Op-ed: How to better combat identity fraud
Imagine your 18-year-old daughter has been accepted to the school of her dreams and, as generally happens, the responsibility to seek out and obtain financial aid falls to you. After long hours of paperwork the financial aid forms are finally in, including your daughter's Social Security Number—the gold standard verification of identity. Both stress and excitement mingle as your anticipate sending your kid off to college.
The lender responds: Sorry, your application for aid has been rejected. You wonder, How can this be? Our credit is outstanding, and we have little debt outside our mortgage which is in good standing.
Upon follow-up, your lender informs you that your teenager's credit history shows she has both a mortgage on a house of her own and a thousands in unpaid credit card debt. It hits you: Someone has been in possession of your child's Social Security Number for years and has stolen her identity.
Unfortunately, this is not a hypothetical scenario, and Congress has taken notice. Child identity theft affects thousands of children and families a year (in addition to the millions more who suffer from other types of identity theft). For example, in Wilmette, Illinois, the SSN of a 13-year old was used by a fraudster to open a credit card with a plan to use it to pay for plastic surgery. A report by Carnegie Mellon CyLab examined more than 40,000 cases, and found that 10 percent of the children in the study had someone else using their Social Security Number. Among other things, children's identities were used to purchase homes and open credit card accounts.
As seen in the hypothetical story above, criminals extort the existing system by applying for credit with the Social Security Number of someone with a nonexistent credit history—common targets are children and recent immigrants—to create a profile with credit reporting agencies. This "synthetic identity" is then made an authorized user of a credit account in good standing to build up its credit score. Before long, fraudsters establish new accounts that will never be repaid. Oftentimes, children and their parents have no knowledge of this fraud until they go to take out their first student or car loan only to find out thousands of dollars of unpaid loans already exist in their name.
Unfortunately, the Social Security Administration is behind the times in combating this type of fraud. It's time the SSA permits trusted credit providers to electronically verify identities before they agree to issue credit cards and loans.
Currently, the Social Security Administration operates what is known as a Consent Based Social Security Number Verification Program. It is typically used by companies that provide banking and mortgage services, process credit checks, provide background checks and satisfy licensing requirements to confirm the identity of Americans. And it protects consumers: Third parties do not receive unfettered access to the information. They can simply confirm if a name is affiliated with an Social Security Number or date of birth.
However, companies must send a piece of snail mail to the SSA for verification—no online access is permitted. This makes little sense in our online e-commerce environment today where consumers expect quick results—regular mail could take weeks or months.
There is precedent for online access to Social Security databases for trusted third parties. The administration already makes a similar service available through the Death Master File, which works to prevent fraud after someone passes away. State insurance commissioners and unclaimed property administrators likewise use the Death Master File to compare life insurance policies and correctly identify those who have passed away whose beneficiaries should be contacted.
Protecting children from fraud through electronic means is a no-brainer. Bringing the Social Security Administration into the 21st Century is a prime opportunity to fight back against identity fraud that is plaguing the personal finances of millions of Americans.
I recently sponsored bipartisan legislation with my colleagues in the House of Representatives directing the Social Security Administration to take a more proactive role in preventing identity theft. The Protecting Children from Identity Theft Act directs the administration to electronically confirm for trusted third parties whether a name is associated with a particular Social Security Number or date of birth. The Social Security Administration will be required to respond to such inquiries within 24 hours, a reasonable standard in the electronic age. Identical bipartisan legislation has been introduced in the Senate.
I will be fighting for our bill to be signed into law.
Congressman Randy Hultgren represents Illinois' 14th District and is a member of the House Committee on Financial Services.