True name fraud difficult to repair

Anyone with a decent credit history fears having his or her good name tarnished. We hear stories of other people's credit problems finding their way onto our credit reports. We're familiar with data breaches that expose our private details to criminals. But the scariest form of identity theft is true name fraud, in which someone opens credit accounts using your name and personal details. Some people don't worry much about true name fraud, believing that a little bit of legwork will clean up the problem. Certainly the credit reporting agencies will know that you are you and that the identity thief is not you, and everything will be corrected. A little proof provided to the credit card companies will show that you did not open the account, and the debt will be removed from your name, right? Not necessarily. People often estimate the amount of time and effort it may take to clear their name when they are the victim of identity theft. And issuers of credit might not be very patient, sometimes using strong-arm tactics to get you to pay debts that you didn't really incur. John Ulzheimer, the founder of creditexpertwitness.com and a frequent expert witness on consumer credit matters in state and federal court, says he has run into several cases where consumers were sued for debts that were incurred through true name fraud. In one case, a scammer applied for and received cable television and cell phone services in someone else's name. The payments were made on time at first, and the victim had no idea her name was being fraudulently used. Eventually the fraudster stopped paying the cable and telephone bills, and $575 was left owing on the accounts. The debt was sent to a collection agency, and the agency promptly tracked down the victim at her correct address (the scammer used a completely different address, but that didn't concern anyone) and started sending her collection letters. The victim contacted the collection agency and told them the cable and telephone bills weren't hers, and even provided the name of the person who had committed the fraud. The victim knew who did it because the perpetrator had been arrested and charged with fraud. But the collection agency would have nothing to do with the person who stole the victim's identity. The fraudster even contacted the agency and tried twice to pay using her own name, in an attempt to make good on the debts prior to going to trial on her fraud charges. But the collection agency refused to remove the debts from the victim's credit reports, even though they now had all the information they needed to prove that the debts did not really belong to the victim. The victim eventually had to sue the collection agency to restore her good name. We hear all the time about problems with credit reports and accurate data. A case like this easily demonstrates how precarious our credit reporting system is. If a creditor refuses to correct erroneous data, even with all the proof they need that what they've reported is erroneous, a consumer can be severely impacted. Beyond the investment of time in trying to correct fraudulent data, there is the financial impact that bad credit data can have on consumers. Your credit score immediately goes down, and you may have a hard time qualifying for a mortgage or a vehicle loan. If you manage to qualify, you'll probably end up paying a higher interest rate than you should because of the negative information on your credit report. Is this fair? Of course not. But it illustrates why it is so important for consumers to regularly check their credit histories and take immediate action to remove accounts that don't belong to them. The three credit reporting agencies each make one free credit report available to consumers each year through the site annualcreditreport.com. Consumers should access those reports throughout the year, rather than all at once, to have a better chance of catching credit problems sooner. If you have been the victim of a data breach (your credit details have been exposed to scammers because of error or carelessness on the part of a company you do business with), consider taking a closer look at your credit each month. Many times the victims of data breaches are offered free credit monitoring services, but often consumers don't take advantage of this tool. Even if you haven't been the victim of any fraud or data breach, paying for a basic credit monitoring service can be worth the $10 or $15 monthly fee. Avoid all the bells and whistles they will try to sell you for an extra fee, as they're not really necessary. All you need is basic access to monitor any changes to your credit reports so that you can take quick action if you become the victim of fraud, because once collection procedures are initiated on a fraudulent account, it can be much more difficult to correct the problem. §§§§§ Tracy L. Coenen, CPA, MBA, CFE, is the president of Sequence Inc., a forensic accounting firm with offices in Milwaukee and Chicago. Coenen can be reached at tracy@sequence-inc.com or 414-727-2361. Published: Tue, Mar 9, 2010

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