The 90-Grand Phone Call

The current credit system is built to give us easy access to credit. We can get a car loan in a couple of hours and refinance a home in just a few days. It's the same system that enabled crooks to make off with tens of thousands of dollars of Joel Albert's money with just one phone call. Dayana Yochim looks at what individuals can do to avoid becoming the next prey.

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By Dayana Yochim (TMF School)
December 9, 2002

In early July, Joel Albert headed to his local Staples in Potomac, Md., to buy a paper shredder. The retired broadcast journalist opted for the cheapest model he could find -- one that accommodated just five documents at a time and cost less than $30.

His purchase was a small gesture toward trying to establish some measure of security for his finances -- giving him and his wife just a little peace of mind in the aftermath of his role in the now widely publicized identity theft ordeal that unfolded just weeks before. Albert was one of the 30,000 victims of the largest identity theft racket in U.S. history.

He was no small contributor to the culprits' total take of $3 million and counting. His contribution? Nearly 90 grand in equity he had built up in his Maryland home over the past 31 years. Evidently, when his alter ego Joel Albert "moved" from Maryland to the Bronx, he notified United Bank and had his home equity loan statements and a new batch of checks sent to the new address. Shortly after, checks to the tune of $2,300, $37,000, and $43,000 were being written against his account. In a little over two months, his home equity loan was nearly tapped out.

"It's a great way to rob a bank without a gun," Albert says.

Still, he is surprisingly good-natured about the ordeal. He knows he got off easy compared to a lot of other victims. The Washington Post spoke with Kate South, a Baltimore business student, whose identity theft tale is still unfolding. Even after filing police reports, making calls, faxing and writing banks and lenders, signs of the crime continue to mar her report. Recently, she was turned down for a student loan that she was counting on.

Resolution in Albert's case came quickly -- in less than one month, his bank, the FBI, and the credit bureaus straightened everything out. Luckily for Albert, his credit record was not compromised. The thieves were extremely conscientious. They knew enough to make regular on-time payments on the account -- $100 one month, $215 another -- so as not to raise suspicions.

"I feel so sorry for the people who are going to have to spend years untangling themselves," Albert says. In the end, he wasn't out the $90 grand -- his bank was. The only cash that came out of his wallet was $30 for the paper shredder.

He's happy with the outcome of his case and how the official agencies (including the credit bureaus and his bank) handled it. "In the end, I didn't lose any money personally. I lost time and aggravation. I'm sympathetic to the system to the extent that I know that clever thieves can find a new way to rob you, especially when you are talking about con artists," he says. But he's not thrilled about the system that enabled some anonymous person to so easily change his address and access his account. "I just think the door is a little too widely open," he says. "Frankly, they [banks] ought to be held accountable for giving up personal secrets so readily. That should be a crime in itself." Albert does not know if his shadow self in the Bronx has been arrested.

The truth is, his shredder is about as good of a defense as money can buy. This new wave of high-tech crooks is savvy, sneaky, and extremely successful at what they do. At a news conference in Florida -- which ranks second in the nation for reported ID fraud incidents -- "Subject X" regaled rapt reporters with tales of his decade-long crime spree that bilked unwary consumers out of more than $15 million by assuming people's identities.

With his identity hidden behind a black leather mask, he described how $100 could purchase a driver's license, and in 10 minutes he could get someone's Social Security number. "If a person has good credit -- say their score is around 689 or 700 -- they will get taken," he said.  A single purloined Social Security number could yield $100,000 in fraudulent credit. Who needs 30,000 IDs when one choice victim will do?

Even more troubling was that his ring of 15 to 20 thieves at times paid workers at the Department of Motor Vehicles, car dealerships, and credit card companies for victims' personal information -- which is exactly how the ring operated in the most recent Fed bust.

You can do all the right things (suggestions are listed below), but there's nothing to prevent some help desk clerk from selling access to your financial life for a measly $30.

Industry insiders hope that will change. They are looking to this case -- and the punishment the court passes down -- to send a strong signal to would-be fraudsters. The message they'd like to send? Steal an ID, and we'll throw away the key.

They also emphasize that egregious crimes like this most recent case are extremely rare. Still, an annual survey on computer crime the FBI and the Computer Security Institute conducted last year found that more than eight out of 10 companies detected security breaches in the past 12 months, and the average reported loss from the 186 companies that could quantify their losses topped $2 million, twice the average from the year before. Current estimates from the government's General Accounting Office show that as many as three-quarters of a million Americans fall victim to identity theft every year.

Who ends up paying for it? Yup, you got it -- we all do, in the form of increased fees and underlying fear. In essence, we're all victims of this crime.

Last spring, TransUnion's Chief Information Officer Len Lombardo made 10 security recommendations to his peers in the credit reporting industry in Response magazine (Adobe Acrobat Reader required). "With the growth of Internet crime, businesses must become smarter about protecting their sites," he wrote. "Organizations that let their systems be commandeered may be held liable for not taking appropriate security measures."

Equifax's (NYSE: EFX) Chief Privacy Officer John Ford agrees. "We all -- us, businesses, law enforcement, and consumers -- play a role in trying to combat ID theft," he says. Companies that handle sensitive data have a responsibility to do the research and take the necessary steps to develop better technology. Businesses that require access to our personal credit information need to help educate consumers about ID theft detection and prevention. And law enforcement must enforce existing fraud and ID theft laws, and add new laws when necessary, such as the 1998 Identity Theft and Assumption Deterrent Act. "Security is not frozen in time. It is a continuous improvement exercise," Ford adds.

Still, more sophisticated encryption technology and tougher laws cannot prevent a determined criminal inside the system from stuffing his pockets with your cash. That's where individual responsibility comes into play. Construction of your own Fort Knox begins with the following steps:

  1. Periodically review your credit reports from all three major reporting bureaus to make sure they are up-to-date, accurate, and that you haven't moved to the Bronx without your knowledge. If you're really concerned, you can pay the credit bureaus to notify you each time there is account activity. But since each bureau operates separately, it'll run you hundreds of dollars to thoroughly track your records.

  2. Do not use your Social Security number on your driver's license, checks, or any form of ID. And never give it out unless you are the one who has initiated the contact. If you're not sure how someone is going to use this data, ask.

  3. Fraudsters look for that red flag -- literally -- on mailboxes alerting the postman of outgoing mail. Use public mailboxes instead.

  4. When shopping online, look for the Better Business Bureau Online Privacy Seal, or the Trustee Seal. Both indicate that the e-tailer provides a secure transaction platform.

  5. Pay attention to your billing cycles for all credit cards, utility bills, or loans. If you stop receiving bills, contact the provider immediately. Albert stopped receiving his home equity loan bill about a month before the unlawful withdrawals were made.

  6. Call the three major credit reporting agencies -- Equifax, TranUnion, and Experian -- and ask them to put a fraud alert on your credit report file. While it won't prevent a thief from accessing an existing line of credit, grantors will call you to verify all attempts to get a loan or credit in your name.

  7. If you do become a victim, the FTC provides an ID Theft Affidavit to help you organize and accurately record your complaint. Here's how to proceed.

Until the organizations that track our most sensitive information find a way to bulletproof their data, there's no foolproof way to guard our intimate financial details from predators. In the meantime, as Albert discovered, a cheap paper shredder may be your best first defense.

Dayana Yochim asked Hannukah Harry for a paper shredder this year. The Motley Fool has a complete disclosure policy.