Financial identity occurs when an imposter uses someone else’s identifying details to commit fraud that is detrimental to a victim’s finances. The information used may include a name, Social Security number, or bank account number. For instance, an imposter may commit financial identity theft by fraudulently opening up a new credit card account in someone else’s name. After the thief charges up the card, they neglect to pay the bill, leaving the victim with a horrible credit score and a world of debt. In more extreme cases of financial identity theft, an imposter will completely take over a victim’s identity. This enables them to easily open bank accounts, multiple credit cards, purchase a vehicle, receive a home mortgage or even find employment in the victim’s name.
More often than not, identity theft involves the fraud of a financial service institution in some way. The act may involve a mortgage lender, a credit card company, or the owner of a bank account. The reason behind the crime is rather simple – financial institutions hold and distribute a substantial amount of money.
How financial identity theft occurs
When involving financial service institutions, identity theft can be accomplished in various ways. Over time, thieves have shown the ability to commit this crime by way of simplistic methods. These low-tech strategies consist of intercepting new checks and credit cards through the mail, or rummaging through someone’s trash in search of discarded bank statements and other personal information. Some implement the bold strategy of pretexting. In this scenario, an imposter will telephone a financial institution posing as a legitimate account holder. Others are bold enough to make direct contact with probable victims.
Modern times have introduced victims to more advanced methods of financial identity theft. One popular practice is referred to as skimming. This act consists of an identity thief using computers and other hi-tech equipment to store the encoded information from a credit or ATM card. The crime typically occurs when an unknowing victim swipes their card at a retail store or gas station pump. A malicious thief will compromise the card reader to translate the information, enabling them to create a duplicate card identical to the one swiped by the victim.
Dangers of financial identity theft
Any victim of identity theft will attest that recovering from this crime is often an expensive, time consuming process. Before a crime is detected, a thief is capable of running up hundreds to thousands of dollars worth of debt in someone else’s name. While the innocent consumer may not be found liable for one hundred percent of the debt, the consequences are still very damaging. Financial identity theft frequently destroy’s a victims credit. This is an issue that can take weeks, months or even years to repair. In the beginning of the act, a victim may be denied loans for mortgages, the opportunity to open a bank account and even turned down for employment.
As technology moves along and imposters become more advanced, financial identity theft will continue to pose a great threat to many individuals. Because of this, the Federal Trade Commission has become an entity that is dedicated to developing ways to prevent the crime and aid victims of all types of identity theft.