By James Marasco, CPA, CIA, CFE

Fraud Matters, Fall 2010

If you or someone you know becomes the victim of identity theft, you’re not alone.

According to available statistics, approximately 11 million Americans will fall victim to identity theft this year. Nearly half of these victims discover the intrusion within three months of its taking place.

Taking steps to prevent it will prove less cumbersome than trying to rebuild your credit following a breach.

Preventing Identity Theft

It’s been estimated that more than $200 billion is lost annually around the globe as a result of identity theft. Protecting yourself from being victimized will help prevent you from becoming another statistic. Some helpful hints include:

• Don’t place sensitive outgoing mail in curbside mailboxes.
• Shield yourself at the ATM from someone trying to capture your card number and/or PIN.
• Pay your bills online using a secure site, and don’t give your credit card number online unless the site is encrypted.
• When making purchases online, consider using a “disposable credit card” rather than the one you’re using.
• Check your credit reports at least once a year.
• Shred all bank statements, credit card bills and preapproved credit card offers.
• Cancel credit cards you haven’t used in the last six months.
• Have yourself taken off the direct mail list (via writing to the Direct Marketing Association), which will stop the flow of preapproved credit card offers to your mailbox.
• Examine your bank and credit card statements each month for suspicious activity.
• Don’t give out personal information to any solicitors.

• Don’t carry around your various account passwords.
• Ensure that your Social Security number isn’t being used by healthcare organizations, colleges, etc., as an identifier.
• Destroy your old computer hard drive when replacing your computer.
• Safeguard your car registration and insurance information if you leave it in your automobiles.
• Safeguard your financial records in your house from burglars.
• Destroy old prescriptions and prescription bottles with health information.
• Keep all credit card customer service numbers readily available in the event of loss or theft.

Responding to Identity Theft

Reconstructing your credit history could take a significant amount of time and effort. It’s imperative that action be taken as soon as you discover a breach. Once you suspect something suspicious, consider the following steps:

1. Initiate a fraud alert on your credit report – One of the three major credit agencies should be contacted and a fraud alert initiated. If you contact one of them, they become responsible for alerting the other two to report information related to the alert. The three major agencies are:

• Equifax at (800) 525-6285 or www.equifax.com
• Experian at (888) EXPERIAN or www.experian.com
• TransUnion at (800) 680-7289 or www.transunion.com

The fraud alert will inform creditors that a possible or actual fraud has been perpetrated on someone’s credit report. This alerts credit card companies that the consumer does not authorize new or extended credit on their accounts.

2. File a complaint with the FTC – The Federal Trade Commission also recommends that you file a complaint with them either via filing a form through their website (ftc.gov/complaint) or by calling their hotline at (877) IDTHEFT. Also available on their site are cover letters which should accompany your complaint report when notifying your local police department.

3. File a police report – Using the complaint form and cover letter obtained above, you should file a report with your local police department. Filing these reports will be helpful when having to dispute fraudulent charges and debts that were incurred on your account.

The identity theft report will help permanently block fraudulent information from appearing on your credit report and ensure that debts don’t reappear. It will also prevent further debt collection arising from an identity theft and place an extended fraud alert on your credit report.

Once this process is initiated, you should periodically check your credit reports for suspicious activity. Immediately close accounts that have been compromised. In addition, dispute all charges using your police identity theft report, and remember to save copies of all of your correspondence with the credit card companies and credit bureaus.

It’s no easy matter getting your credit back. But you can help yourself by remaining vigilant on clearing up fraudulent charges, monitoring your accounts closely and being reactive to future suspicious activity. James I. Marasco, CPA/CFF, CFE, CIA Jim is a partner at EFPR Group. He brings more than 18 years of public accounting and auditing experience. He is a full-time management consultant and travels extensively throughout the country while leading StoneBridge Business Partners (an EFPR Group affiliate company).