Bert Caldwell: Identity theft is a war we all must fight

Identity thieves don’t even have to steal an identity anymore, they can create one.

By stitching together fragments of identities — names, Social Security numbers, etc. — thieves can create a “bionic identity” as hard to unmask, if not harder, than the real thing. With 8.4 million ID theft victims in 2006 alone, there’s plenty of cover for a synthesized person hiding in plain sight.

“It could take years for it to be detected,” says Adam Levin, co-founder of a company that sells ID education and recovery products to insurers, banks, credit unions and other financial institutions. Just four years old, Identity Theft 911 services are already available to more than 10 million customers of those companies.

They need them, says Levin, whose history in consumer protection goes back to 1977, when he began a five-year stint as director of the New Jersey Division of Consumer Affairs. ID theft wasn’t even on regulator radar screens back then.

Now, the crime costs consumers more than $5 billion a year, and businesses perhaps 10 times as much. Washington residents have been among the most likely to file an ID theft complaint with the Federal Trade Commission, with more than 6,000 submitted in 2004. Idaho residents filed 600.

Manufactured identities may be a minor problem given the scope of the electronic larceny.

Levin, who was in Spokane last week to speak to bankers, says only 2 percent of the identities compromised have ever been used by thieves. He does not buy official assertions the other 98 percent have been neutralized. In his nightmare scenario, organized groups unleash millions of stockpiled identities in an attack that overwhelms financial networks.

“This is a new form of cyber-terrorism,” he says.

Levin says ID thieves are finding new avenues for fraud, with hijacked medical records a particularly dangerous example. A thief who accesses health insurance coverage using someone else’s identity can create a nightmare of commingled diagnoses and prescriptions that can endanger the victim’s health and jeopardize their ability to get insurance in the future.

And though it may be possible to correct bad credit record information, cleaning up a scarred medical history may not be. The relationship between patient and doctor may be forever poisoned.

Identity Theft 911 does not sell identity protection. Instead, employees take over the grunt work for consumers whose personal financial information has been compromised, or who think it may have been compromised. Individuals are paired with an advocate who can do in a few weeks, says Levin, what might take a consumer working on their own more than a year, and a lifetime of stress.

“There are people running around out there who say they can prevent identity theft,” Levin says. “You can’t.”

Although financial institutions have stepped up ID theft defenses, he says it will take better encryption and biometrics like fingerprints or iris scans to approach failsafe levels. As a start toward better deterrence, institutions of all kinds must move beyond reliance on the Social Security number to distinguish individuals, he adds.

Meanwhile, Congress and state government are increasing the penalties on businesses that are careless with personal information, while giving consumers more tools to fight back. A bill introduced in the U.S. Senate last week would give consumers more opportunities to recover losses, and seek compensation for time spent clearing their records.

And the three major credit agencies are easing procedures for freezing access to credit records, even for those who have not been victims of ID theft. Washington residents can get information on the latest developments at Attorney General Rob McKenna’s Web site, www.atg.wa.gov/freeze.aspx.

McKenna attempted to step up consumer and business awareness of the problem with a 15-city Guard It! Washington tour that concluded last week.

Idaho residents will find information by clicking on “Consumer Protection” at www2.state.id.us/ag/.

Levin says credit card-dependent consumers will have to accept a little less convenience in return for more security. Government, hardly guiltless itself, will have to increase penalties on careless businesses, or let trial lawyers become the enforcers.

“It’s going to take tough love,” he says.