeguard your personal information

Here’s another example of scamming, one I had experienced during the process of applying for jobs and rentals. One of the rentals sent back a link along with photos of a really nice home at a very reasonable price. However, I had to complete a credit check before they could provide any more details on the house. Basically, according to the company, it was used to determine whether I had any past evictions. Seems innocent enough, right? Wrong! This is actually a huge red flag to look out for.

On another occasion, the so-called company of an available job position I had inquired about had sent me a bunch of forms to fill out, including a I-9 form (requires social security number) and a direct deposit form (they only pay that way). There was even a form that required a passport size photo of myself. Be aware that these are red flag signs to look out for, as well.

Build awareness

These schemes, among many others, may still be working for many scammers, so get the word out and build awareness. Thankfully, there are still many reputable companies out that strive to make life easier, providing payday loans and other types of short term loans to help with unexpected money problems.

Identity theft can seriously disrupt the lives of its victims. Essentially, it is characterized by one stealing the identity of another for the purpose of using the victim’s credit information and finances for ill-gotten gain. Thieves are sometimes able to ruin a person’s credit and drain a checking and savings account before a victim even knows that their security has been compromised. To prevent this from happening, there are a few things that every person can do.

Tips for preventing identity theft

Information storage. Do not store personal financial and identifying information on a computer. Social security numbers, identification numbers, bank account numbers, passwords, password reminders and other log in information is what identity thieves are after. Keep this information safely stored elsewhere, but do not store it on a computer that can be hacked into.

Virus-protection software. Keep all personal and work computers adequately protected with . Some computer viruses are specifically designed for identity theft and may harvest personal information, such as social security numbers and bank account numbers, from an unprotected computer. To avoid this, virus-protection software should not only be installed on all computers used, but also updated regularly.

Firewalls. Install a good firewall program, which will prevent thieves from accessing any information stored on a computer.

Hyperlinks. Do not click on hyperlinks unless it is from a trusted source. Identity thieves are notorious for sending special offers by email that require a recipient to click on a link for more information or to make a purchase. Unfortunately, these links are often used to expose the computer to a virus or some sort of program that harvests personal financial information from a person’s computer.

Trusted sources. When making a purchase, applying for a personal loan or performing other financial transactions online, always be sure that the site is a trusted source. Never follow a link from an email to make a purchase or apply for a cash advance, even if the link looks like it is from a source that would ordinarily be trusted. Instead, take the time to type the store or lender’s URL into the browser’s address bar directly.

Safe Browsers. Only make purchases or perform financial transactions on the Internet when using a safe browser that will scramble or otherwise encrypt all of the date you send online. Also, look for a tiny padlock symbol at the bottom of web pages asking for personal or financial information. This lock means that the site has been deemed secure. If you do not see it, do not proceed with your transaction.

Computer-servicing precautions. Be careful when sending your computer out for servicing. It cannot be repeated enough times not to store personal financial information on a computer. However, if you do, be very careful as to whom you allow to service your computer, as the technician will easily be able to access this information, as well as other private photographs and information.

Selling precautions. When selling a used computer or even if you are just throwing one away, always delete any personal information that was previously stored on it. Special wipe programs exist, which can help delete this information. Be advised that simply erasing the information by hand is not recommended as deleted information still remains on a computer’s hard-drive.

Keeping up in a dangerous game of cat and mouse

Overall, shopping online, applying for an Internet loan and handling other financial transactions by computer are all relatively safe if the tips described above are regularly implemented. There is no guarantee that identity theft will never happen to an individual, as thieves are always inventing new and resourceful ways of stealing information. However, making an effort to stay up to date on these tips and others, as they become available, can save a lot of money and heartache.

Image from Picasa.

Millie Benger, 73, of Toledo, Ohio, needed to take out installment loans to help her stranded granddaughter. She received a call in the middle of the night. The caller claimed to be her granddaughter and said her car broke down in Montreal. The solution? She requested that Benger Western Union her $4,000 so she could get home safe.

Benger used a combination of quick loans to come up with the funds. When she went to her local Western Union office, she luckily ran into some opposition. A particularly shrewd Western Union agent started asking questions. First of all, Montreal is known to have a reputation for fraud. When the agent asked if her granddaughter had any credit cards, Benger recalled that the woman on the phone said her card wasn’t accepted in Montreal. The agent asked more questions and Benger realized she had most likely been duped.

Using Western Union to Wire money

More and more thieves are using Western Union and an elderly target to make money. In fact, it’s estimated that the “grandparents scam” has already taken the elderly for more than $3.5 million nationwide. It’s a scam where a fake grandson or daughter calls an unsuspecting and concerned grandparent and asks for emergency money. The amount could be small, or it could be a large chunk of money. The scammers normally say that their credit cards aren’t accepted in the country they are visiting, and they usually fail to give their name. A worried grandparent does everything they can to find the money quickly.

The “grandparents scam” is a routine

The way thieves dupe the elderly with the “grandparents scam” is pretty routine. Here are the warning signs:

• A distressed young person calls in the middle of the night
• He/she has an emergency that needs immediate funds
• They rarely are forthcoming with their name, but rely on the elderly, who out of hasty concern, divulge their relative’s name first
• They suggest Western Union for immediate funds — they have an “emergency” after all!
• The grandparent looks for immediate solutions like installment loans, savings or credit to provide the cash

If you or a loved one are the victim, be smart. Ask questions. Sergeant Carl Pouley, detective for the Middleton, Ariz., police department, said, “It’s pretty easy to take a thief off guard because they have a routine. If their scam is up, they quickly move to another person. …Asking for the name of a pet or childhood toy is not unheard of. Most likely your crook will give up.” Pouley added that most of these scammers have “hundreds of names” to get through daily and if they think you are onto them, they will end the call pretty quickly.

Protect yourself against thievery

People need to be wise. Rather than getting emotional and distressed when a loved one calls, the elderly are cautioned to be calm and think rationally. Would loved ones really turn to their grandparents for emergency funding via savings, credit or installment loans? Most likely a grandchild in distress would first turn to parents and friends for aid. Sergeant Pouley added, “Grandparents these days are on fixed incomes so the likelihood of asking them for cash just isn’t that great.”

Apply here for Installment Loans

Phishing, pharming, spoofing, smishing —what do all these words mean? Each one has to do with online hackers and your personal information. Almost everyone today who does anything online has had some experience with unscrupulous companies or people. Phishing for example is when you get an email that looks like it’s coming from your bank or PayPal or EBay, but is actually a fake. It instructs you to click on a provided link to “confirm” your information. The link is phony and will take you to a website that collects your personal information and allows thieves access to your account.

Different words, same result

Then there’s pharming, also known as spoofing, where hackers redirect legitimate online traffic to their own website, and smishing, where criminals use cell phone text messages to get you to divulge your personal information.  Regardless of the name, each one of the above are things hackers use to steal your personal information. They may use the information themselves by trying to withdraw money from your account, or they may sell it to a third-party, black-market company. Either way, you’ll have some trouble fixing the problem once your information is compromised.

Hackers are getting smarter

Some people think they can outsmart hackers by eliminating the computer from their daily bill payment method. Sure this may cut out some of the above tactics, but rest assured there are others. Hackers spend hours devising ways of stealing information. They also use vishing, or “voice phishing,” to leave you automated phone messages from fake banks or credit card companies. The message will ask you to confirm your information in order to get details about where you are keep your money.
There’s also bank-card skimming where thieves actually put bogus ATM machines. When you enter your card, your information is captured and when you enter your pin, they have that too. A simple portable card reader does the trick and can leave you vulnerable to theft.

Not to spread alarm, but . . .

The solution is not to stop answering phone calls or get rid of your credit cards. Phones and credit cards are modern necessities. But the reality is that you have to protect yourself. Here are some basic tips to remember about identity theft:

• Order your credit report yearly. You are allowed one free report every year from Equifax, Experian, and TransUnion. Get them, review them, and make sure everything is accurate, including account numbers and balances, your name, and addresses.
• Never give your personal information to anyone over the phone or online. Remember that your bank, PayPal, EBay and your credit card company already have your personal information. There is no reason for them to request it again.
• If you are self-employed, do business on your own computer and never a public one. Even after you sign out, you may leave valuable information on a public computer. Wireless connections are also more dangerous when dealing with business issues.
• Protect yourself when you are at an ATM. Don’t be afraid to let someone go before you if you think they are standing too close. Also, be sure to never keep your PIN near your card. There’s a reason why banks tell you to pick a number you can easily remember.
• Use the paperless option when it comes to your bank statement. Thieves will go through your mail and garbage to get your information. Handling transactions online leaves no physical record for anyone to steal.

Keep your guard up

These are just some of the ways you can protect your identity and your finances from hackers and thieves. Be vigilant and careful with your information. Theft in general and identity theft in particular, can be difficult to sort out when it happens to you.

Using credit cards can be a pleasure and a pain. Will anonymous credit cards make security one less thing to worry about? (Photo: flickr.com)

Credit cards are both a blessing and a curse for millions of people worldwide. Managed use of this form of consumer credit can help build one’s credit score and provide a convenient means through which to transact with merchants who require a credit card in order for a consumer to secure services (automobile rentals, hotel rooms, etc). The key to managing one’s credit card usage, however, is a something that many consumers do not practice: paying off the balance each month. By making only the minimum payment, credit card debt grows significantly as interest is compounded. Revolving lines of credit like credit cards can saddle a consumer with a lifetime of debt.

Then There’s Identity Theft

Use of credit cards can expose consumers to the nightmare of identity theft. Whenever you pay a restaurant bill with your card, you’re exposing yourself to risk if the server is less than honest with your sensitive information. If you’re shopping online at a site with less than industrial-strength security, great potential for an information leak is there. Giving your credit number over any form of telephone connection is highly problematic as well.

Such scenarios of financial pain and horror might cause you to wonder how you can keep yourself from becoming a victim. One answer is to use payday loans rather than credit cards in emergency situations where you need quick cash, as the process does not generally expose you to potential identity theft. However, having a small number of credit cards can be beneficial to your FICO score (indicating diversity in your credit portfolio, which creditors like to see), so perhaps a better long-term answer would be how to make credit card usage less dangerous.

Make it Anonymous, Perhaps?

Elli Androulaki and Steven Bellovin of Columbia University recently published a study entitled “An Anonymous Credit Card System” which proposes a system that could serve as a solution to this problem with credit cards. Consumers would be able to kept close track of their credit card usage while banks would be able to justify the payments it makes to merchants through an anonymous E-cash system.

An Anonymity Barrier

One of the benefits consumers enjoy when using credit cards is that logs of transactions are readily accessible. In addition to convenience, this provides a level of security in that consumers can challenge erroneous charges. However, such logs can be a double-edged sword in that banks can (and often do) sell that consumer profile information to third parties. What the study authors propose is a system that maintains the benefits while at the same time protecting consumer and bank privacy through a barrier of anonymity. For consumers, however, the anonymity system express is conditional in that the consumer must make honest attempts to keep up with payments. If an overspending transaction occurs, the consumer is blacklisted from the anonymous service.

For online retail, truly anonymous credit cards would prevent any unauthorized outsider from acquiring information about a transaction or those involved in the transaction. Androulaki and Bellovin stress that banks would not be able to create profiles that they sell without the cardholder’s permission. In order to achieve this level of privacy and security, the authors have created a theoretical system whose high points will be discussed here.

The Dawn of Credit Card Security

According to previous studies of credit cards and state-of-the-art security methods, measures have existed since at least 1994, but such schemes have involved extraneous trusted parties to maintain security. Furthermore, previous credit card protection schemes offered no expense reports or means of error correction for consumers. Using E-cash as a money substitute that cannot be copied or spent more than one time has furthered security schemes, but it requires prepayment to function and works only for online transactions. It also provides no avenue for error correction or clear listing of transactions. Prepaid debit cards are limited in their security application for similar reasons.

What the authors propose is a system that combines an E-cash system for making payments and a combination of “blind and plain digital signatures” for other operations. Consumers, merchants, card-issuing banks, acquiring banks (institutions merchants are authorized to receive payments through) and credit card associations (Visa, MasterCard and others who set transaction rules between the different bank types named here) would all be served by this system. Credit cards under the new system, write the authors, “should not be forgeable or usable by any third party. It should be possible for cardholders to track their transactions (Expense Report Service) and provide an undeniable proof of any mischarge (Error Correction Service) without endangering their privacy.”

How E-cash works

There are two types of E-cash used in this system, drawn from “wallets.” One is accessed by the consumer while the other is where merchants deposit E-cash received from the consumer. Blind signature schemes are used to ensure that merchants get paid and consumer identities are protected from third parties. If set limits are exceeded, conditional anonymity of the consumer is revoked – an added incentive to make payments, which appeases the banking establishment. For the most part, merchants and consumers are identified only by signature keys when they open their E-cash accounts with their banks. In order for consumers to access their E-cash credit cards, they create an anonymous pass code. Backups, multiple layers of encryption and loss recovery systems are present here, as are timestamps for online transactions; consult the study for a more detailed account. It is interesting to note that encryption is performed by the consumer during the anonymous credit card origination process, via secure home software. Thus, a home computer would be required.

How are Anonymous Credit Cards Paid?

Obviously a consumer honor system would be inappropriate, so the consumer is required to report the amount of money spend each month to the card-issuing bank. Regular backups and reporting are required to protect both banks and consumers. Spending is proven through receipts. The card-issuing bank then computes the consumer’s monthly payment through the same formula used today for standard credit cards.

How Does Error Correction Work?

The consumer has the right to contact their credit card association in the event of an error or fraudulent use. In the event of a error, a receipt is required in order for a correction to be made. When the merchant makes the correction and gives back funds via E-cash, the currency passes the refund to the credit card association, who in turn moves it to the merchant’s acquiring bank. It is the acquiring bank who finally moves the funds back to the consumer’s card-issuing bank. If fraudulent charges require purchase cancellation, the exchange is handled in a similar fashion.

Breaching the Veil of Anonymity

As mentioned previously, consumer anonymity is dropped if credit cards are charged over their limit. In that instance, all E-coins withdrawn by the consumer are traced. The authors mark this as necessary for loss recovery. But seeing as how a cardholder may open as many anonymous accounts as desired, being able to achieve transaction linkage is possible.

Buying into the Checks and Balances

The anonymous credit card system proposed by the study authors could eliminate identity theft altogether (until someone figures out how to introduce decryption technologies in the middle of the process). That could occur, but the system proposed could be the best current option for safe credit card use.

I find it interesting that the proposed system would require consumers to hang on to their receipts. It’s something consumer groups and banks (not to mention mom and dad) always advise us to do, but how often do we practice what they preach? If you’re a conscientious consumer who already keeps track of such things, your adjustment to such an anonymous credit card system would likely be painless. For those of us who are forced to become more accountable, the transition would be more difficult. However, it is a much safer financial road to travel. It is also a responsible road. Sure, payday loans are still be more desirable in situations where carrying a balance over from month to month becomes too expensive, but credit cards will still have their place. The layers of checks and balances that preserve security may sound inefficient to some, but remember that the financial world rarely gives us something for nothing. This isn’t trading freedom for protection, in my opinion.

IRS building. Image from Flikr.com.

If you have gotten a “notice of unreported income e-mail,” delete it and do nothing else. And if you do get a notice of unreported income e-mail or any e-mail from the IRS that asks for a response in the future, do not respond.

Don’t panic if you’ve gotten a notice of unreported income e-mail and opened it. Replying is the part that will get you in trouble. It’s a phishing scam from someone who is trying to get your IRS login ID and password, so just don’t respond. Giving out your password online is the first step toward identity theft, and you don’t want some scammer taking out online cash loans in your name and running off with the money.

IRS does not use e-mail

OK, so the IRS does use e-mail, but not for getting personal information from you. Any transfer of personal information between you and the IRS online will happen via your online IRS account, which you must log in to, using your password.

Don’t e-mail your IRS login information and password to anyone. The IRS will never ask you to do this. In fact, this is a good rule of thumb for any password you want to keep a secret: don’t put it in an e-mail.

Why would someone do this?

If the phishers are successful at getting your IRS login information, they will be able to attempt to change your tax filing to show that you are owed a tax refund. Of course, they will arrange for the tax return to be sent to them, not you.

Once the IRS catches the mistake, you will have to pay back the money. Even though it was the person who stole your identity and not you who ended up with the cash, you will be held responsible. And you don’t want to be on the IRS’s bad side.

Same old story

This “notice of unreported income e-mail” isn’t the first time scammers have tried to get people’s tax information. Back in 2005 some scammers started an e-mail campaign, saying they were the IRS, asking for taxpayers to give their social security number and credit card information.

The IRS will never need your credit card information. If you choose to put taxes owed on a credit card, you can do so. But the IRS will never solicit your credit card information from you. Also, never give out your social security number unless you are absolutely positively certain you know where it’s going and who you’re giving it to. Don’t e-mail your social security number to someone you don’t know.

Avoid IRS e-mail scams

The most important thing to remember is that the IRS does not send unsolicited e-mails. That means that the only time the IRS will ever e-mail you is when you e-mail them first and they respond. If you are going to get an e-mail alert informing you that your taxes have been filed or that your refund has been deposited into your account, you will be warned in advance when you file your taxes.

In the case of e-mail alerts, the IRS will not ask you to respond, and in fact you can’t respond. The IRS won’t ever ask you for personal information in an e-mail, and they will not communicate with you by e-mail unless you request it. So don’t get scammed by the “notice of unreported income e-mail” or any other IRS scams!