Consumer Law

New Identity Theft Scheme Targets Children

By M. Stan Herring

Associated Press has posted an article about a new form of identity theft that targets children's social security numbers. Hundreds of businesses are using computer searching to locate dormant social security numbers, which belong to children who don't use them. The businesses then sell the numbers under a different name to people who can then earn phony credit and rack up huge debts they have no intention of ever paying off.

This scheme is a new threat to the nation's credit system because it falls in a legal gray area in that federal investigators have not yet figured out how to prosecute those involved.

"If people are obtaining enough credit by fraud, we're back to another financial collapse," said Linda Marshall, an assistant U.S. attorney in Kansas City. "We tend to talk about it as the next wave."

A Kansas City FBI agent accidentally uncovered the scheme while investigating a mortgage fraud case. The sellers avoid dealing with the law by not referring to them as social security numbers. Instead they call them CPNs, which can stand for credit profile, credit protection, or credit privacy numbers. Because of this, this form of identity theft is difficult to detect and it remains unclear exactly how much damage is being done.

The scheme works like this:

Online companies use computers and publicly available information to find random Social Security numbers. The numbers are run through public databases to determine whether anyone is using them to obtain credit. If not, they are offered for sale for a few hundred to several thousand dollars.

Because the numbers often come from young children who have no money of their own, they carry no spending history and offer a chance to open a new, unblemished line of credit. People who buy the numbers can then quickly build their credit rating in a process called "piggybacking," which involves linking to someone else's credit file.

The businesses also instruct customers to provide false information when using the number to apply for credit. Customers are told to use their real name and date of birth, but to avoid listing any addresses or phone numbers they've used in the past. They're also told to avoid any other information that connects the new, clean credit profile with the old, damaged one.

Children's social security numbers are more in demand than other unused numbers, such as a deceased person's. Children's numbers offer the identity thief a "clean" chance of acquiring fake credit from a number no one else is using and that won't be detected until several years later when the child applies for a loan or seeks credit for the first time. Credit bureaus can quickly identify a deceased person's social security number being used fraudulently by consulting the Social Security Administration's death index. There is no such index for dormant/ unused numbers.

If you have had problems with identity theft and have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on August 06, 2010 (boomark / email).