Identity Theft: Getting Back to Square One

So it's happened. Someone stole your name, Social Security number, and credit card number, bought a townhouse in Monte Carlo, and started commuting to the local jewelry store in a new Ferrari that was, yes, also billed to your account.

You don't even want to pay for the gas, but what can you do about it?

You can notice the theft quickly, reject the fraudulent charges, restore your good name, and protect against future fraud.

The ID theft counter-offensive has two goals: To restore your good name, and to make sure you don't wind up paying for Ferraris driven by anonymous thieves. Unfortunately, you will largely be left to your own devices; while you should contact the Federal Trade Commission (FTC), and probably your local police, the government will provide little or no help.

But if you know the rules, act fast, and work carefully, your main cost will be time spent. Otherwise, the effort, confusion, frustration, and expense of an ID theft can last for years.

To catch a thief

The first sign of an ID theft may be arrival of statements for a credit card account you did not open. Regular bills mysteriously may cease arriving because a crook changed your address during the identity theft. Or you may start receiving phone calls related to unknown purchases, or be notified about unexpected credit denials.

If you suspect fraud, act immediately. Alert one of the credit reporting agencies, which is obliged to notify the others, about the suspected identity theft. Direct the agencies to place a "90-day fraud alert" on the account. This will require financial firms to get extra identification from applicants before opening an account or establishing credit in your name. If you have not recovered your identity after 90 days, ask the credit reporting agencies to place a seven-year alert on your file.

Close compromised credit accounts, and confirm the action by mailing the FTC's ID theft affidavit, for each account. On all correspondence, include your name, address, account number, and the amount, date, and explanation for the fraudulent charges. Unless directed otherwise, use the address listed for "billing inquiries," not the payment address.

The Fair Credit Billing Act governs credit card disputes. In most cases, liability is limited to $50 for each credit card--if you contact the issuer within 60 days of the bill's arrival (or normal arrival date). This is one reason to keep an eye on the incoming mail, and to act fast when something is amiss.

Once you notify the financial institution, the first step in fighting fraudulent credit union and bank transactions (such as unauthorized withdrawals) is to check jurisdiction: Federal law governs electronic transfers, while state law governs "paper" withdrawals. Try to report lost or stolen ATM (automated teller machine) cards within two business days of the loss. The longer you wait, the larger your financial liability. While state laws vary in the degree of protection afforded for losses due to stolen checks, the sooner you notify your financial institution, the greater the protection will be. What's at stake? You could lose all the money in your account, plus your maximum overdraft line of credit, if any.

You may want to fill out the FTC's ID theft complaint form. But, according to the FTC, this is unlikely to enlist federal help in investigating the crime: "While the FTC does not resolve individual consumer problems, your complaint helps us investigate fraud, and can lead to law enforcement action."

Another official agency that may or may not actively help is the local police. The major benefit of filing a police report is the resulting official paperwork, which will help confirm the theft and avoid liability for fraudulent charges. Police documents also are essential for restoring a bruised credit rating.

Careful wins the race

Your files should record the who, when, what, where, and why. For each contact, record the name of the person you spoke with, the date and time of the conversation, the address, phone number, and full name of the business, and what was discussed--why you made the contact or why they contacted you.

Send all important correspondence via registered mail, with return receipt requested.

Organize files, using at least one paper folder, and one folder or directory on your computer. Back up computer files and print records regularly.

Send copies. Don't risk losing the original of any document.

Keep the paperwork on hand for years after recovering your good name.

Once you and a creditor have settled a claim, ask the firm to mail a letter confirming that the matter is settled. This letter is your best protection if the same phony claim reappears.

Start quickly, and finish strong. You will win in the long run but a fast, confident response will shorten the road to victory.

Published June 25, 2007