U.S. GOVERNMENT PRINTING OFFICE

56–605CC WASHINGTON : 1999

IDENTITY THEFT: IS THERE ANOTHER YOU?

JOINT HEARING

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS,

TRADE, AND CONSUMER PROTECTION

AND THE

SUBCOMMITTEE ON FINANCE AND HAZARDOUS

MATERIALS

OF THE

COMMITTEE ON COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

APRIL 22, 1999

Serial No. 106–16

Printed for the use of the Committee on Commerce

(
COMMITTEE ON COMMERCE

TOM BLILEY, Virginia, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

MICHAEL G. OXLEY, Ohio

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

Vice Chairman

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

BRIAN P. BILBRAY, California

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

TOM A. COBURN, Oklahoma

RICK LAZIO, New York

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

RON KLINK, Pennsylvania

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

THOMAS C. SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

JAMES E. DERDERIAN, Chief of Staff

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE, AND CONSUMER PROTECTION

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,

Vice Chairman

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ROBERT L. EHRLICH, Jr., Maryland

TOM BLILEY, Virginia,

(Ex Officio)

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

BILL LUTHER, Minnesota

RON KLINK, Pennsylvania

THOMAS C. SAWYER, Ohio

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)
SUBCOMMITTEE ON FINANCE AND HAZARDOUS MATERIALS

MICHAEL G. OXLEY, Ohio, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

Vice Chairman

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

STEVE LARGENT, Oklahoma

BRIAN P. BILBRAY, California

GREG GANSKE, Iowa

RICK LAZIO, New York

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ROBERT L. EHRLICH, Jr., Maryland

TOM BLILEY, Virginia,

(Ex Officio)

EDOLPHUS TOWNS, New York

PETER DEUTSCH, Florida

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

FRANK PALLONE, Jr., New Jersey

BOBBY L. RUSH, Illinois

JOHN D. DINGELL, Michigan,

(Ex Officio)

(III)
3

C O N T E N T S

Page

Testimony of:

Albright, Charles A., Chief Credit Officer, Household International, Inc ... 23

Anderson, Robert, Mineral, Virginia ............................................................... 11

Bernstein, Joan Z., Director, Bureau of Consumer Protection, Federal

Trade Commission ........................................................................................ 16

Connelly, D. Barry, President, Associated Credit Bureaus, Inc ................... 27

Material submitted for the record by:

(V)
(1)

IDENTITY THEFT: IS THERE ANOTHER YOU?

THURSDAY, APRIL 22, 1999

HOUSE OF REPRESENTATIVES,

COMMITTEE ON COMMERCE,

SUBCOMMITTEE ON TELECOMMUNICATIONS,

TRADE, AND CONSUMER PROTECTION, JOINT WITH

SUBCOMMITTEE ON FINANCE AND HAZARDOUS MATERIALS,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2123, Rayburn House Office Building, Hon. W.J. ‘‘Billy’’ Tauzin

(chairman) presiding.

Members present from the Subcommittee on Telecommuncations,

Trade and Consumer Protection: Representatives Tauzin, Oxley,

Deal, Shimkus, Wilson, Fossella, Blunt, Bliley (ex officio), Markey,

Luther and Sawyer.

Members present from Subcommittee on Finance and Hazardous

Materials: Representatives Oxley, Tauzin, Ganske, Shimkus, Wilson, Shadegg, Fossella, Blunt, Bliley (ex officio), DeGette, Barrett,

Luther and Markey.

Staff present: Linda Rich, majority counsel; Robert Gordon, majority counsel; Brian McCullough, professional staff member; Robert Simison, legislative clerk; Consuela Washington, minority counsel; and Bruce Gwinn, minority professional staff.

Mr. TAUZIN. The committee will please come to order.

Good morning. Today’s hearing is on identity theft—how it occurs, whether the anti-fraud laws are being enforced properly, and

what can we do to help innocent people clean up their credit

records after they have been victimized by an identity theft criminal.

While we are sitting here today, each one of us may unknowingly

be the victim of identity theft. Some person might be searching

through our mailbox or hacking our consumer accounts over the

Internet to obtain the names, addresses and Social Security numbers of ourselves or our families. The thief then uses that information to open up lines of credit and go on a spending spree perhaps,

all under someone else’s identity.

As victims, we might not find out about this identity theft until

several months later when the collection agencies start calling and

we get turned down for a mortgage or credit loan, and then the

real consumer nightmare begins.

Repairing your credit record, like trying to get rid of IRS liens,

after you have been victimized by identity theft can take years of

constant phone calls and letters trying to establish your innocence
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to creditors you have never heard of. How can we end this kind of

devastation and protect innocent victims?

Today we are fortunate to have with us the Director of Consumer

Protection of the Federal Trade Commission, Jodie Bernstein, who

will talk to us about the prosecution of identity theft and what sort

of safeguards victims have under current law. Last year, Congress

enacted the Identity Theft and Assumption Act to make identity

theft a Federal crime and to empower the FTC to help victims repair their credit records. But we have over 500,000 credit fraud victims every year, and only a small fraction are ever actually prosecuted. I will be interested in hearing how the Federal Trade Commission is implementing this new law and how far their efforts will

take us in helping innocent victims.

One such victim of identity theft is Bob Anderson, who is with

us today from Mineral, Virginia. He was unable to refinance his

mortgage because an identity thief stole his Social Security number

and used that information to charge up bills on his account. Five

years later, Mr. Anderson, believe it or not, is still trying to get his

name cleared and his identity back.

Mr. Anderson’s experience raises the critical question of how we

should allocate the responsibility for fixing the damaged credit card

and the credit record of an innocent victim. For example, what responsibility should be shared by the companies which granted the

improper credit, especially to notify the appropriate organizations

of potential fraud and suspend any payment claims? What responsibility should credit bureaus have to verify identity theft and to

help clean up a credit report, notify all of the creditors? What sort

of timeframe can we create to ensure that innocent victims like Mr.

Anderson don’t have to suffer through a nightmare that lasts for

5 long years and it is still not over?

Mr. Connelly and Mr. Albright will enlighten us as to the special

problems facing credit bureaus and finance companies, and hopefully they can offer us some guidance on how we can better help

victims like Mr. Anderson in the future, a future that will be punctuated with more and more electronic commerce and more and

more opportunities for people to steal someone’s identity and improperly take their credit and their good name with them.

We need better enforcement and prosecution of our anti-fraud

laws. We need a system that helps, not ignores, the victims of identity theft; and today we will begin how, with the absolute minimum

of Federal intrusion, we can still make a system work to protect

the victims of identity theft, help them clear up their records in a

timely fashion.

Additionally, I would like to thank my good friend, Mr. Oxley, for

co-chairing this important event and look forward to working with

him on this important issue. This is an issue that crosses the jurisdiction of our two committees in which we both work together as

chairman and co-chairman, and so I am pleased to have Mr. Oxley

join me in this hearing and will yield to him and then welcome the

chairman of our full committee in just a second.

Mr. Oxley.

Mr. OXLEY. Thank you. As the gentleman from Louisiana indicated, both subcommittees are looking into this; and I have to say
3

that the title of our hearing probably says it best: Identity Theft:

Is There Another You?

I was looking at the information from the Better Business Bureau that was just released, and it is headlined, San Diego, a man

who knows baseball star Tony Gwynn’s bank account, Social Security and driver’s license numbers and his mother’s maiden name

recently cashed a $950 check at Anaheim. Also, someone has used

Gwynn’s name to test drive a Ford Escort and has yet to return

the car. It says, anybody, even Tony Gwynn, can become a victim

of identity fraud. And this person that tried to steal Tony Gwynn’s

identity couldn’t steal his batting stroke; but it does show, I think,

the ever-increasing dangers behind the identity theft problem. It is

a phenomenon that has developed in concert with the growth of pin

numbers and credit cards and other conveniences that improve the

way that people and businesses engage in everyday transactions.

Identity theft occurs primarily in the area of financial services

because, when someone is stealing another’s identity, it is generally

to get at their bank account or investment account or credit card

account.

Identity theft, thanks to our colleague on the committee, Mr.

Shadegg, is now a crime. There have been countless stories of people whose lives were ruined as a result of a thief who destroyed

their credit, making it impossible for the victim to get a mortgage

for a home, open a bank account or even get or keep a job. Indeed,

we have one such victim testifying today who will help us understand just how damaging identity theft can be.

The Identity Theft and Assumption Deterrence Act of 1998,

which Mr. Shadegg introduced and was signed into law last Congress, is an important step toward putting a stop to this crime.

Law enforcement now has a tool to go after identity thieves for

stealing a person’s identity for the purpose of engaging in fraudulent activities.

The act also directed the FTC to take steps to help consumers

who are victims of identity theft, including helping them repair

their fraudulently damaged credit records. It is simply unconscionable that victims of identity theft have to suffer not only the personal damage done to them by the thieves but also from the frustration of being unable to promptly correct credit records that reflect bad debts run up, not by them, but by a criminal.

Under the Fair Credit Reporting Act, credit reporting agencies

are responsible for correcting inaccurate information in credit reports. Based on the testimony of Mr. Anderson, as well as numerous stories of identity theft victims who have found it difficult, if

not impossible, to correct credit reports that have been damaged by

an identity thief, it seems that something is not working the way

that it should.

A victim of identity theft should not have to battle with credit

card issuers or credit reporting agencies to clear up his or her

record if there is adequate evidence that a fraud has been committed. Unfortunately, that has been the experience of our first witness today, Mr. Anderson, who spent nearly 5 years working to

clear up the damage done to his credit by an identity thief.

Thank you for coming today, Mr. Anderson, and sharing your experiences with the subcommittees; and I hope we can develop a
4

way to remedy this problem so others don’t continue to face the

same problems that you did.

The Federal Trade Commission, which has responsibility for administering the Fair Credit Reporting Act as well as the Identity

Theft and Assumption Deterrence Act, among other statutes relating to this problem, has undertaken several initiatives to help educate and protect consumers from identity theft. I look forward to

learning from the Federal Trade Commission what they are doing

to ensure that victims are able to clear up their credit records once

a fraud has been discovered.

Mr. Connelly, the President of the Associated Credit Bureaus,

will indicate what steps credit bureaus are taking to facilitate and

expedite the clearing up of fraudulently damaged credit records.

Today we will learn how a finance company that is a credit card

issuer tackles the thorny issue of identity theft. After all, the card

issuer generally absorbs the lion’s share of the bad charges run up

by an identity thief. The issuer has a strong incentive to put measures into place to prevent the fraud from happening in the first

place.

I thank all of our witnesses for joining us today and look forward

to both subcommittees learning more about this ever-growing problem, and I yield back.

Mr. TAUZIN. I thank my friend, the chairman of the Finance

Committee, for his opening statement.

Bill, with your forbearance, I will now recognize the chairman of

the full committee.

When the chairman of the full committee shows up at a subcommittee hearing, it means that we are doing something pretty

important, so I want to recognize him and thank him for coming.

By the way, Mr. Chairman, this hearing reminds me of the old

story of the lady in Washington who woke up in the middle of the

night and said to her husband, wake up, honey; I think there is

a thief in the house. He said, oh, go back to sleep; there are at least

a dozen of them in the Senate.

The Chairman of the full Committee on Commerce, Tom Bliley.

Chairman BLILEY. Thank you, Mr. Chairman.

The Subcommittees on Telecommunications, Trade and Consumer Protection and on Finance and Hazardous Materials will be

examining an issue of enormous significance to every American

consumer and business. The issue is the growing problem of identity theft. This crime not only results in significant losses to businesses as a result of bills incurred by identity thieves who never

intend to pay those debts, but also exacts terrible tolls on the victim’s personal life before he or she even knows it is happening. We

will hear today that victims of identity theft often do not discover

this fraud until he or she can least afford it, when applying for

credit or for a loan. That is a time when a victim of identity theft

is informed of bad debts that do not belong to them.

The victims of identity theft suffer substantially. Not only is

their credit hurt but all of the problems associated with a crime fall

on their shoulders through no fault of their own. Long after the

damage is done, the victim is burdened with continual problems of

repairing his credit record, in fighting claims against him by the

businesses the perpetrator has bilked. All because a thief was able
5

to acquire personal identification such as a Social Security number

or credit card number and assume the victim’s identity.

Fortunately, our colleague from Arizona, Mr. Shadegg, took it

upon himself to move legislation to address this problem. While

there were several statutes that prohibit fraud and relate to identity theft prior to the enactment of the Identity Theft and Assumption Act of 1998, there was no Federal law that criminalized the

act of stealing another’s identity. This lapse made it extremely difficult for victims of identity theft to have any recourse against the

thieves who caused them such great personal expense.

The new law makes it a Federal crime to steal someone’s identity

and increases the penalties for the criminals. Additionally, the law

requires the Federal Trade Commission to take actions to help the

victims of these terrible crimes.

I welcome our witnesses today and look forward to hearing how

the new act and other laws administered by the FTC are working—

or not—to protect consumers and businesses from the damage done

by identity thieves.

I would like to extend a special welcome to my fellow Virginian,

Bob Anderson, who has suffered a great deal as a result of having

been a victim of this crime.

I also thank our witnesses from the Federal Trade Commission,

the Associated Credit Bureaus and Household International for

joining us today to educate the subcommittees and the public on

this important issue.

I look forward to learning today how we can improve enforcement of the statutes on the books and what else we in Congress

as well as private industry and consumers can do to stop identity

theft and the damage it has already done to consumers and businesses across America.

Thank you, Mr. Chairman.

Mr. TAUZIN. Thank you very much, Mr. Chairman.

I wanted to acknowledge that the ranking minority member, Mr.

Markey, of our subcommittee is in an electricity hearing upstairs

and has sent word that he apologizes for not being here. It does

not mean that he is not deeply committed to resolving some of

these problems with us here.

And the chair now recognizes any member who would like to

make an opening statement.

Mr. Luther of Minnesota.

Mr. LUTHER. Thank you, Mr. Chairman.

Just briefly, I think most of us are very concerned about this

issue and particularly the length of time that it takes to straighten

out the record once the identity theft occurs. Obviously, we are all

interested in seeing what can be done to shorten that period of

time so people can get on with their lives. So anyone who has suggestions and recommendations along those lines, I hope you will

share them.

Thank you, Mr. Chairman, for the hearing. It is a very important

subject, and I appreciate your calling it.

Mr. TAUZIN. Thank you very much, Bill.

Mr. Towns will be coming. He is the ranking minority member

of the subcommittee chaired by Mr. Oxley. He will be coming a little later. He is at a previous commitment.
6

Anyone on this side?

The author of the legislation that we will be discussing today,

Mr. Shadegg.

Mr. SHADEGG. Thank you, Mr. Chairman; and I thank Mr. Oxley

as well for holding this very important hearing today to discuss

both an issue which is critically important to me, identity theft,

and more important to me is the implementation of the legislation

that we enacted last year, the Identity Theft and Assumption Deterrence Act which creates the basis for this hearing.

I am very pleased that you would schedule this hearing. I want

to talk a little bit about the problem and then a little bit about

what we discovered in trying to get the law enforced and implemented.

The issue of identity theft was brought to my attention by two

of my constituents who were victims of identity theft. Bob Hartle

and his wife experienced the devastation of identity theft firsthand

when a convicted felon stole Mr. Hartle’s identity and, using that

stolen personal identification information, made purchases totaling

$110,000. Using Mr. Hartle’s identity, this individual obtained a

Social Security card, a driver’s license, bank accounts, credit cards

and even life insurance in Mr. Hartle’s name. He bought trucks,

motorcycles, a mobile home, furniture and appliances.

Incredibly, he even obtained a security pass to a restricted area

of Sky Harbor International and took advantage of Mr. Hartle’s

clean record to get around the Brady law and purchase handguns.

Mr. and Mrs. Hartle have had to spend a great deal of money to correct their credit ratings, indeed $15,000 to try to set the

record straight. Because at the time these events occurred there

were no criminal penalties for idebtity theft, the Hartles were left

with virtually no remedy whatsoever. The individual was prosecuted for making false statements to purchase a handgun, and

was sentenced to prison in 1995 and released earlier this year. But

because there was no law at the time, he was not required to and

did not make any restitution to the Hartles, the victims of the

crime.

Today, as I think everyone in this room knows, identity theft has

become the fastest-growing financial crime in America and indeed

probably the fastest-growing crime of any kind in our society.

Arizona, in 1996, became the first State in the Nation to enact

criminal penalties for identity theft. Since then, it has been joined

by California, Colorado, Georgia, Kansas, Mississippi, Wisconsin

and West Virginia. Other States, including New York, are similarly

working to pass laws of this type.

The key to identity theft is that it prohibits the obtaining and

the transfer of personal identification information. It used to be

that you could prosecute people for credit card fraud or bank fraud

or for bad checks, but that was all after the fact. What this law

does, both the Arizona law and the laws enacted in other States

and the law we were able to pass last year, is empower Federal law

enforcement agencies to investigate the crime, apprehend the individual, and prosecute the individual before they cause the damage.

My colleague on the other side referred to the serious problem

that is caused when someone’s credit rating is destroyed because

the crime has been effectuated. This law allows law enforcement
7

agencies to prevent the crime by stopping it before all of those consequences, all of the theft, all of the fraud occurs and someone’s

credit rating is completely destroyed.

I think that is the key to the law, and it is why this hearing is

so important. The Federal Trade Commission, under the legislation

we passed last year, was directed within 1 year of its enactment

to establish a centralized complaint and consumer education service for the victims of identity theft, and I am sure that we will hear

testimony about their efforts today. They are also required to log

complaints from identity theft victims, to provide information materials to those victims and refer complaints to consumer reporting

and law enforcement agencies.

I want to talk a little bit about what is happening now in the

enforcement of the law and the problems that we are finding.

The two greatest obstacles that we are finding is, one, a lack of

information amongst the public about the fact that this conduct is

criminal and that they can report it as soon as it occurs.

Second, and this is more important and I hope our witnesses will

discuss the issue, is confusion regarding jurisdiction. Many law enforcement agencies think, well, you have called me about an identity theft where your identity has been stolen, but we only handle

bank fraud so we only handle the bad checks. No bad check has

cleared yet. Then they turn that person away. Or someone comes

in and says, have you had a credit card fraud? We are in charge

of credit cards. We will handle it once you have some credit cards

stolen.

The Arizona Attorney General’s Office went out to a local law enforcement agency in Phoenix and, while waiting for an appointment, two individuals came to the window and complained and

said, I want to complain about an identity theft which has occurred

to me. In both instances, the policeman taking the complaint said

they stole your identity and you are not the victim. Because, until

this legislation passed, the theft was considered to have been committed against the credit card company or against the bank that

wrote the check or against the individual who extended the credit,

not the victim.

I am sure that we will hear from our victims that they really are

the victim of the crime, but our laws prior to the passage of this

legislation and the similar legislation in various States did not

make the individual the victim. That illustrates one problem.

The second problem is the lack of awareness. The law enforcement officers, in this instance, the Arizona law had been in effect

since 1996, the Federal law has been in effect for 6 months now,

and this law enforcement agent said to the individual, you are not

the victim. Obviously, they were the victim.

In an effort to educate the public about this crime and assist law

enforcement in Arizona, I formed an Identity Theft Task Force, because victims kept coming to my office saying law enforcement is

not helping us with this problem. Thirty-five members have shown

up for the most recent meetings of this task force, and they include

representatives from local police, County Attorney’s Offices, the

State Attorney General’s Office and, I am very pleased to say, representatives in Phoenix from the FTC, FBI, the INS, the Secret

Service, Postal Service, Social Security Administration and the U.S.
8

Attorney’s Office along with representatives of the banking industry, the credit bureau industry and a number of private industry

groups.

As a result of this task force, we have worked very hard to do

two things. One is compile a list of the kinds of crimes that can

be and are committed once somebody’s identity has been stolen;

second, to write a protocol so that law enforcement agencies will

know how to handle these complaints when they come in. That protocol is in its final draft form. The Arizona Attorney General’s Office and Maricopa County Attorney’s Offices have worked on it, and

I am very pleased to say that it is moving forward.

In the absence of that protocol what is happening in the enforcement of this law is confusion. Agencies don’t know which agency

has jurisdiction.

And just to give you a quick anecdote. During the last task force

meeting, they explained that someone comes in to the Phoenix Police Department and they say, my identity has been stolen. They

then begin to list the credit cards that may have been created and

the bank accounts that may have been opened and the other credit

which may have been established all across the country, a credit

card issued in Delaware or a bank account established in perhaps

Minnesota. The law enforcement agencies in Arizona say, how in

the world do we have jurisdiction over this crime and how can we

get the resources to enforce this crime?

Because the nature of the crime is the theft of an individual’s

identity, I argue that at least legal jurisdiction for prosecution of

that crime is wherever that person lives. That creates a huge resource problem for the local law enforcement agencies.

I do believe that the Federal Trade Commission can do a great

deal of good in this area. I commend them for their efforts. And,

again, I commend both chairmen of these subcommittees for holding this hearing so we can move forward on enforcement of this important law.

Mr. TAUZIN. Thank you. Both of us were commenting on how

much of an effort you have been responsible for and how much the

victims across America should be indebted to your dedication and

work in this area.

Mr. SHADEGG. Thank you.

[The prepared statement of Hon. John Shadegg follows:]

PREPARED STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF ARIZONA

Thank you Mr. Chairman. I am pleased that the Subcommittees on Finance and

Hazardous Materials and Telecommunications, Trade and Consumer Protection

have combined efforts today to discuss an issue that is very important to me—identity theft.

Identity theft occurs when stolen personal information is used to establish false

credit, open checking accounts, apply for loans, file for bankruptcy, and run up thousands of dollars in debt by someone other than the individual whose identity was

stolen. Victims are left to clean up the mess, settle thousands of dollars in debt, and

reestablish their credit.

This problem was first brought to my attention by two of my constituents, Bob

and JoAnn Hartle of Phoenix, Arizona, who, being victims of identity theft, were instrumental in passing the first state law in the nation making identity theft a crime

and assisted me in passing H.R. 4151, the Identity Theft and Assumption Deterrence

Act.
9

Mr. and Mrs. Hartle experienced the devastation of identity theft first hand when

a convicted felon stole Mr. Hartle’s identity and, using this stolen personal identification information, made purchases totaling more that $110,000. With Mr.

Hartle’s identity, this individual obtained a Social Security card, driver’s license,

bank accounts, credit cards, and life insurance in Mr. Hartle’s name. He bought

trucks, motorcycles, a mobile home, furniture, and appliances.

Incredibly, he even used Mr. Hartle’s identity to obtain Federal Aviation Administration security clearance to Sky Harbor International Airport in Phoenix. He used

Mr. Hartle’s military service in Vietnam to get a federal home loan and even took

advantage of Mr. Hartle’s clean record to get around the Brady Law and purchase

handguns. Mr. and Mrs. Hartle have spent over $15,000 of their own money—and over four

years of their lives—re-establishing their good credit and reclaiming Bob’s identity.

Because at the time these events took place there were no criminal penalties for

identity theft, the Hartles were left with virtually no remedy. The criminal who victimized them was prosecuted for making false statements to procure firearms. He

was sentenced to prison in 1995 and released earlier this year. Most importantly

though, he was not required to, and therefore did not make any restitution to the

innocent victims of his outrageous conduct, the Hartles.

Tragically, the Hartles’ story is far from unique. Today, identity theft has become

the fastest growing financial crime in America and one of the fastest growing crimes

of any kind in our society. Thousands of people are victimized every day. A single

national credit bureau reported that over two-thirds of the complaints it received

in 1997 involved identity theft—a total of 300,000 complaints in just one year. Cost

to individual victims, financial institutions and taxpayers from identity theft have

skyrocketed in recent years to almost $2 billion dollars annually.

In 1996, my state of Arizona became the first state in the nation to enact criminal

penalties for identity theft. Since then, California, Colorado, Georgia, Kansas, Mississippi, Wisconsin and West Virginia have enacted similar laws making this conduct criminal. Several other states, including New York, are currently working to

pass state identity theft laws.

In response to the Hartle’s story and the growing number of identity thefts across

the country, I introduced H.R. 4151, the Identity Theft and Assumption Deterrence

Act, in the 105th Congress to make identity theft a federal crime. And, after introducing this legislation last year, literally hundreds of constituents came forward to

tell Members of Congress their stories of victimization, including dozens of congressional staff members here on Capitol Hill.

H.R. 4151 passed the House of Representatives by voice vote on October 7, 1998,

and subsequently received unanimous consent from the Senate and was signed into

law on October 30, 1998.

This new federal identity theft law prohibits the transfer and use of personal

identification information—such as a person’s name, address, or social security number—to acquire an individual’s identity. This empowers federal law enforcement

agencies to investigate, apprehend and prosecute criminals before they can use an

individual’s stolen identity to acquire credit cards, checking accounts, home loans,

purchase vehicles, furniture, appliances or handguns or otherwise cause irreparable

damage to victims.

Identity thefts range from individual instances involving small and large amounts

of money, like the Hartle’s, to organized, professional crime rings operating in multiple states and stealing hundreds of thousands of dollars. One such crime ring,

using a fictitious home improvement business as a front, established a credit bureau

account and used its computer link to download roughly 500 credit reports. With

this personal financial information, the crime ring stole more than $250,000.

The identity theft law imposes penalties of up to 15 years imprisonment for federal identity theft crimes and increases penalties to 20 years for identity theft

crimes associated with drug trafficking offenses or any violent crime. Because H.R.

4151 created a new crime under the federal fraud statute, victims of identity theft

can now seek restitution for expenses incurred to reestablish their credit as well as

compensation for legal and court fees.

Finally, H.R. 4151 directed the Federal Trade Commission (FTC), within one year

of enactment, to establish a Centralized Complaint and Consumer Education Service for victims of identity theft. Specifically, the FTC is required to log complaints

from identity theft victims, provide informational material to victims, and refer complaints to the appropriate consumer reporting and law enforcement agencies.

The FTC is currently working to establish a toll free number for identity theft

victims, to create a separate consumer complaint database for identity thefts and

to develop consumer educational materials. In an attempt to streamline the information included in these educational materials, the FTC is drawing from existing
10

materials provided by a variety of federal agencies as well as new information regarding identity theft to create a more thorough and up-to-date set of materials.

In the interim, the FTC has taken steps to assist identity theft victims right now,

including training current consumer complaint phone counselors to facilitate identity theft inquiries. In addition, modifications have been made to the existing database to log identity theft complaints until a permanent database is in place and current educational materials available to consumers have been expanded to address

identity theft. Finally, the FTC anticipates that in the coming weeks, the consumer

complaint website (located at www.consumer.gov) will have an identity theft page

added to provide information and links to other federal law enforcement agencies.

It has come to my attention that the two greatest obstacles to enforcing the laws

in this area and deter identity theft are a lack of awareness and confusion regarding

jurisdiction. Victims are unsure of their options for repairing their damaged credit

ratings and eliminating the accrued debt. Likewise, law enforcement is often unfamiliar with existing state, and now federal laws that provide them with the ability

to actively investigate and prosecute identity thefts. Although Arizona’s identity

theft law has been in place since 1996, and now has the backing of the federal law,

both victims and law enforcement agencies from around the state are still experiencing difficulty and confusion in how to handle complaints of identity thefts.

In an attempt to further educate the public about this crime and assist law enforcement, earlier this year I formed an Identity Theft Task Force. This thirty-five

member task force includes representatives from local police, county attorney’s and

state attorney general’s offices. In addition, staff members from the local FTC, FBI,

INS, Secret Service, Postal Inspectors, Social Security and U.S. Attorney’s Office,

along with banking and private industry groups participate in the task force.

As a result of this effort, the Task Force has compiled a list of the different types

of crimes that can be committed once someone’s identity is stolen and a protocol for

handling identity theft complaints is being written. This will assist law enforcement

in determining the appropriate jurisdiction for crimes associated with identity theft.

The Arizona Attorney General’s Office, the Maricopa County Attorney’s Office and

the Secret Service are currently working to compile an educational booklet for consumers and agencies.

In the absence of a protocol for handling identity theft complaints, victims are

being turned away by law enforcement because the agencies do not understand the

law or how to process complaints. The Identity Theft Task Force is continuing to

meet regularly and I am confidant that opening the lines of communication between

consumers, law enforcement and private industry is the most effective method to

fully enforce the state and federal identity theft laws and assist victims with reestablishing their credit and their good name.

I commend Chairman Oxley and Chairman Tauzin for holding this hearing to inform both Members of Congress and the public about the pervasiveness of identity

theft and the efforts underway by federal and state agencies and industry to combat

this crime. Furthermore, I hope the witnesses can elaborate on the obstacles that

still exist which effectively prevent the prosecution of instances of identity thefts.

I would like to thank both the Associated Credit Bureaus and the Federal Trade

Commission for their efforts to implement the new federal identity theft law and

acknowledge their initiatives. I look forward to hearing their testimony on the

progress of this program and their thoughts on the frequency of identity theft based

on consumer complaints to date.

Thank you and I yield back the balance of my time.

Mr. TAUZIN. Any other members wish to make an opening statement?

Dr. Ganske, you are recognized.

Mr. GANSKE. Mr. Chairman, I am interested in learning about

identity theft and what the FTC is doing about it. My understanding is that we will hear some personal examples today of this problem, and I think it is commendable that you are holding a hearing

on this to draw public attention to this problem, and I thank you.

Mr. TAUZIN. Thank you, Mr. Ganske.

Anyone else for an opening statement?

Then the Chair is pleased to yield to Chairman Oxley to introduce the panel. As he introduces you, if you will come forward and

take your seats.

Mr. Oxley.
11

Mr. OXLEY [presiding]. Thank you, Mr. Chairman.

Let me first introduce Mr. Robert Anderson from Mineral, Virginia; and Ms. Jodie Bernstein, the Director of the Bureau of Consumer Protection at the Federal Trade Commission; Mr. Charles A.

Albright, Chief Credit Officer from Household International; and

Mr. D. Barry Connelly, President of the Associated Credit Bureaus

here in Washington.

Thank you, all of you, for appearing.

Mr. Anderson, we will begin with you.

STATEMENTS OF ROBERT ANDERSON, MINERAL, VIRGINIA;

JOAN Z. BERNSTEIN, DIRECTOR, BUREAU OF CONSUMER

PROTECTION, FEDERAL TRADE COMMISSION; CHARLES A.

ALBRIGHT, CHIEF CREDIT OFFICER, HOUSEHOLD INTERNATIONAL, INC.; AND D. BARRY CONNELLY, PRESIDENT, ASSOCIATED CREDIT BUREAUS, INC.

Mr. ANDERSON. I thank you for the opportunity to share my story

with you. I have heard some of these kinds of stories before, particularly with credit card and bank account theft; and I think mine

is just a little bit different, as you will see, in that the perpetrator

hasn’t stolen anything tangible from me other than my credit rating. All of the thefts have been from other places, businesses primarily.

Basically everything I have to say is based on my own documentation, which is extensive; and I am glad that early on I started documenting, because it would probably be 15 years instead of

5 years if I had not.

I don’t know statistically how identity theft normally begins, but

in my case it was not lost credit cards, it wasn’t a lost or stolen

driver’s license, and it was not something stolen from a checking

account or a mailbox. Rather, it was a number from a supposedly

very protected system of records, my Social Security account number.

At the beginning, the person responsible for this found a way,

and I don’t know to this date just how, to go into five different Social Security offices in California and get my number and I believe

in each case probably not only the number, but little bits and

pieces of identity to go with it. It wasn’t immediately obvious that

anything was happening. Except that in 1994 I got called into a Social Security office regarding a disability claim for somebody with

a name very similar to mine, but not me. When I visited the office,

they said, yes, it appears there has been an enumeration problem;

and we are going to correct it. At that point, I thought the problem

was solved.

Well, several months later, getting into 1995, I found strange

things happening with my credit reports. Just really casual applications for credit cards or lower balance credit cards, whatever,

were turned down. And in almost every case, I would receive a notice from the bank involved that I had collections and foreclosures

on my credit report. Of course, since I have never had a collection

or foreclosure in my life, I immediately tried to find out what that

was all about.

When I pulled the reports, and that was an effort in itself, it took

three attempts before one of the credit reporting agencies even re-
12

sponded to me, and even then I had a lot to learn. I had to learn

to play the game in that the format of whether I needed to send

$8, whether I needed to write it on yellow paper or green paper,

what have you.

Once I learned to play the game, I was able to pull my reports

from all three of the credit reporting agencies. When I did, lo and

behold, there were collections and foreclosures at that point in time

based on telephone service, cellular and interstate telephone service from a cellular company and Pacific Bell.

Well, I immediately contacted the provider of that derogatory information and their collection agency and explained to them that

I had a Social Security number fraud problem and that the accounts didn’t belong to me, that I never had telephone service in

California, that I had never had a cellular phone in California.

I was given assurance that it would be taken care of. At that

point, it was TRW that I was dealing with; and nothing happened.

So when I saw that nothing was happening, 6 or 8 weeks later I

decided I better do something about it.

And, just thinking it through, that I had witnessed a theft of

interstate telephone communications, I wrote a letter to the FBI in

California. I was contacted subsequently by the Special Agent in

Charge who said, yes, this sounded like it was a problem, but it

didn’t rise to the level of things that they could investigate.

Basically, I was told by the FBI that, in California at least, they

really couldn’t get into cases like this or I guess any kind of a personal theft thing unless it rose to the level of $250,000. In my case

we are talking about thousands of dollars, not anything like that.

So armed with that information, I started with Social Security.

I contacted the Office of Inspector General and their hot line, and

I advised them of what was happening and of the information that

I had from the Social Security Administration and they put me in

the queue. After months and months of some conversation but

nothing happening, I got pretty adamant with the Inspector General’s Office, and I found out that basically, was that they could not

do anything because of the burden of the backlog of beneficiary

theft, that is, checks actually taken out of mailboxes were keeping

them too busy and that they didn’t quite know what to do with me.

At that point I decided I probably better get after the credit reporting agencies and start focusing on the things that I could do

with the Fair Credit Reporting Act.

I again pulled my credit reports. Now there was even more substantial bad derogatory credit information, and it was clear that

the person doing this had obtained a little more of my identity. I

don’t know how. I have to suspect since one credit report was totally merged, that is, I know this person’s workplaces, I know this

person’s addresses, so on and so forth, I have to assume that that

person probably knows the same thing about me if he pulled the

same credit report. I have to assume that risk.

I pulled over 20 credit reports from the crediting agencies over

the past 3 years, and I have disputed virtually every one of them.

I guess only recently, and I will explain why a little bit more, the

person got into use of medical services; and that actually helped

me.
13

But, after disputes, I was able to pretty well clear up one of the

three credit reporting agencies. The other one still had these computer problems with this merged report. And although they took

out the addresses and some things of the other person, they put the

same computer numbers, Los Angeles file numbers and things on

my report and put my name and address on the cover of it; and

that is where that stands today. So the other person is indeed off

that credit report, but the information is not.

The third one generally refused to do anything. They said that

they had contacted the likes of the telephone companies in California, and department stores were a favorite of this person. And that

they had been advised, because a valid Social Security number had

been presented, they could not do much for me.

Now this was after I had sent these people copies of a letter that

I had from Social Security advising them that I was a fraud victim.

This is after I had them place statements on my credit reports over

3 years that I didn’t want any credit to be granted to anybody because I was a fraud victim and I was to be contacted, et cetera, if

that was the case. Yet the third CRA still wouldn’t do anything and

to this day still won’t do anything about the disputed and disputed

and disputed information that clearly emanates from California,

that clearly fits the mold of the fraud that occurred, and it is frustrating I guess is the best way to state that.

A major breakthrough in starting to get something going was

that the person started using hospitals and medical facilities. Just

about every night at dinner time we would get a call and it would

be from a collection agency wanting to know when I was going to

pay them for the surgery that was done and the likes of this. It

was appalling to me then and still is that a hospital or a doctor

could perform surgery on somebody and not even know who they

were operating on, and that seems to be the case.

Similarly, with the department stores, that fit the same category.

These are the kinds of things that would happen. There is a

Mervyns store out in California. The person would walk in, open

an account, charge right away $500 or $600 worth of merchandise;

and 2 or 3 months later I would get the call at dinner time. The

person has never tried, as far as I know, to get into my bank accounts, has never tried to steal money from myself, but it has always been consumer, department store, or medical fraud.

In my opinion, the laws seem pretty clear. I have read the Fair

Credit Reporting Act. I am somewhat familiar with the Criminal

Code. There are a number of laws that seem to be out there, and

I really do welcome the one criminalizing the one with the use of

identity with the smaller dollar amount that came out last year,

but the problem is finding somebody that thinks that the theft of

your identity is worth a quarter of a million dollars or whatever

standard they have set to do something about it. If there is anything that can be done with setting standards, I think it could be

very helpful to people such as myself.

In the case of the victim, I will be quite honest with you, I think

I could have solved this real quickly if I was wealthy. Basically, the

attorneys that I talked to told me to get a high-profile attorney. I

guess that means if you are a victim of identity theft and you can

afford the likes of an F. Lee Bailey or a Johnny Cochran, you can
14

probably solve the problem. But I found it extremely difficult to

find attorneys that were subject matter knowledgeable and that

were willing to take the case on a modest fee or some other basis,

particularly in my case when the actual damages that would go

into the lawsuit are not huge, $50,000 would be my guess at this

point. The whole thing in my case is going to be punitive damages.

And what is my identity worth? I don’t know. I think that is one

of the major things that can be done to help victims, is to set some

standard that this is worth as much as a diamond or $250,000 or

whatever, so that the people that are responsible for prosecuting

and enforcing the laws can do something about it.

As far as the credit reporting agencies go, I don’t know. I think

the FCRA is a real good document. I think this covers all of the

bases. But what I have seen in terms of foot dragging, requiring

notification time after time after time again of a moving target

which, by the way, by the time they correct has moved to another

place and you have another problem, that is hard to deal with.

I am advised by attorneys that the legal process is no better.

That going into court, first of all, will probably, this is under 15

U.S. Code now, probably results in a modest award. It has in the

past in some cases, but that award is going to be appealed by a

throng of lawyers, and the reality is that the case is going to be

in court for years. I don’t know what to do about that one. I don’t

know where we set a standard.

And I have probably run up my 5 minutes right there. That is

about the story. I am looking for any help I can get, and I welcome

the opportunity to sit here and tell you the story.

[The prepared statement of Robert Anderson follows:]

PREPARED STATEMENT OF ROBERT ANDERSON

In Mid 1994 I became aware of a problem with my Social Security Number and

also experienced denial of very routine credit due to reported ‘‘collections and foreclosures.’’ I have never had a collection nor foreclosure against myself.

In August of 1994 I visited a Social Security District Office in Baltimore, Maryland, and was advised that SSA records showed my SSN as belonging to a person

with a similar name, but not myself. I was told that the problem would be corrected.

During the same period I began to experience unusual reactions from creditors,

and was advised several times that this was due to ‘‘Collections and foreclosures.’’

Virtually all of my investments were in Real Estate. Since I was now a widower

and an early retiree, I decided to sell my primary residence, reduce and eliminate

real estate debt, and move to another property I already owned. In the process I

applied for mortgage refinance credit and found that I now had credit problems. My

credit reports in December 1995, showed collections and foreclosures on telephone

service in California occurring from late 1994 through 1995. This derogatory information delayed and made my Real Estate transactions either very difficult or impossible thus depriving me of significant financial leverage.

I obtained some information regarding the Fair Credit Reporting Act, and requested copies of my consumer credit report from all three of the major Credit Reporting Agencies (CRA’S). I was advised that I needed to get the individual collection agencies to contact the CRA in order to remove the derogatory information and

was given contact information. The agencies involved and particularly, Pacific Bell

Telephone would not delete the harmful information from my reports since it had

been verified by someone using my SSN.

My mortgage processor advised me to contact Social Security and obtain a statement that my SSN was being used fraudulently. I did so, and received a letter from

the SSA District Office stating that my SSN had been issued to another person on

five different occasions. All SSN issuance’s were in the Pomona/Glendora area of

California, and I was even provided with a local address in California, reported as

belonging to myself.
15

When I moved and applied for a driver’s license (which uses SSN), I was delayed

and questioned by a motor vehicle inspector as to whether I had ever lived in, or

had a record in California. Recognizing that this had become a serious problem requiring resolution I escalated my efforts.

At this point, I had a name, address and other information about the person in

California, and decided that I must attempt to stop their damaging actions.

Telephone calls to local law enforcement agencies in California did no good. I was

told that since I live in another State, I must file a complaint with my local authorities. The State Police told me that this appeared to be a Federal matter and that

I should contact FBI. I wrote to the FBI in California and advised that identity

fraud had occurred involving interstate telephone services. The special agent in

charge called me and advised that unless the dollar amount of the fraud exceeded

$250,000, they could do nothing. I contacted the Social Security Office of Inspector

General Hotline and attempted to file a complaint in order to obtain some sort of

police report number. I was initially told that SSA had such a backlog of beneficiary

theft (checks) that they could do nothing. After three years of telephone calls and

endless letter writing, I still have not reached resolution with SSA. Only after Congressional intervention did I receive indications of help from SSA.

Thus began a four year long nightmare of credit problems. The perpetrator was

apparently knowledgeable enough not to apply for credit cards, commit postal fraud,

nor directly attack my personal accounts. Instead, he began victimizing Department

stores by applying for revolving credit, immediately purchasing to the limit, and disappearing. I would receive a call from some collection agency and would recite my

story of Social Security Number theft and identity fraud. In some cases, such as

Montgomery Wards, research performed indicated the existence of someone in California and the matter was removed from my credit report. In other cases, such as

Target, and Mervyns, the information was never corrected; and I still receive calls

from collections agencies. Both Target and Mervyns were advised of the SSN problem and fraud, yet chose to ignore that information.

The California fraud now began to use Medical facilities in California, using my

SSN for billing. I received phone calls, letters of collection, and collection agency actions from two Hospital groups, an ambulance service and radiology centers. One

surgeon sent me a statement that he performed surgery upon myself (I have never

had surgery). It was clear that the Medical facilities did not know who they were

treating. I obtained legal counsel and one of the hospitals corrected and wrote off

at least $6,000 in charges, but only after threat of lawsuit. The others remain a

problem and still appear on some of my credit reports. I have been unable until just

recently to reduce the interest rates of my credit accounts due to the fraud. My children are routinely offered credit at 6% while I have been saddled with 18% credit

for three years.

The CRA’s were another story. I notified all that was I was a fraud victim, and

disputed the erroneous information on their reports. I asked that statements be put

on my report to advise creditors of the fraud and not to grant credit without my

permission. The CRA’s responded variously, but I found that as soon as I could correct and dispute one item, frequently more bad credit information would be added.

At one point a credit report completely merged my personal and credit information

with that of someone in California, thus providing me with addresses, places of

work, credit history and other information. When I disputed the information, the report was corrected to reflect only my name and address but still contained all information on two different persons, including the CRA coding information. I requested

and disputed my credit reports every 90-180 days and disputed in writing all erroneous information. Although this is finally beginning to result in an accurate report,

one of the major CRA’s still willfully refuses to remove damaging erroneous information. That CRA has been provided multiple copies of letters from SSA which document myself as a fraud victim.

There seem to be more than adequate Federal laws in existence to cover my situation. Title 15, USC 1681, the Fair Credit Reporting Act, provides both for theft and

fraudulent use of SSN’s and for willful failure of credit reporting agencies to protect

consumers by correcting fraudulent information. The Federal Criminal Code, Title

18, USC 1028, also appears to make the SSN use a federal offense. I expect there

are other related laws.

The problem I have experienced is the tremendous difficulty in causing someone

to prosecute and/or enforce the laws unless there is a large amount of money involved. This raises the questions in my mind: What is the value of one’s identity?

What is the value of ones credit worthiness? What is the price to be paid for the

stress, suffering and personal damage to a victim? This applies not only to law enforcement agencies, but to attorneys as well. My experience has been that where

an Attorney can choose between a personal injury automobile accident case, and an
16

identity theft case, the personal injury case wins hands down. I am advised that

should one lose a Federal Civil case against a CRA, the CRA may charge all legal

fees to the plaintiff. I also am told that the CRA will most certainly appeal should

a judgement against them be rendered, and that the history of existing cases indicates years of litigation in each case. After two aborted attempts to pursue litigation

against a CRA have been sidetracked due to the complexities of my case, I still pursue Federal Civil Court action.

Mr. TAUZIN. Mr. Anderson, we deeply appreciate it.

Actually, we did not put a timer on you. We thought after all

these years, you ought to be able to say whatever you wanted to

say for as long as you wanted to say it. Thank you, Mr. Anderson.

Ms. Bernstein.

STATEMENT OF JOAN Z. BERNSTEIN

Ms. BERNSTEIN. Thank you very much, Mr. Chairman, all three

chairmen. Thank you very much for the opportunity to be with you

today at this very important hearing on this subject that the Commission cares very deeply about.

Before I start, as your practices are, I think, Mr. Chairman, our

full statement will be accepted for the record; and I will just summarize briefly for you this morning the steps that the Commission

has already undertaken, what our plans are for the future.

I would like to thank Mr. Shadegg particularly for his leadership

in this area in recognizing the capacity of the FTC that has been

working in the area of handling consumer complaints over the last

couple of years especially.

Our hope is, in welcoming the authority that the committee and

the Congress gave us, is that it will result in a better system for

people like Bob Anderson who have suffered such grave damage to

their reputations and to the loss of their identity. Hopefully, as we

finish the implementation of this and the Fair Credit Reporting Act

amendments, it will result in a better system.

Just to focus on the statute itself, the Identity Theft Assumption

and Deterrence Act, and as you pointed out in your statement, the

act requires the FTC to establish procedures to do three things: to

log the receipt of complaints by victims of identity theft; to provide

victims of identity theft with informational materials; and, three,

to refer complaints to appropriate entities, including major national

credit bureaus and law enforcement agencies.

We intend to meet your deadline of October 1 to have these procedures in place. They are already under way.

So the way we view our role, it is largely as a coordinator, to

serve as a central point of contact and the source of information for

victims and to manage that information to be shared with the various agencies in its support of law enforcement.

So what we have done specifically is we have a plan to establish

an 800 number. It is already under way. We have already reserved

a number which is a pretty good one, 877-I-D-theft—it has been reserved, but it has not been implemented just yet—in order to take

complaints from consumers and provide them with information as

to what to do about it. I think that is a critical role for us.

We are also planning, and it is also under way, a data base. It

is built on the other data bases that the Commission has already

established so that the information can be available across the

country out of the data base. It will help law enforcement, particu-
17

larly. If I haven’t stressed that enough, the coordinating function

between us as a repository of information and criminal law enforcement across the country in the Federal agencies will be critical.

And perhaps as important as the other functions are the education or informational function. We have started on that, and we

issued a consumer alert in April that is on identity crisis, what to

do if your identity is stolen. And the first thing to do is to give specific information as to where to report initially an episode of identity theft. These are available. Copies are available with me here

today.

This back page, Chart Your Course of Action; and it is helpful

in identifying what you ought to do initially if you have been a victim of identity theft. It is to help victims begin to cope with this

problem.

What have we done in addition to these steps? We have trained

our consumer response center counselors, and we have them in

place to handle other consumer problems, and we have added a

number to that staff to recognize ID complaints and assist victims

right away if and when they call up. We already have numbers in

place for that.

We have modified our existing data base to track basic information on the ID theft calls that we are already receiving. As I said,

we have issued consumer information already. We are publicizing

it as broadly as we can, this consumer information, and through

media coverage of the consumer information.

Within a couple of weeks we are about ready to launch a web

page that will be dedicated entirely to identity theft, and it will be

built on www.consumer.gov, which is a page that we took the initiative on and has 61 Federal agencies coordinating. I am proud of

it because, for the first time, a consumer can get information from

the Federal Government without knowing what the acronym is for

the agency, and I think that is a real breakthrough. So we will be

building on that experience.

Just this week we held a conference with 16 Federal agencies to

begin to get them to be aware of the need to coordinate this information and to foster law enforcement as best we can. The National

Association of Attorneys General also attended that. We want them

to coordinate with us as we begin to develop the tools for consumers so that we are getting from consumers the information that

they need, that law enforcement needs in order to bring rapid enforcement in this area.

On a related subject, I would add one more point, because this

is important. It was stated in the written testimony of the Commission, this week the Commission—just yesterday, they authorized us

to file a complaint in Federal court that for the first time attacked

the process known as pretexting. Pretexting is people who, I guess

in lay language, lie about who they are to obtain very sensitive financial information to be used by third parties without the authorization of you, the consumer, whose material it is.

We filed a case in Colorado yesterday naming Touchtone Information, a company which we believe plays a significant role in this

business, to attack under section 5 of the FTC act the Commission’s existing authority to attack deceptive and unfair practices for

two things, the lying and the passing on of the information.
18

1This written statement represents the views of the Federal Trade Commission. My oral presentation and response to questions are my own, and do not necessarily represent the views of

the Commission or any Commissioner. 2Pub. L. No. 105-318, 112 Stat. 3007 (1998).

3 In at least one case, an identity thief reportedly even died using the victim’s name, and the

victim had to get the death certificate corrected. Michael Higgins, Identity Thieves, ABA Journal, October 1998, at 42, 47.

We will be happy to keep the committee advised as to the course

of that litigation. I have with me today copies of the complaint as

well as the majority and dissenting statements of the Commission

for your information.

I do want to say that others here at the table have been very

helpful and cooperative in terms of our consumer education efforts.

We will need the private sector as well as the government agencies

to carry out the task.

Again, I thank the committee for the opportunity to be with you

today.

[The prepared statement of Joan Z. Bernstein follows:]

PREPARED STATEMENT OF JOAN M. BERNSTEIN, DIRECTOR, BUREAU OF CONSUMER

PROTECTION, FEDERAL TRADE COMMISSION

Mr. Chairman Tauzin, Mr. Chairman Oxley, and members of the Subcommittees,

I am Jodie Bernstein, Director of the Bureau of Consumer Protection, Federal Trade

Commission (‘‘FTC’’ or ‘‘Commission’’).1 I appreciate the opportunity to present the

Commission’s views on the important issue of financial identity theft.

In my remarks today, I will discuss the increasingly common problem of identity

theft, the role of the FTC in addressing this problem under the recently enacted

Identity Theft and Assumption Deterrence Act 2, and the steps the Commission is

taking to aid consumers who become identity theft victims. I will also briefly address one of the notable ways in which identity theft can occur in the financial services industry—‘‘pretexting,’’ i.e., obtaining private financial information from banks

and others under false pretenses.

I. IDENTITY THEFT: THE PROBLEM

Identity theft occurs when someone uses the identifying information of another

person—name, social security number, mother’s maiden name, or other personal information—to commit fraud or engage in other unlawful activities. For example, an

identity thief may open up a new credit card account under someone else’s name.

When the identity thief fails to pay the bills, the bad debt is reported on the victim’s

credit report. Other common forms of identity theft include taking over an existing

credit card account and making unauthorized charges on it (typically, the identity

thief forestalls discovery by the victims by contacting the credit card issuer and

changing the billing address on the account); taking out loans in another person’s

name; writing fraudulent checks using another person’s name and/or account number; and using personal information to access, and transfer money out of, another

person’s bank or brokerage account. In extreme cases, the identity thief may completely take over his or her victim’s identity—opening a bank account, getting multiple credit cards, buying a car, getting a home mortgage and even working under

the victim’s name.3

Identity theft almost always involves a financial services institution in some

way—as a lender, holder of a bank account, or credit card or debit card issuer—

because, as the bank robber Willie Sutton observed, that is where the money is.

Identity theft involving financial services institutions, furthermore, is accomplished

through a wide variety of means. Historically, identity thieves have been able to get

the personal information they need to operate through simple, ‘‘low-tech’’ methods:

intercepting orders of new checks in the mail, for example, or rifling through the

trash to get discarded bank account statements or pre-approved credit card offers.

Sometimes, identity thieves will try to trick others into giving up this information.

As discussed in more detail below, one way in which identity thieves do this is by

‘‘pretexting,’’ or calling on false pretenses, such as by telephoning banks and posing

as the account holder. In other cases, the identity thief may contact the victim directly. In one recent scheme, fraud artists have reportedly been preying on consumers’ fears about Year 2000 computer bugs; a caller, for example, represents that he
19

4FEDERAL TRADE COMMISSION, Y2K? Y2 CARE: PROTECTING YOUR FINANCES FROM YEAR 2000

SCAM ARTISTS (Consumer Alert, March 1999). 5See, e.g., FEDERAL TRADE COMMISSION, INDIVIDUAL REFERENCE SERVICES: A REPORT TO CONGRESS (December 1997) (examining computerized databases or ‘‘look-up services’’ that disseminate personally identifiable information on individuals, often through on-line access). With the

FTC’s encouragement, members of the individual reference services industry have adopted voluntary guidelines, effective December 31, 1998, limiting the availability of certain types of personal information. 6The Fair Credit Billing Act, 15 U.S.C. § 1601 et seq. and the Electronic Fund Transfer Act,

15 U.S.C. § 1693 et seq. limit consumers’ liability for fraudulent transactions in connection with

credit and debit cards, respectively. 7 Calls to this department included ‘‘precautionary’’ phone calls, as well as calls from actual

fraud or identity theft victims. 8 U.S. GENERAL ACCOUNTING OFFICE, IDENTITY FRAUD: INFORMATION ON PREVALENCE, COST,

AND INTERNET IMPACT IS LIMITED (May 1998). The Social Security Administration attributed the

increase in investigations, in part, to the hiring of additional investigators. 9 15 U.S.C. § 45(a). 10 Certain entities such as banks, savings and loan associations, and common carriers as well

as the business of insurance are wholly or partially exempt from Commission jurisdiction. See

Section 5(a)(2) of the FTC Act, 15 U.S.C. § 45(a)(2), and the McCarran-Ferguson Act, 15 U.S.C.

§ 1012(b).

or she is from the consumer’s bank and tells the consumer that the caller needs certain information about the consumer’s account (or needs to transfer money to a special account) in order to ensure the bank can comply with Year 2000 requirements.4

Other methods of identity theft may involve more sophisticated techniques. In a

practice known as ‘‘skimming,’’ identity thieves use computers to read and store the

information encoded on the magnetic strip of an ATM or credit card when that card

is inserted through either a specialized card reader or a legitimate payment mechanism (e.g., the card reader used to pay for gas at the pump in a gas station). Once

stored, that information can be re-encoded onto any other card with a magnetic

strip, instantly transforming a blank card into a machine-readable ATM or credit

card identical to that of the victim. In addition, the increased availability of information on the Internet can facilitate identity theft.5

For individuals who are victims of identity theft, the costs can be significant and

long-lasting. Identity thieves can run up debts in the tens of thousands of dollars

under their victims’ names. Even where the individual consumer is not legally liable

for these debts,6 the consequences to the consumer are often considerable. A consumer’s credit history is frequently scarred, and he or she typically must spend numerous hours sometimes over the course of months or even years contesting bills

and straightening out credit reporting errors. In the interim, the consumer victim

may be denied loans, mortgages, and employment; a bad credit report may even prevent him or her from something as simple as opening up a new bank account at

a time when other accounts are tainted and a new account is essential. Moreover,

even after the initial fraudulent bills are resolved, new fraudulent charges may continue to appear, requiring ongoing vigilance and effort by the victimized consumer.

Although comprehensive statistics on the prevalence of identity theft are not currently available, the available data suggest that the incidence of identity theft has

been increasing in recent years. The General Accounting Office, for example, reports

that consumer inquiries to the Trans Union credit bureau’s Fraud Victim Assistance

Department increased from 35,235 in 1992 to 522,922 in 1997, 7 and that the Social

Security Administration’s Office of the Inspector General conducted 1153 social security number misuse investigations in 1997 compared with 305 in 1996.8

II. THE FEDERAL TRADE COMMISSION’S AUTHORITY

A. Overview

The FTC’s mission is to promote the efficient functioning of the marketplace by

protecting consumers from unfair or deceptive acts or practices and increasing consumer choice by promoting vigorous competition. The Commission’s primary legislative mandate is to enforce the Federal Trade Commission Act (‘‘FTC Act’’), which

prohibits unfair methods of competition and unfair or deceptive acts or practices in

or affecting commerce.9 With certain exceptions, the FTC Act provides the Commission with broad civil law enforcement authority over entities engaged in or whose

business affects commerce, 10 and provides the authority to gather information about
20

11 15 U.S.C. § 46(a). 12 In addition to the credit laws discussed in the text, the Commission also enforces over 30

rules governing specific industries and practices, e.g., the Used Car Rule, 16 C.F.R. Part 455,

which requires used car dealers to disclose warranty terms via a window sticker; the Franchise

Rule, 16 C.F.R. Part 436, which requires the provision of information to prospective franchisees;

and the Telemarketing Sales Rule, 16 C.F.R. Part 310, which defines and prohibits deceptive

telemarketing practices and other abusive telemarketing practices. 13 15 U.S.C. §§ 1601 et seq. 14 15 U.S.C. §§ 1681e, 1681i . 15 15 U.S.C. § 1681-1681u. 16For example, in 1992, Citicorp Credit Services, Inc., a subsidiary of Citicorp, agreed to settle

charges that it aided and abetted a merchant engaged in unfair and deceptive activities. Citicorp

Credit Services, Inc., 116 F.T.C. 87 (1993). In 1993, the Shawmut Mortgage Company, an affiliate of Shawmut Bank Connecticut, N.A., and Shawmut Bank, agreed to pay almost one million

dollars in consumer redress to settle allegations that it had discriminated based on race and

national origin in mortgage lending. United States v. Shawmut Mortgage Co., 3:93CV-2453AVC

(D. Conn. Dec. 13, 1993). The Commission brought the Shawmut case jointly with the United

States Department of Justice. In 1996, the J.C. Penney Company entered into a consent decree

and paid a civil penalty to resolve allegations that the company failed to provide required notices of adverse actions to credit applicants. United States v. J.C. Penney Co., CV964696

(E.D.N.Y. Oct. 8, 1996). In 1998, in conjunction with the law enforcement efforts of several state

attorneys general, the Commission finalized a settlement agreement with Sears, Roebuck and

Company that safeguards at least $100 million in consumer redress based on allegations that

the company engaged in unfair and deceptive practices in its collection of credit card debts after

the filing of consumer bankruptcy. Sears, Roebuck and Co., C-3786, 1998 FTC LEXIS 21 (Feb.

27, 1998). The Commission also worked with state attorneys general in resolving allegations

against other companies that involved practices in the collection of credit card debts after the

debtors had filed for bankruptcy. Montgomery Ward Corp., C-3839 (Dec. 11, 1998); May Department Stores Co., File No. 972-3189, 1998 FTC LEXIS 117 (Nov. 2, 1998). 17 Commission staff participates in numerous task forces and groups concerned with, for example, fair lending, leasing, subprime lending, electronic commerce, and fraud on the Internet, all

of which have an impact on the financial services industry.

such entities.11 The Commission also has responsibility under approximately forty

additional statutes governing specific industries and practices.12

Among the Commission’s statutory mandates of particular relevance here are the

Fair Credit Billing Act and Fair Credit Reporting Act, which provide important protections for consumers who may be trying to clear their credit records after having

their identities stolen. The Fair Credit Billing Act, which amended the Truth in

Lending Act, provides for the correction of billing errors on credit accounts and limits consumer liability for unauthorized credit card use.13 The Fair Credit Reporting

Act (‘‘FCRA’’) regulates credit reporting agencies and places on them the responsibility for correcting inaccurate information in credit reports.14 In addition, the FCRA

limits the disclosure of consumer credit reports only to entities with specified ‘‘permissible purposes’’ (such as evaluating individuals for credit, insurance, employment

or similar purposes) and under specified conditions (such as certifications from the

user of the report).15

B. The FTC’s Activities With Respect to the Financial Services Industry and Financial Privacy

The Commission has extensive experience in addressing consumer protection

issues that arise in the financial services industry, involving, for example, the use

of credit cards, lending practices, and debt collection.16 The Commission also provides consultation to Congress and to the federal banking agencies about consumer

protection issues involving financial services. The Commission periodically provides

comments to the Federal Reserve Board regarding the Fair Credit Reporting Act,

and the implementing regulations for the Truth in Lending Act, the Consumer Leasing Act, the Electronic Funds Transfer Act, and the Equal Credit Opportunity Act.17

In addition, The FTC has taken an active role in addressing a range of issues involving consumer privacy, including the privacy of personal financial information.

Thus, for example, the Commission has recently reported to or testified before Congress and/or held public workshops on online privacy, individual reference services,

pretexting, financial privacy, and the implications of electronic payment systems for

individual privacy.

C. The FTC’s Role in Addressing Identity Theft

As an outgrowth of its broader concern about financial privacy, the Commission

has been involved in the issue of identity theft for some time. In 1996, the Commission convened two public meetings in an effort to learn more about identity theft,

its growth consequences, and possible responses. At an open forum held in August

1996, consumers who had been victims of this type of fraud, representatives of local

police organizations and other federal law enforcement agencies, members of the
21

18Pub. L. No. 105-318, 112 Stat. 3007 (1998). 19 18 U.S.C. § 1028(a)(7). The statute further defines ‘‘means of identification’’ to include ‘‘any

name or number that may be used, alone or in conjunction with any other information, to identify a specific individual,’’ including, among other things, name, address, social security number,

driver’s license number, biometric data, access devices (i.e., credit cards), electronic identification

number or routing code, and telecommunication identifying information. 20 If the $1000 threshold is not met, the maximum penalty is three years imprisonment. The

maximum penalty is increased to 20 years imprisonment if the identity theft offense is committed to facilitate a drug trafficking crime or in connection with a crime of violence, and 25 years

if the offense is committed to facilitate an act of international terrorism. 21 Because individual consumers’ financial liability is often limited, prior to the passage of the

Act, financial institutions, rather than individuals, tended to be viewed as the primary victims

of identity theft. Setting up an assistance process for consumer victims is consistent with one

of the Act’s stated goals, to recognize the individual victims of identity theft. See S. Rep. No.

105-274, at 4 (1998). 22Pub. L. No. 105-318 § 5, 112 Stat. 3010 (1998). 23Most identity theft cases are best addressed through criminal prosecution. The FTC itself

has no direct criminal law enforcement authority. Under its civil law enforcement authority provided by section 5 of the FTC Act, the Commission may, in appropriate cases, bring actions to

stop practices that involve or facilitate identity theft. The practices the Commission expects to

focus its law enforcement resources on are those where the effect is widespread and where civil

remedies are likely to be effective. See, e.g., FTC v. J.K. Publications, Inc., et al, Docket No.

CV 99-00044 ABC (AJWx) (C.D. Cal., filed January 5, 1999) (Alleging that defendants obtained

Continued

credit industry, and consumer and privacy advocates discussed the impact of identity theft on industry and on consumer victims. Subsequent press coverage helped

to educate the public about the growth of consumer identity theft and the problems

it creates. In November 1996, industry and consumer representatives reconvened in

working groups to explore solutions and ways to bolster efforts to combat identity

theft.

Having thereby developed a substantial base of knowledge about identity theft,

the Commission testified before the Senate Judiciary Committee in May 1998 in

support of the Identity Theft and Assumption Deterrence Act.

III. THE IDENTITY THEFT AND ASSUMPTION DETERRENCE ACT OF 1998

Last fall, Congress passed the Identity Theft and Assumption Deterrence Act of

1998 (‘‘Identity Theft Act’’ or ‘‘Act’’).18 The Act addresses identity theft in two significant ways. First, the Act strengthens the criminal laws governing identity theft.

Specifically, the Act amends 18 U.S.C. § 1028 (‘‘Fraud and related activity in connection with identification documents’’) to make it a federal crime to:

knowingly transfer[] or use[], without lawful authority, a means of identification

of another person with the intent to commit, or to aid or abet, any unlawful

activity that constitutes a violation of Federal law, or that constitutes a felony

under any applicable State or local law.19

Previously, 18 U.S.C. § 1028 addressed only the fraudulent creation, use, or transfer

of identification documents, and not theft or criminal use of the underlying personal

information. Thus, the Act criminalizes fraud in connection with unlawful theft and

misuse of personal identifying information itself, regardless of whether it appears

or is used in documents. Furthermore, one who violates this prohibition and thereby

obtains anything of value aggregating to $1000 or more during any one-year period,

is subject to a fine and imprisonment of up 15 years.20 These criminal provisions

of the Act are enforced by the U.S. Department of Justice, working with investigatory agencies including the U.S. Secret Service, the Federal Bureau of Investigation,

and the U.S. Postal Inspection Service.

The second way in which the Act addresses the problem of identity theft is by

improving assistance to victims.21 In particular, the Act provides for a centralized

complaint and consumer education service for victims of identity theft, and gives the

responsibility of developing this service to the Federal Trade Commission. The Act

directs that the Commission establish procedures to: (1) log the receipt of complaints

by victims of identity theft; (2) provide identity theft victims with informational materials; and (3) refer complaints to appropriate entities, including the major national

consumer reporting agencies and law enforcement agencies.22

IV. CURRENT EFFORTS: THE FTC’S CONSUMER ASSISTANCE PROGRAM

In enacting the Identity Theft Act, Congress recognized that coordinated efforts

in this area are essential to best serve identity theft victims. Accordingly, the FTC’s

role under the Act is primarily one of managing information sharing among public

and private entities in support of criminal law enforcement efforts, 23 and aiding vic-
22

consumers’ credit card numbers without their knowledge and billed consumers’ accounts for

unordered or fictitious Internet services). 24 In the Identity Theft Act, Congress authorized the appropriation of such sums as may be

necessary to carry out the FTC’s obligations under the Act. Pub. L. No. 105-318 § 5(b), 112 Stat.

310 (1998). These plans are, of course, contingent on the actual appropriation of such funds.

Should the volume of calls received from consumers approach the levels reported by Trans

Union to the General Accounting Office, the appropriation required to respond to these calls

may be substantial. 25The Commission has successfully undertaken a similar effort with respect to telemarketing

fraud. The FTC’s Consumer Sentinel network is a bi-national database of telemarketing, direct

mail, and Internet complaints used by law enforcement officials throughout the U.S. and Canada. 26Www.consumer.gov is a multi-agency effort, with technical maintenance provided by the

FTC. It contains a wide array of consumer information and currently has links to information

from 61 federal agencies.

tims by serving as a central, Federal source of information. In order to fulfill the

purposes of the Act, the Commission has developed and begun implementing a plan

that centers on three principal components 24: (1) Toll-free telephone line. The Commission plans to establish a toll-free telephone

number that consumers can call to report identity theft and to receive information

and referrals to help them to resolve the problems that may have resulted. The

identity theft toll-free number will build on the success of the Commission’s twoyear-old Consumer Response Center, a general purpose hotline for consumer information and complaints.

(2) Identity theft complaint database. The Commission is developing a database

to track the identity theft complaints received by the FTC and other public and private entities. This database will allow the Commission to monitor better the extent

and nature of identity theft. Moreover, the Commission expects that the database

will enable the many agencies involved in combating identity theft to share and

manage data so as to more effectively track down identity thieves and assist consumers.25 For example, criminal law enforcement agencies could take advantage of

a central repository of complaints to spot patterns that might not otherwise be apparent from isolated reports. In addition, a consumer with a concern that his or her

social security number has been misused would not—and should not—need to call

all the many federal agencies that could possibly be involved to ensure that the complaint was directed to the appropriate people. Under the planned system, the consumer could make a single phone call to one central number (the FTC’s or that of

any other agency sharing data with the Commission), to report the offense, have it

referred to the appropriate agency, and receive additional information and assistance.

(3) Consumer Education Materials. A number of public and private organizations

have published or begun developing materials that provide information on particular aspects of identity theft. The FTC is coordinating with others, both within and

outside the government, to develop unified, comprehensive consumer education materials for victims of identity theft, and those concerned with preventing identity

theft, and to make this information widely available.

Commission staff has been working hard to implement these plans. Phone counselors in our Consumer Response Center have been trained to handle identity theft

complaints, and our general complaint database has been modified so as to permit

entry of at least basic information about the identity theft complaints we already

receive. In addition, we have recently issued a Consumer Alert that provides an

overview of the steps consumers should take if they become victims of identity theft.

We are also working with other government agencies to launch a web page in the

near future devoted to identity theft information. The web page, which will include

links to information from a number of government agencies, will be located on

www.consumer.gov, the federal government’s central site for consumer information.26

The Commission, in fact, has been working closely with other agencies in a number of ways in our effort to help consumers. For example, FTC staff has been working with the identity theft subcommittee of the Attorney General’s Council on White

Collar Crime to provide interim guidance to law enforcement field offices on how

best to assist identity theft victims, and with the Social Security Administration’s

Inspector General to coordinate the handling of social security number misuse complaints. Most recently, Commission staff hosted a meeting on April 20, 1999, with

representatives of approximately a dozen federal agencies as well as the National

Association of Attorneys General. The meeting brought together individuals involved

in diverse aspects of identity theft to discuss the implementation of the consumer

assistance provisions of the Identity Theft Act. In particular, Commission staff
23

27 Id. At last summer’s hearings before the House Banking and Financial Services Committee,

former and current information brokers described the recent explosion in the number—from a

handful to hundreds—of information brokers offering confidential financial information, and

noted that there are currently hundreds of Web pages available on the Internet advertising the

ability of information brokers to obtain such information. See Obtaining Confidential Financial

Information by Pretexting: Hearings Before the House Comm. on Banking and Financial Services, 105th Cong. (1998) (statements of Al Schweitzer, Robert Douglas).

sought input from others in the design of the identity theft complaint database, to

ensure that the FTC captures the information most useful to other agencies in both

assisting consumers and catching identity thieves. In addition, this meeting was the

first step in the FTC’s efforts to develop a single set of consumer education materials. The Commission expects that a number of agencies will be working jointly

with the Commission on this project to ensure that consumers have the best information possible on preventing and recovering from identity theft.

V. PRETEXTING

Related to identity theft is a practice known in the information broker industry

as ‘‘pretexting.’’ Pretexting involves obtaining confidential consumer information

under false pretenses, e.g., by lying and pretending to be the consumer. This tactic

appears to be gaining popularity in response to the booming market for comprehensive personal information relating to consumers. Today, many information brokers

tout their ability to obtain sensitive financial information—including current bank

or brokerage account numbers and balances, which are not publicly available—without the subject ever knowing.27 Pretexting is the method they use to obtain this information.

Pretexting may harm consumers in two related ways. First, there may be a significant invasion of the consumer’s privacy resulting from the disclosure of private

financial information through pretexting. Second, pretexting also may increase the

risk of identity theft, resulting in serious economic harm. For example, using account balances and numbers obtained from a pretexter, an identity thief could deplete a bank account or liquidate a stock portfolio. The Commission just voted to

file a complaint in federal district court against alleged pretexters. I will be prepared to discuss it at the hearing and the Commission will provide the Committee

with a copy of its complaint and the concurring and dissenting statements of the

Commissioners as soon as possible.

VI. CONCLUSION

Financial identity theft clearly continues to present a significant threat to consumers. The FTC looks forward to working with the Committee to find ways to prevent this crime and to assist its victims.

Mr. OXLEY. Thank you, Ms. Bernstein.

Mr. Albright.

STATEMENT OF CHARLES A. ALBRIGHT

Mr. ALBRIGHT. Chairman Oxley, Chairman Tauzin, members of

the committee, thank you for this opportunity to testify on behalf

of the issue of identity theft.

My name is Charles Albright, and I am Chief Credit Officer of

Household International. Household is a leading provider of consumer financial services and credit card products in the United

States, Canada and the United Kingdom. I am here to offer a twofold perspective on this critical issue. First, from my personal experience as a victim of identity theft; and, second, from my professional experience at Household International in this area.

As you all know, identity theft occurs when a perpetrator gains

access to another person’s information and uses this information to

commit financial fraud. Unfortunately, it is extremely easy to get

access to some of this information in the marketplace today. This

can be done by stealing someone’s mail, going through their trash

or even perpetration of employees at credit operation throughout
24

the country. As an aside, it is not at all uncommon for a family

member to commit identity theft upon another family member. In

our experience at Household, we find that 50 percent of all

incidences of identity theft are committed by another family member.

Armed with this information, the perpetrator will then open new

accounts in the victim’s name and access the victim’s existing accounts. After running up significant debts, the perpetrator will

likely fail to pay the charges, and ultimately the delinquency or

bad debts will be reported on victim’s credit report.

This is essentially what happened to me several years ago when,

unbeknownst to me, someone obtained my personal information, including my Social Security number, and then proceeded to open

several credit card and retail credit accounts in my name. The perpetrator had my address changed to a location in Philadelphia. For

these accounts I received no statements or other information about

the accounts. After opening these fraudulent accounts, the perpetrator proceeded to incur debts in tens of thousands of dollars.

Believe me, I am very sympathetic with Mr. Anderson’s comments

today.

I would like to say, even though I have been in the consumer

credit business for over 30 years, I intentionally worked through

the entire process of trying to correct my personal situation myself;

and I did not let anyone know in the credit reporting industry or

even in the companies where I knew the senior executives that

were carrying the balances on my accounts that this had happened.

So I approached this strictly as a consumer, someone who reads

USA Today and someone who hears about these stories.

I was unaware of any of this activity until 1 day when my wife

received a telephone call at home from a collection agency after the

debts had been delinquent for 60 days. It was at this time that I

realized the scope of problem and began the lengthy and painstaking process of repairing my credit record. I spent countless hours

dealing with credit grantors and credit bureaus sorting out this

problem. I would like to state that in my case there was particular

difficulty due to lack of response from two specific credit grantors.

While I was ultimately able to successfully resolve the situation

after 18 months, I am nonetheless keenly aware of the problems related to identity theft and the difficulty in combating them. I believe it is fair to state that, since my experience, both the credit

bureaus and creditors have become more sensitized and effective in

dealing with this problem.

Household takes the issue of identity theft very seriously. We understand that dealing with the issue requires us to delicately balance the needs of our customers’ expectations for expeditious credit

decisions and efficiencies in granting credit, while taking prudent

steps to adequately deal with the issues of fraud and identity theft

as well as credit quality. Toward that end, Household has a team

of over 200 dedicated professionals throughout the company who

deal exclusively with the issues of consumer fraud. All employees

undergo a thorough background check, including fingerprinting and

criminal record investigations, to ensure that internal fraud is not

perpetrated; and, unfortunately, this is not always the case. Sometimes, this does happen.
25

In addition, Household offers extensive employee training in this

area, with an emphasis on customer service and counseling for

those Household customers who have been victimized for truename fraud.

In 1998, Household had more than 18,000 incidences of truename fraud, with claims in excess of $35 million. The average size

of an identity fraud case is approximately $1,600 to $2,000, depending on the business unit involved. It is important to note that

the losses incurred are borne by the credit granting community,

and in our case these losses go largely uncollected. In 30 percent

of the cases, the customers either do not follow through on their

claims of identity fraud or are found to have filed false claims.

When Household is contacted by a consumer who believes that

they have been a victim of true-name fraud, we go through a series

of steps to inform consumers of their rights and to assist in their

efforts to rectify the situation. Household operates under the assumption that our customers have the benefit of the doubt in cases

of identity theft and other types of fraud.

Once we have determined that there is a credible claim, we immediately put the customer’s account in dispute, which means that

the customer will not receive any calls from our collection department or that the account will be reported to the various credit bureaus as in dispute. This suppresses all balance and status information of the account to protect the consumer. From that point, we

work with the consumer to complete the necessary affidavits and

gather other documentation to assist in our efforts to process the

claim.

Household dedicates a tremendous amount of resources to prevent such fraud from occurring throughout the entire credit granting process. We utilize sophisticated fraud modeling as well as a

series of other steps to root out fraud and identity theft from the

system. While credit grantors will never fully be able to stop instances of identity theft from occurring, we are making great

progress in deterring such fraud through state-of-the-art technology

and other prevention programs.

One problem we see in the credit granting community is that

identity theft crimes are rarely prosecuted. Household also advocates that greater criminal penalties be placed on those who perpetrate such crimes, and we applaud those States that have recently acted in this area. Household also applauds Congress for enacting the Identity Theft and Assumption Deterrence Act of 1998,

as it goes to the heart of the problem in dealing with combating

identity theft.

Other problems in addressing this problem are that a number of

different enforcement authorities have some jurisdictional problem

and that identity fraud can surface in an array of financial crimes.

Household concurs with the findings of the General Accounting Office in its report of May, 1998, detailing the jurisdictional challenges facing law enforcement entities as well as the limited statistics that exist in identifying the scope of this issue.

In closing, Household is committed to addressing this critical

issue and has dedicated significant resources to combat this problem. I, for one, realize the devastating effect identity theft can have

on an individual, having personally experienced it. Working to-
26

1 Household International, Inc., headquartered in Illinois with major facilities in California,

Nevada, New Jersey, Delaware, Florida, and Virginia, is a leading provider of consumer financial services and credit card products in the United States, Canada and the United Kingdom.

Household has total assets in excess of $63 billion, employs over 25,000 people and provides financial services to more than 40 million customers. Household Finance Corporation (HFC),

which recently completed its acquisition of Beneficial Corporation, is one of the oldest providers

of consumer financial services in the United States, having been founded in 1878. Household’s

consumer finance business operates under the HFC and Beneficial brands, two of the oldest and

best-known names in the consumer finance industry. HFC and Beneficial have over 1400 retail

offices in 46 states as well as Canada and the United Kingdom. Household Credit Services and

Household Retail Services are two of the nation’s largest issuers of general purpose and privatelabel credit cards, including the GM Card and the AFL-CIO’s Union Privilege card.

gether with Congress, I am confident we can shed light on this difficult problem and implement strategies to deter criminals from

perpetrating fraud on honest individuals.

Thank you for the opportunity to testify today. I will be happy

to answer any questions you may have.

[The prepared statement of Charles A. Albright follows:]

PREPARED STATEMENT OF CHARLES A. ALBRIGHT, CHIEF CREDIT OFFICER, HOUSEHOLD INTERNATIONAL, INC.

Chairman Oxley, Chairman Tauzin, members of the Subcommittees on Telecommunications, Trade & Consumer Protection, and Finance & Hazardous Materials, thank you for the opportunity to testify on the issue of identity theft. My name

is Charles A. Albright and I am the Chief Credit Officer for Household International, Inc.1 Household is a leading provider of consumer financial services and

credit card products in the United States, Canada and the United Kingdom. I am

here to offer a two-fold perspective on this critical issue, first from my personal experience as a victim of identity theft and the second from my professional experience

at Household International, Inc. in this area.

As you all know, identity theft occurs when a perpetrator gains access to another

person’s information and uses this information to commit financial fraud. I would

note that it is extremely easy for someone who seeks to commit fraud to obtain a

person’s private financial information. This can be done by stealing someone’s mail,

or going through their trash to find such information. As an aside, it is not at all

uncommon for a family member to commit identity theft upon another family member, and in Household’s experience, we find that 50% of all incidences of identify

theft are committed by another family member.

Armed with this information, the perpetrator will then open up new accounts in

the victim’s name or access the victim’s existing accounts. After running up significant debts, the perpetrator will likely fail to pay the charges, and ultimately the

delinquency or bad debts will be reported on the victim’s credit report. This is essentially what happened to me several years ago when, unbeknownst to me, someone

fraudulently obtained my personal information, including my social security number, and then proceeded to open several credit card and retail credit accounts in my

name. The perpetrator had my address changed to a location in Philadelphia, PA

for these accounts so I received no statements or other information about the accounts. After opening these fraudulent accounts, the perpetrator proceeded to incur

debts in the tens of thousands of dollars.

I was unaware of any of this activity until one day my wife received a telephone

call at home from a collection agency after the debts had been delinquent for sixty

days. It was at this time that I realized the scope of the problem and began the

lengthy and painstaking process of repairing my credit record. I spent countless

hours dealing with credit grantors and credit bureau agencies sorting out this problem. I would like to state that in my case there was particular difficulty due to the

lack of response from two specific credit grantors. While I ultimately was able to

successfully resolve this situation after many months, I am nonetheless keenly

aware of the problems related with identity theft and the difficulty in combating

them. I believe it is fair to state that since my experience, both the credit bureaus

and creditors have become more sensitized and effective in dealing with this problem.

Household takes the issue of identity theft very seriously. We understand that

dealing with the issue requires us to delicately balance the needs of our consumers’

expectation for expeditious decisions and efficiencies in granting credit, while taking

prudent steps to adequately deal with the issues of fraud and identity theft as well

as credit quality. Toward that end, Household has a team of over 200 dedicated pro-
27

2 ‘‘Identity Fraud: Information on Prevalence, Cost, and Internet Impact is Limited,’’ United

States General Accounting Office, May, 1998.

fessionals throughout the company who deal exclusively with issues of fraud. All

employees undergo thorough background checks to ensure that internal fraud is not

perpetrated. In addition, Household offers extensive employee training in this area,

with an emphasis on customer service and counseling for those Household customers who have been victimized by true-name fraud.

In 1998, Household had more than 18,000 incidences of true-name fraud with claims in excess of $35 million. The average size of an identity fraud case is approximately $2000 for our consumer finance and retail services businesses and $1600 for

our bank card business. It is important to note that the losses incurred are borne

by the credit granting community, and in our case these losses go largely uncollected. In 30% of cases, customers either do not follow through on their claims of

identity fraud or are found to have filed false claims.

When Household is contacted by a consumer who believes that they have been

a victim of true-name fraud, we go through a series of steps designed to inform consumers of their rights and to assist in their efforts to rectify the situation. Household operates under the assumption that our customers have the benefit of doubt

in cases of identity theft and other types of fraud. Once we have determined that

there is a credible claim, we immediately put the customer’s account in dispute,

which means that the customer will not receive any calls from our collection department and that the account will be reported to the various credit bureaus as in dispute. This suppresses balance and status information of the account to protect the

consumer. From that point, we work with the consumer to complete the necessary

affidavits and gather other documentation to assist in our efforts to process the

claim.

Household dedicates a tremendous amount of resources to prevent such fraud

from occurring throughout the entire credit granting process. We utilize sophisticated fraud modeling, as well as a series of other steps to root out fraud and identity

theft from the system. While credit grantors will never fully be able to stop instances of identity theft from occurring, we are making great progress in deterring

such fraud through state of the art technology and other prevention programs. One

problem we see in the credit granting community is that identity theft crimes are

rarely prosecuted. Household also advocates that greater criminal penalties be

placed on those who perpetrate such crimes, and we applaud those states who have

recently acted in this area. Household also applauds Congress for enacting the

‘‘Identity Theft and Assumption Deterrence Act of 1998,’’ as it goes to the heart of

the problems in dealing with, and combating identity theft. Other difficulties in addressing this problem are that a number of different enforcement authorities have

some jurisdiction over the problem and that identity fraud can surface in an array

of financial crimes. Household concurs with the findings of the General Accounting

Office in its report of May, 1998 detailing the jurisdictional challenges facing law

enforcement entities as well the limited statistics that exist in identifying the scope

of this issue.2

In closing, Household is committed to addressing this critical issue and has dedicated significant resources to combat this problem. I, for one, realize the devastating

effect identity theft can have on an individual, having personally experienced such

an ordeal. Working together with the Congress, I am confident we can shed light

on this difficult problem and implement strategies to deter criminals from perpetrating fraud on honest individuals. Thank you for the opportunity to testify today. I

would be happy to answer any questions you may have.

Mr. OXLEY. Thank you.

Mr. Connelly.

STATEMENT OF D. BARRY CONNELLY

Mr. CONNELLY. My name is Barry Connelly, and I am the President of Associated Credit Bureaus. ACB is the international trade

association representing over 600 consumer credit and mortgage reporting companies operating here in the United States and internationally.

We commend you for choosing to hold this oversight hearing on

the crime of identity theft. Identity theft is an equal opportunity

crime that affects everyone represented at this witness table. It is
28

a particularly invasive form of fraud where consumers, consumer

reporting agencies and creditors must untangle the snarl of fraudulent accounts and information resulting from a criminal’s actions.

This task is often frustrating and time-consuming for all concerned.

I would like to join the others in acknowledging Congressman

Shadegg’s assistance and leadership in passing the Identity Theft

and Assumption Deterrence Act. We think that the crime bill is a

clear victory for all U.S. citizens.

Mr. Chairman, it is appropriate for me to depart from my prepared text and express to Mr. Anderson, on behalf of our association, my sincere regret for the difficulty that you have experienced.

Naturally, I hope that it is the exception rather than the rule, and

I don’t have all of the facts from the companies you dealt with, but

I would promise you, sir, I will do whatever I can to assist you in

clarifying your situation, and I am sorry that it happened.

Mr. Chairman, consumer reporting agencies maintain information on individual consumer payment patterns associated with various types of credit obligations. The data compiled by these agencies is used by creditors and other as permitted under the strict

rules of Fair Credit Reporting Act.

Consumer credit histories are derived from the voluntary provision of information about consumer payments on various types of

credit accounts or other debts from thousands of data furnishers

such as credit grantors, student loan accounts, child support enforcement agencies; and, in some cases, public record items do appear such as bankruptcy judgments and liens.

For purposes of data accuracy and proper identification, generally our members maintain information such as full name, current and previous addresses, Social Security number, and places of

employment. This data is put into the system on a regular basis

to ensure the completeness and accuracy of the data.

As important as knowing what we have in our files, it is also important to know what types of information our members do not

maintain in their files. Our members do not know what consumers

have purchased, and they do not know where they used a particular bank account card. They also don’t have a record of when consumers have been declined credit or another benefit on the use of

a consumer report. Medical treatment data is not a part of the consumer credit file.

Enacted in 1970, the Fair Credit Reporting Act was significantly

amended in the 104th Congress with the passage of the Credit Reporting Reform Act. The Fair Credit Reporting Act serves as an example of successfully balancing the rights of the individual with

the economic benefits of maintaining a competitive consumer reporting system so necessary to a market-oriented economy.

The Fair Credit Reporting Act protects the consumer by narrowly

limiting the appropriate uses of a consumer report. Some of the

more common uses of a consumer’s file are in the issuance of credit, subsequent account review and collection processess. Reports are

also permitted to be used by child support enforcement agencies

when establishing levels of support.

A question that we hear with some frequency relates to how data

found in a consumer’s credit report may be used other than for

credit reporting. Let me first point out that any data defined as a
29

consumer report under the FCRA may not be used for any purpose

other than for those outlined in section 604.

It is a fact that some of our members do use consumer identification information to develop other high-value information-based

products. Some of our members also develop direct marketing lists

in order to stay competitive in the information marketplace. Again,

note that the data used for direct marketing purposes is not the

credit history information defined as a consumer report under the

FCRA.

Identity theft is a crime that affects everyone. Our industry has

a history of bringing forward initiatives to address fraud, and these

efforts focus on use of new technologies and better procedures and

education to reduce fraud. My written testimony lists a number of

these initiatives, and I urge you to review them.

But in January, 1998, the ACB Board of Directors created a task

force to insure our industry’s focus on the issues of identity theft.

The task force consists of the senior-most executives in our largest

members.

The task force has progressed with a number of initiatives. Let

me tell you that ACB has retained former Vermont Attorney General Jerry Diamond, who has an aggressive consumer protection

record and who is former president of the National Association of

Attorneys General. We hired him to act as an independent adviser

to our industry on the specific issue of identity theft. Mr. Diamond’s work helps our task force consider a broad range of concerns and ideas from external constituencies.

His work has included personal visits to each of the company

fraud units. It has included interviews of the Secret Service, the

Attorneys General and the FTC. He has talked with consumer advocates, he has interviewed victims of credit fraud crime, and he

is opening up channels of communication with the National Association of Attorneys General.

In addition, the association created an Operations Working

Group consisting of industry experts in fraud to explore the best

practices and exchange ideas. We also formed a policy working

group. This working groups seeks to keep the task force members

informed on the types of issues and questions being raised by legislators and law enforcement.

The result of our work will be a series of initiatives and best

practices which will focus on assisting victims to ensure that the

consumer has a consistent experience in working with ACB members. It will attempt to be limiting the possible recurrence of identity theft, and it will develop and sponsor more consistent consumer information for victims and for crime prevention.

ACB and the FTC are currently exploring ways, as Mrs. Bernstein said, in which we can work cooperatively and effectively to

implement the Identity Theft and Assumption Deterrence Act, but

there are a few cautionary thoughts that I would like to leave with

you.

It is difficult for laws to prescribe procedures and practices that

prevent crime. Crime is a moving target, and, thus, our fraud prevention strategies must be as agile as the tactics of the criminals.

Information is a key economic growth factor in this country.

Laws that limit information are most likely to merely take fraud
30

1Our members estimate that there are approximately 180 million credit active consumers.

Since our members operate in competition with each other, these consumers are likely to have

more than one credit history maintained. 2 Note that there are in fact a number of major credit reporting systems in this country. Within ACB’s membership the three most often recognized systems would be Equifax, Atlanta, GA;

Experian, Orange, CA; and Trans Union, Chicago, IL. These systems not only manage their own

data, but provide data processing services for the over 400 local independently-owned automated

credit bureaus in the Association’s membership.

prevention tools out of the hands of legitimate industry. Ironically,

to prevent fraud, we must be able to cross-check information. Absent this authentication of identifying information, we will be less

able to prevent the very crime we are discussing here today.

Thank you for the opportunity to appear and answer questions.

[The prepared statement of D. Barry Connelly follows:]

PREPARED STATEMENT OF D. BARRY CONNELLY, PRESIDENT, ASSOCIATED CREDIT

BUREAUS, INC.

Mr. Chairmen and members of the Subcommittees, my name is Barry Connelly

and I am president of Associated Credit Bureaus, headquartered here in Washington, D.C. ACB, as we are commonly known, is the international trade association

representing over 600 consumer credit and mortgage reporting companies operating

here in the United States and around the world. Over 400 of our members are also

in the collection service business.

We want to commend you for choosing to hold this oversight hearing on the crime

of identity theft. Identity theft is an equal-opportunity crime that affects everyone

represented at this witness table. It is a particularly invasive form of fraud where

consumers, consumer reporting agencies and creditors must untangle the snarl of

fraudulent accounts and information resulting from a criminal’s actions. This task

is often frustrating and time-consuming for all concerned.

Let me pause here to acknowledge that the leadership of one of your own committee members, Congressman John Shadegg, has helped us take an important step

forward with regard to identity theft. His efforts resulted in the successful passage

of the Identity Theft and Assumption Deterrence Act of 1998. This crime bill was

a clear victory for every U.S. citizen, and our industry appreciates his attention to

this important issue.

Before I discuss our concerns and industry efforts regarding identity theft, I have

always found it helpful to first provide a short review of what a consumer reporting

agency is, what is contained in a consumer report, and the law that governs our

industry.

CONSUMER REPORTING AGENCIES AND CONSUMER REPORTS

Consumer reporting agencies maintain information on individual consumer payment patterns associated with various types of credit obligations.1 The data compiled by these agencies is used by creditors and others permitted under the strict

prescription of the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.) to review the

consumer’s file.

Consumer credit histories are derived from, among other sources, the voluntary

provision of information about consumer payments on various types of credit accounts or other debts from thousands of data furnishers such as credit grantors, student loan guarantee and child support enforcement agencies. A consumer’s file may

also include public record items such as a bankruptcy filing, judgment or lien.

For purposes of data accuracy and proper identification, generally our members

maintain information such as a consumer’s full name, current and previous addresses, Social Security Number (when voluntarily provided by consumers) and places of

employment. This data is loaded into the system on a regular basis to ensure the

completeness and accuracy of data.2

It is interesting to note that the vast majority of data in our members’ systems

simply confirms what most of you would expect; that consumers pay their bills on

time and are responsible, good credit risks. This contrasts with the majority of systems maintained in other countries, such as Japan or Italy, which store only negative data and do not give consumers recognition for the responsible management of

their finances.

As important as knowing what we have in our files is also knowing what types

of information our members do not maintain in files used to produce consumer reports. Our members do not know what consumers have purchased using credit (e.g.,
31

3Public Law 104-208, Subtitle D, Chapter 1.

a refrigerator, clothing, etc.) or where they used a particular bank card (e.g., which

stores a consumer frequents). They also don’t have a record of when consumers have

been declined for credit or another benefit based on the use of a consumer report.

Medical treatment data isn’t a part of the databases and no bank account information is available in a consumer report.

THE FAIR CREDIT REPORTING ACT (FCRA)

In addition to our general discussion of the industry, we believe it is important

for your Subcommittees to have a baseline understanding of the law which regulates

our industry. Enacted in 1970, the Fair Credit Reporting Act was significantly

amended in the 104th Congress with the passage of the Credit Reporting Reform

Act.3

Congress, our Association’s members, creditors and consumer groups spent over

six years working through the modernization of what was the first privacy law enacted in this country (1970). This amendatory process resulted in a complete, current and forwarding-looking statute. The FCRA serves as an example of successfully

balancing the rights of the individual with the economic benefits of maintaining a

competitive consumer reporting system so necessary to a market-oriented economy.

The FCRA is an effective privacy statute, which protects the consumer by narrowly limiting the appropriate uses of a consumer report (often we call this a credit

report) under Section 604 (15 U.S.C. 1681b), entitled ‘‘Permissible Purposes of Reports.’’

Some of the more common uses of a consumer’s file are in the issuance of credit,

subsequent account review and collection processes. Reports are also, for example,

permitted to be used by child support enforcement agencies when establishing levels

of support. A complete list of permissible purposes can be found under Appendix A

of this testimony.

A question that we hear with some frequency relates to how data found in a consumer’s credit report may be used other than for credit reporting. Let me first point

out that any data defined as a ‘‘consumer report’’ under the FCRA may not be used

for any purpose other than for those outlined under Section 604.

However it is a fact that some of our members do use consumer identification information to develop high-value information-based products such as fraud prevention and authentication products; risk management systems; and locator services,

just to name a few. Some of our members also develop direct marketing lists in

order to stay competitive in the information marketplace. Note that the data used

for direct marketing purposes is not the credit history information defined as a ‘‘consumer report’’ under the FCRA.

Beyond protecting the privacy of the information contained in consumer reports,

the FCRA also provides consumers with certain rights such as the right of access;

the right to dispute any inaccurate information and have it corrected or removed;

and the right to prosecute any person who accesses their information for an impermissible purpose. The law also includes a shared liability for data accuracy between

consumer reporting agencies and furnishers of information to the system. Attached,

as Appendix B is a text version of ACB’s Brochure, ‘‘Credit Reports, Consumer Reporting Agencies and the Fair Credit Reporting Act—The Everything-You-Need-ToKnow Guide to Consumer Rights in Consumer Credit Reporting’’.

IDENTITY THEFT

Let me now turn to the issue at hand—identity theft. As I said at the beginning,

it is a crime that affects everyone. Our industry has a history of bringing forward

initiatives to address fraud. These efforts focus on use of new technologies, and better procedures and education to reduce fraud.

Consider the following initiatives undertaken during this decade:

• ACB formed a Fraud and Security Task Force in 1993

• A ‘‘membership alert form’’ was developed to be used in notifying other ACB members of a customer, which was committing fraud through the misuse of data.

Implemented in 1994.

• A ‘‘Universal Fraud Information Form’’ was developed for use by creditors when

communicating the incidence of fraud to national consumer reporting systems.

• A generic credit reporting industry presentation on ACB fraud and security initiatives was developed and presented to customer segments during 1995.

• Minimum standards for data access equipment and software were announced to

industry suppliers in March 1995.
32

• ACB members implement company-specific limitations on the availability of account numbers, and truncation of Social Security Numbers on consumer reports

sold to certain customer segments. • Experian, Equifax and Trans Union voluntarily formed special fraud units with

800 number service and consumer relations personnel specially trained to work

with fraud victims. • A hardware and software certification program is created by the industry and administered by a third-party certification authority for those access products,

which have implemented minimum industry security standards. • Over 150,000 copies of a new customer educational brochure entitled ‘‘We Need

Everyone’s Help to Protect Consumer Privacy and Reduce Fraud’’ have been distributed since its first printing in the last Q.1997. • An education program was also developed for use by ACB members in presenting

the information found in the brochure. 2nd Q. 1998.

ACB TRUE NAME FRAUD TASK FORCE

In January of 1998, the ACB Board of Directors created a Task Force to ensure

our industry’s focus on the issues of identity theft. Its mission is to explore how our

industry can continue to assist consumers and customers, which have been victimized by the crime of identity theft. The Task Force consists of the senior-most executives in our largest members.

Since its formation, the Task Force has progressed with a number of initiatives

including:

(A) ACB has retained former Vermont Attorney General Jerry Diamond who has

an aggressive consumer protection record, and who is a former president of the National Association of Attorneys General, to act as an independent advisor to our industry on the specific issue of identity theft. Diamond’s work helps our Task Force

consider a broad range of concerns and ideas from various external constituencies.

Diamond’s work has included:

1. Visits to the fraud units of the three national consumer reporting systems. These

visits were opportunities for exploration of ideas and to learn from frontline operators, what consumers need and what challenges they face in assisting consumers.

2. Interviews with the Secret Service, Attorneys General, and the Federal Trade

Commission.

3. Interviews with consumer advocates.

4. Interviews with victims of the crime.

5. Opening up channels of communication with the National Association of Attorneys General.

B. The Association created an Operations Working Group—the working group

consists of industry experts in fraud to explore best practices, exchange ideas and

ultimately to recommend a series of voluntary initiatives for our membership.

C. We also formed a Policy Working Group—this working group seeks to keep the

Task Force members informed on the types of issues and questions being raised by

legislators, regulators and law enforcement.

The results of our work will be a series of initiatives and best practices, which

will focus on:

• Adopting best practices for assisting victims to ensure that the consumer has a

consistent experience in working with ACB members.

• Adopting best practices for limiting the possible recurrence of identity fraud.

• Developing and sponsoring better and more consistent consumer information for

victims and for crime prevention.

CONCLUSION

You can see on a number of fronts there is progress, and admittedly more to do.

We have better law, both in the states and at the federal level, which targets the

crime and vigorous enforcement will be a key to effective deterrence. ACB and the

FTC are currently exploring ways in which we can work cooperatively and effectively on fraud victim assistance. This dialogue is, in part, a positive result of the

Identity Theft and Assumption Deterrence Act of 1998.

We have a very substantive industry-sponsored process going forward to develop

initiatives that will be brought to completion later this year.

But there are a few cautionary thoughts that I would like to leave with each of

you. It is difficult for laws to prescribe procedures and practices that prevent crime.

Crime is a moving target and thus, our fraud prevention strategies must be as agile

as the tactics of the criminals.
33

Information is a key economic growth factor in this country. Laws that limit information are most likely to merely take fraud prevention tools out of the hands of

legitimate industry. Ironically, to prevent fraud you must be able to crosscheck information. Absent this authentication of identifying information, we will be less able

to prevent the very crime we are discussing here today.

Thank you for this opportunity to testify.

Mr. TAUZIN. Thank you very much.

Mr. Oxley has gone to make the vote, and he will be returning

to continue the hearing, and then I will leave to vote. Let me recognize myself for 5 minutes.

First of all, Mr. Anderson, I am a little confused. Did the Social

Security Administration itself make an error in giving this man a

Social Security card with your number on it or did he somehow

participate in a fraud to get your number from the Social Security

office?

Mr. ANDERSON. Well, because of the silence from Social Security,

I have to go by the documentation that I have.

Mr. TAUZIN. Which is what?

Mr. ANDERSON. I have a letter which lists the offices, the person’s name and their last given address in Cucamonga, California,

as going into the offices in Glendora, Pomona, et cetera, California,

and getting my number on five occasions.

Mr. TAUZIN. So the person, the perpetrator, went into the Social

Security offices and got your number, but how did he get a card

with your number on it?

Mr. ANDERSON. I don’t know.

Mr. TAUZIN. Social Security has never explained that to you?

Mr. ANDERSON. They did not.

Mr. TAUZIN. But Social Security did issue him a card with your

number on it?

Mr. ANDERSON. That is correct.

Mr. TAUZIN. Maybe Social Security has some answering to do

here.

In your case, Mr. Albright, your Social Security number was obtained?

Mr. ALBRIGHT. I will tell you how I believe it was obtained. My

resolution was never complete. I believe it was one of two major

credit grantors where they had an internal employee which had access because I was a customer and had a credit relationship, where

they had access to my personal financial information.

Mr. TAUZIN. In Virginia the Social Security number is your driver’s license number. Every public official I know on this panel has

filed documents with the SSN on it, either tax returns which have

been made public or other documents under some sort of financial

reporting requirements. Every student I know in most universities

has the Social Security number as their ID number. I am told that

some put it on tests. Every test has the Social Security number on

it. I guess what I am saying is that it is pretty easy in our society

to take your number and use it, isn’t that correct?

Mr. ALBRIGHT. In this case, it was obviously an intent to create

a crime.

Mr. TAUZIN. I am assuming that somebody has a bad intent. It

is pretty easy to get the number?
34

Mr. ALBRIGHT. Yes. If I might finish, I would argue also the fact

that that information is extremely valuable to a credit grantor to

assist consumers.

Mr. TAUZIN. I accept that. I understand that.

But let’s take it a step at a time. So somebody has got your number. In fact, Social Security gave him a card with your number

which allowed him to use your credibility with a Social Security

issued card with your number. So he goes out and he makes all of

these charges and defrauds some companies out of money. And, as

Mr. Shadegg said, you are not considered a victim because it was

companies that were defrauded.

How about every customer in America who has to pay higher retail prices because the cost of business has increased? We have a

lot of victims out there to deal with. You yourself, Mr. Anderson,

finally, with Mr. Shadegg’s legislation, is identified as a victim.

Knowing the number is fairly easy to obtain and knowing that

there are people out there willing to do this, how do we protect people without compromising the availability of useful information? At

the same time, how do we also make a lesson, an object lesson, of

people who would do this?

Let me ask you, Mr. Anderson. You know the guy’s name and address and where he lives in California. Have you ever been tempted

to go out and egg his house?

Mr. ANDERSON. I have thought about it.

Mr. TAUZIN. Why haven’t the enforcement authorities arrested

the guy?

Mr. ANDERSON. We heard about that earlier. Basically, I started

with the local law enforcement authorities in that county in California. They referred me to the Virginia State Police.

Mr. TAUZIN. You have been bounced around. Nobody has ever

prosecuted this guy.

Mr. ANDERSON. I wound up after two trips to the FBI with Social

Security. Only after intervention by Congressman Bliley a few

months ago have I started to see any substantive action.

Mr. TAUZIN. I congratulate you on going to a good source. But

does every member of our society have to know a congressman to

get some help? Is that the only way you are going to get help?

Mr. ANDERSON. That is what it took.

Mr. TAUZIN. Isn’t that awful? We have some work to do.

We have five reference points here. We have a perpetrator of

fraud. We have a retailer, provider of goods and services. Neither

one is going to be responsible for cleaning up this mess. The retailer is a victim. The perpetrator is the perpetrator. He is not

going to clean it up.

You have three other people. You have the owner of the number,

the owner of the credit who has been victimized. You have the

credit reporting authority that now has a bad record and is reporting to other people about bad credit. And you have the issuer of

the credit, the financier, the credit card.

I am going to have to run and go vote. Mr. Oxley will take over.

You have three points of reference now of responsibility. How

much is the consumer responsible to clean up his own mess? How

much is the finance company, the issuer of the credit card responsible for cleaning up the mess when the numbers that they have
35

issued have been used improperly to create bad credit and defraud

people? And how much is a credit reporting agency, whose job it

is to collect and send out good information to people that won’t

damage people and will help people, how much is it your responsibility to clean up this mess? And if we haven’t figured it out, can

we figure it out today?

Think about it. I am coming back.

Mr. Oxley.

Mr. OXLEY [presiding]. I will let Mr. Tauzin come back and finish

up that line of questioning.

Let me ask you about the growth of identity theft, particularly

Mr. Albright and Ms. Bernstein. It is obvious that identity theft is

growing in recent years. In your experience, both of you, what are

the causes? Why is there an explosion of this? Why is it happening

now? What technology is available perhaps that wasn’t available

then?

Mr. Albright, let me begin with you.

Mr. ALBRIGHT. Thank you.

In our case, it has been rather explosive. I don’t have the information in front of me going back in historical years. I know that

it has increased exponentially for the last couple of years.

At our company last year we processed in excess of 30,000 claims

of people who came to us and said that they were victims of credit

card fraud or some type of identity fraud. Thirty percent of those

people, when we sent out the appropriate forms and started asking

the questions, we never heard from again, so that number now

comes down to 70 percent. Of the 70 percent of the people left over,

80 percent were some type of identity fraud type situation. So that

number just continues also to increase year after year after year.

Mr. OXLEY. Ms. Bernstein?

Ms. BERNSTEIN. Yes, thank you, Mr. Oxley.

We, too, have tried to gather some statistics on the extent of it;

and the most recent data is from GAO that reports that consumer

inquiries to the credit bureaus increased from 35,000 in 1992 to

522,000 in 1997, similar data from the Social Security Administration.

In response to why now, I think you alluded to some of the

things that we are seeing happening. The techniques for perpetrating identity fraud used to be low-tech, getting information out of

garbage cans or picking up a piece of mail with some identifier on

it.

More recently, we have seen a more sophisticated technique in

a practice known as skimming. Identity thieves use computers to

read and store the information on a magnetic strip of an ATM or

credit card. When that card is inserted either in a specialized card

reader or legitimate payment mechanism and once it is stored, the

information can be re-encoded on any other card with a magnetic

strip, instantly transforming a blank card into an ATM or credit

card identical to the victim.

There are undoubtedly technological mechanisms that have come

into use now that are facilitating any thief who is engaged in those

practices. So it has been, I believe, for a couple of reasons but because it is easier to do it in more ways.

Mr. OXLEY. So technology is our friend and our enemy?
36

Ms. BERNSTEIN. Exactly right. We are trying to stop it, so we are

hopefully as smart as they are.

Mr. CONNELLY. Mr. Oxley, can I comment?

The 550,000 calls used in the GAO study came from one of my

members, and it deserves some explanation because it is misleading.

That was the total number of calls that the fraud division of that

company received in 1 year. In fact, the fraud division does not categorize them by specific categories, each call, such as a proactive

call or questions about fraud, things like Mr. Albright described,

people who call and maybe have lost their wallet and never had a

fraud. I am not trying to minimize the seriousness of the number

of instances but bring it into perspective, that it wasn’t 550,000

theft fraud calls. Thank you for that opportunity.

Mr. OXLEY. Mr. Anderson, first of all, do you know whether the

criminal who stole your identity has ever been prosecuted, to your

knowledge?

Mr. ANDERSON. I have every reason to believe they have not.

Mr. OXLEY. When you had your discussion with the Special

Agent in Charge from San Francisco, the FBI——

Mr. ANDERSON. Yes.

Mr. OXLEY. [continuing] Was it your understanding that the bureau had said that they didn’t have the statutory authority to investigate identity theft at that time?

Mr. ANDERSON. No. It was my understanding that, with most law

enforcement of that type, there seems to be a dollar threshold on

what will or will not be accepted for prosecution and that—if I understood what the special agent was telling me correctly, he was

telling me that my problem didn’t rise to the level that the U.S.

Attorney would take the case.

Mr. OXLEY. This was before Mr. Shadegg’s bill became law; is

that correct? Before the law was passed in the last Congress?

Mr. ANDERSON. Yes, it was. That was several years ago.

Mr. OXLEY. So it may have been that the only opportunity the

Bureau had to investigate was under the major thefts statute; is

that correct?

Mr. ANDERSON. That is correct. When the new law came out,

since I was now dealing with Social Security Inspector General. I

wrote to them and I said, here is a violation of 18 U.S. Code. What

are you going to do about it?

Mr. OXLEY. But the initial statute that the Bureau had to act

under was major theft, which does set a monetary amount, maybe

$250,000. I can’t remember now what the statute says, but that

was the case.

Let me ask Ms. Bernstein, has any credit rating agency been

found to have illegally sold or transferred data to another party?

Ms. BERNSTEIN. I’m sorry, I didn’t understand your question.

Mr. OXLEY. Has any credit rating agency been found to have illegally sold or transferred data to another party?

Ms. BERNSTEIN. Not to my knowledge.

Mr. OXLEY. Within the scope of your jurisdiction, you don’t know.

Mr. Connelly, do you know?

Mr. CONNELLY. No, not the way that the question is phrased.

Mr. OXLEY. What about any charges to that effect?
37

Mr. CONNELLY. Frankly, more to the contrary. There have been

circumstances where an individual may have obtained information

impermissibly from a consumer reporting agency.

Mr. OXLEY. Has any credit reporting agency ever violated the

statute as it relates to providing data in your——

Mr. CONNELLY. Since 1971, since the law went into effect, there

is certainly a body of case law in effect. Some consumers have succeeded in winning cases against consumer reporting agencies. Usually, it would be more a matter of the jury finding that the bureau

exceeded the reasonable procedures and did make an error beyond

the limit of reasonable procedures.

Mr. OXLEY. That is civil action?

Mr. CONNELLY. Those are civil actions, yes. I, frankly, don’t know

of any criminal actions. Again, the FTC, of course, in enforcing has

brought some consent decrees, but again I don’t know of any criminal situations where a consumer reporting agency has violated.

Ms. BERNSTEIN. The FTC’s authority is all civil, and we have

brought many enforcement cases over the years to enforce the provisions of the FCRA.

Mr. OXLEY. Many credit thieves send in a change of address to

creditors to avoid detection for a longer period of time. Is there any

way, working with the Postal Service, that credit bureaus can

cross-check or send a notice to the old address when a new address

is received and the credit history is updated? Mr. Connelly, is that

something that we could——

Mr. CONNELLY. That certainly is something that our members

would want to have access to be able to do.

Usually, I think Mr. Albright will speak to that, when they get

a new address from consumers, they have methodologies at the

credit grantors’ point of information where they will attempt to reverify, and I don’t think you will send a credit card to a new address without reverifying it. We get our address from the credit

grantor who has submitted the data to us or from a consumer.

Mr. OXLEY. Mr. Albright?

Mr. ALBRIGHT. If I might just take a moment to explain, my situation was pretty straightforward, I believe.

Someone penetrated my personal data. They then had a Pennsylvania driver’s license issued in my name with a new address in

Philadelphia, Pennsylvania. They then took that piece of information, went in to these various retail stores and opened up an account under the Philadelphia address. They would have also had

my previous address in Arlington Heights, Illinois, and they would

complete the application.

They go into the credit bureau data base, and the data base

looks, we do not have Charlie Albright with this Social Security

number at this address, but we have him at the previous address

in Chicago. They would presume Charlie Albright has relocated.

And this was not a real estate mortgage. These were $1,000

transactions, not $10,000 transactions. They would presume that

Charlie Albright relocated and go through whatever algorithm required, and the credit file would be clear, and probably in a matter

of seconds the account number was issued and the account was approved.
38

So credit information was a resident in Arlington Heights, Illinois. New address, a very transient society, we all have a tendency

to move around. No reason to think that I was a criminal. They

thought I took a new position in Philadelphia, and the criminals

were off and running.

Mr. OXLEY. Which makes the enforcement and tracking and all

of that just more difficult.

Mr. ALBRIGHT. When you get to enforcement also, in our case, at

the end of day you are dealing with tens of millions of dollars. On

a case-by-case business situation in our business you are talking

about 1,600 to 2,000 transactions, and you just have one company.

These things are not all bunched together, so you are not going to

pursue them legally. No. 1, no one is going to listen to you, and,

No. 2, the economics would not warrant it.

Mr. OXLEY. What about a situation where someone got your Social Security number, Mr. Anderson? That is how the whole thing

started?

Mr. ANDERSON. That is right.

Mr. OXLEY. Shouldn’t there be some ability of the Social Security

Administration to check to see whether a particular Social Security

number has already been obtained? In other words, had that individual applied for a SSN under your name, I would assume in Social Security they have the wherewithal to verify the fact that your

name and your Social Security number are on file there so when

somebody else went in to obtain that number it would come up that

you already have a number and it is already matched with your

name?

Mr. ANDERSON. Well, I would think so.

According to correspondence I have from Social Security, they

have a process that they call reconciliation, and it is supposed to

detect situations where a person is working under the same name

and SSN. But, remember, before I started having the credit problems, I went face to face into a Social Security office in Baltimore,

and they told me that they knew that there was a problem. The

name that was on the document that they called me in was the

same as mine with a different middle name, and it is the name of

the alleged perpetrator that was given to me in the letter from Social Security.

So I think it is clear that they know who the person is, or they

at least know an alias of the person. There is somebody there. I

think they are well aware of that. They have a system in place

called reconciliation. Why they didn’t do something about this is a

mystery to me, and it has only been in the last few months I have

been able to get any momentum to push them at all. It has taken

years.

Mr. OXLEY. Yes, Mr. Albright.

Mr. ALBRIGHT. It appears to me, in Mr. Anderson’s case, you

have a surgeon who has operated on a patient who used this information who clearly knows who this person is and where he lives.

That doesn’t happen very often.

Mr. OXLEY. So the middle name was different.

Mr. ANDERSON. That is what I understand, yes.

Mr. OXLEY. You don’t know that for a fact?
39

Mr. ANDERSON. I just know what I have in documents, and the

middle name has always been different until the medical visits that

I told you about. The person was apparently hospitalized and went

to two hospitals, and the hospitals, of course, called me with collections. After that, I had to verify who I was to the hospitals. I had

to tell them my real middle name, and they asked me for my mother’s maiden name and so on. After I provided that information to

the hospitals to protect myself, this person started using better information. So somehow through the information I gave the hospitals in California, this person got additional information.

Mr. OXLEY. So we are talking about a pretty sophisticated individual?

Mr. ANDERSON. The person has been very selective. Every couple

of months the person walks into a department store, rips them off

and disappears. Until the medical business came, for whatever reason, there was not a really good trail. My letter to Social Security

IG simply said, with medical records, I think it should be pretty

simple to identify somebody, under the new law particularly. That

is where I am with Social Security at this point.

Mr. OXLEY. Thank you.

The gentleman from Missouri, Mr. Blunt.

Mr. BLUNT. Thank you, Mr. Chairman; and thank you for having

this hearing on implementation of the law that we passed last

year.

We had a person in my district in southwest Missouri, Angela

Williams, who really for 2 years was spending a substantial

amount of her time just trying to restore her credit because of this

very problem. And, of course, this as a civil matter was handled

differently than I hope it will be in the future.

Mr. Anderson, what do you think could be done to help clean up

the credit record more quickly once it has been determined that

you are a victim?

Mr. ANDERSON. Well, I have thought about that. If this were a

hockey game, I think I would like the credit reporting agencies to

be the victims of a red light and a penalty box. When I go through

all of the necessary procedures to notify both them and the provider of the information which I am disputing that I am a victim

of bona fide Social Security fraud, that they go into the penalty box

at that point and things stop and get corrected. That doesn’t happen. It seems like we just shift into another round of the game.

Maybe something gets corrected, maybe it doesn’t. Maybe it gets

partially corrected, and I am right back a month later writing the

same letters, filing the same disputes and contacting the same providers of bad credit information.

Mr. BLUNT. Ms. Bernstein, there is a California law that was enacted last year that requires the credit reporting agencies to block

reporting any information that the victim of identity theft alleges

appeared improperly on their credit report as long as the victim

submits a copy of a valid police report. Is that something that could

be done nationwide and, if so, could you do it and what would we

have to do?

Ms. BERNSTEIN. The FTC would have to be authorized, Congressman, in order to do that. There are already some efforts, and they

would be more effective if they would be required by law to put a
40

fraud flag on the credit report as soon as Mr. Anderson’s report

was made, and that would in part do the same thing the California

act is doing. Then nobody could rely on the information that has

already been flagged in order to issue additional credit.

Mr. BLUNT. It would still be on the report?

Ms. BERNSTEIN. Yes. It would be on the report.

Mr. BLUNT. In the California case, they don’t put the information

out after the person has effectively filed the police report and done

whatever else is necessary?

Ms. BERNSTEIN. That would seem to be—I am not familiar with

the particular California law, but it would seem to be a very effective device.

Mr. BLUNT. Mr. Albright, from a credit officer’s point of view,

what are the problems with that? Do you have any information on

how that is being implemented and what do you see as the problems? And what sort of responsibilities should the creditor have to

stop sending out reports of debts incurred after they have been told

that this is a person who is the victim of identity fraud?

Mr. ALBRIGHT. I am sure this has happened in our company, and

I know everybody would be ashamed of it if we didn’t respond, and

let me tell you how our process works. Early on in the process, as

I indicated in my opening testimony, I alluded to what I call a flag

on the system. What that flag on the system does is it sends back

a message electronically to a credit grantor that there is a fraud

situation with this account. What we do in our company then is we

force that account to be manually reviewed.

In that also there is a statement that says, I believe, to call the

customer; there has been some fraudulent activity on this account.

So in my case they would have called me or whatever.

Clearly, I believe that the creditor has a moral and business obligation when they are convinced that there has been an identity

fraud situation to, No. 1, to put a flag on that account. I believe

it has worked very, very well. Household has installed an automated process to make that go very quickly from us to the other

credit grantors.

In addition to that, we remove the trade line entirely from the

credit file. I believe the mechanics are there today.

My personal situation is that I was treated as a criminal by the

credit grantors. One of my charges was at a store in Wilkes-Barre,

Pennsylvania, for $1,800 for automobile repair. I don’t own that

type of car, and I was told on the telephone that I was lying and

I made that type of repair. This is a very, very large organization,

and they really got my attention when they called me a liar. I am

a credit grantor but also a consumer. But, in any event, in my case

no one believed that I was telling the truth. Even when you go

through all of the documentation.

Finally, how I got it resolved is I knew the general counsel personally of the company that was involved. After 18 months I called

him on the phone; and I said, look, I have a file here that is about

6 inches thick. I have return receipts and certified letters. I have

not been harmed personally because I have not applied for credit.

I know what my credit bureau file looks like. I said, I am ready

to start litigation. What would happen if a senior credit executive

were to sue your company for this performance?
41

He came back to me and he said, if you have what you say you

have and you are right, we will write you a check today for $2 to

$3 million to go away. This case is so ugly, we don’t want this to

go any ways. I indicated I wanted it fixed, and it was fixed by the

time the sun went down that night.

What that tells you, the mechanics are in places—training, education, and sensitivity. Credit grantors have that obligation to employees. Make sure that we are hiring the right people.

At Household, we have internal employees in our bank card operation that have perpetrated fraud, where they have confiscated information from our card holders and done the same thing to innocent people that was done to me. If we catch them, we prosecute

them, and we try to take them to the extreme extent of the law.

A lot of laws are there today. It is a matter of people utilizing the

system.

Mr. BLUNT. Mr. Connelly, I cosponsored Mr. Shadegg’s bill last

year. I understand why we needed to make this a crime. I know

that it is a tough job, and you have lots of vulnerability out there

with the information you give out being accurate. Why hasn’t the

industry solved this problem like the California law or other States

are now trying to require it be solved? Why hasn’t this been done?

The industry would have done this better than government

would have if they would have done it, and I am asking you why

they didn’t do it and how far along you are on a national standard

that accomplishes these kinds of things once you are convinced

there was a legitimate problem.

Mr. CONNELLY. Thank you for asking that question, and in my

prepared testimony I hope that I made clear to the committee that

indeed Associated Credit Bureaus and our members do recognize it

as a problem, and we are trying to do it individually or without

government assistance other than things like making it a criminal

activity.

Each of our companies, the three major companies, have dedicated fraud units to handle the cases like Mr. Anderson’s. And I

can’t tell you what happened, where his went awry; and I commented on that before.

But, as Mr. Albright said, as soon as one of our companies is notified of a possible fraud, even the potentiality of a fraud, a call

from a consumer, that file is flagged. So, if it didn’t happen in Mr.

Anderson’s case, I can’t give you the information why without going

into the specifics. As a policy, that happens each time.

So you heard Mr. Albright explain that in his company they see

the flag, they take the flag seriously on an application for credit.

If a company, a credit grantor, does not take that flag seriously,

the flag is worthless. It is like a red light that is out there, and

someone goes through the red light, and that is going to perpetuate

the crime. So a flag is not the only answer.

Mr. BLUNT. Is this such a big problem that you can’t do more

than just flag the file?

Mr. CONNELLY. That is one thing.

Let me speak to the California case that you just described.

Yes, in California if a consumer presents a police report, I am

going to call it the individual trade line, the individual item that
42

is disputed as being a victim of fraud is deleted or blocked from the

credit history. And that is fine. We would all agree with that.

The trouble is, let me tell you what is happening. What we are

seeing now is an increased number of credit repair clinics, additional con artists who are using this legitimate tool as a tool to

eliminate and strike from the file legitimate adverse credit history

from other consumers. So then the Albrights of the world and the

Households and the rest of the credit grantors get stuck for not

being able to get true information on truly adverse paying customers.

So, yes, that is one thing. I am showing you another side to it

that makes it not a perfect solution.

Mr. BLUNT. Thank you, Mr. Chairman.

Mr. TAUZIN [presiding]. The gentleman——

Mr. ALBRIGHT. I did not answer the last part of your comment

about the California situation. I was told two things specifically as

I queried all of our business units, knowing that I was going to be

coming here.

No. 1, Charlie, be very careful about the California situation in

terms of police reports because, in many jurisdictions, I have been

told, it is not very complicated to get a police report, and it could

perpetuate the crimes if the wrong people get onto that.

No. 2, try to get the message across that there needs attention

to this whole situation of law enforcement agencies because, working with them today, we cannot get them to be interested, and that

gets back to the heart of the discussion we have been talking back.

Mr. BLUNT. I would not mind to have Mr. Anderson’s comment.

Mr. ANDERSON. I honestly believe in virtually every case of successful theft from department stores and hospitals, that had the

people granting the credit done a positive ID, somehow positively

identified the person that they were dealing with other than just

asking for a Social Security number, there would not be a problem.

I think that the creditors are lax in identifying and knowing who

they are doing business with.

Ms. BERNSTEIN. That has been our experience as well. There has

been really insufficient attention of credit grantors to whom they

are granting credit and ignoring the flags that are on the credit bureau reports as well.

Mr. BLUNT. By ignoring the flags, do you mean that they don’t

understand the flags and they assume that this person is in trouble, or they just ignore the whole report?

Ms. BERNSTEIN. It is a mixed bag, I believe, to the best of our

knowledge.

Mr. TAUZIN. The Chair is going to ask the agreement of Mr.

Shadegg, and we will turn the time over to him in just a second.

I am being called to the Appropriations Committee.

I just wanted to get an answer to the question that I posed. And

the question is, among the three reference points, excluding government, which should be the enforcer in the end, but among the

three reference points, the consumer, the credit bureau or reporting

agency, and the person handling the financing, issuing the credit

cards, extending the credit, among those three players, who has a

responsibility for cleaning up the record and making sure that Mr.

Anderson doesn’t have to wait 5 years?
43

Let me pose it quickly maybe a different way.

If Mr. Anderson supplies your member company, Mr. Connelly,

with information that he has been defrauded, is it your responsibility to make sure all of the companies get proper information that

he is not, in fact, a bad credit risk? Is it your responsibility today

and do you assume that responsibility? Does it need to be clarified

in law or regulation?

Mr. Albright, in terms of the issue of the credit card, how much

responsibility does the issuer of the credit card or the financing,

the extension of credit, have in terms of helping Mr. Anderson clear

up his record?

It is to your benefit to give him that credit card. I get them in

the mail all the time unrequested. There must be some real value

in having me as a credit card holder.

He has now been damaged. How much responsibility do you have

to help insure that his records are cleared up? Somebody has some

responsibility. He may have some to properly document the problem. I think he has taken 5 years to do it. You yourself, Mr.

Albright, mentioned the time it took you.

But once you have documented, which one of you are most responsible or what do you share in responsibility in cleaning this up

so he doesn’t have to go to Mr. Bliley and say, Congressman, it

doesn’t work out there, and I need you to intercede with somebody.

Which one of you is most responsible or how do you share that responsibility? Please respond.

Mr. ALBRIGHT. I believe Household in this case has a very clear

responsibility once we start the investigation of fraud to, No. 1, flag

the account as being under investigation. Again, there is no guilt

or innocence here, because the case is not resolved, the fact that

we have been contacted. We code the account, put the flag out

there.

Mr. TAUZIN. Is it your responsibility to notify?

Mr. ALBRIGHT. It is my responsibility to notify him.

Mr. TAUZIN. It is your responsibility to notify him that his number has been compromised and it ain’t his fault? He has done nothing wrong.

Mr. ALBRIGHT. He has notified me.

Mr. TAUZIN. Notified you timely. You have corrected the records.

You may have taken a loss yourself in the process, but now your

job is to notify Mr. Connelly’s member. What is your member’s responsibility?

Mr. CONNELLY. Our responsibility in the instant case you just described is to delete the information and not let it reappear on the

file.

Mr. TAUZIN. Why has that not happened for Mr. Anderson? Does

anybody know? Mr. Anderson, do you know why it hasn’t happened?

Mr. ANDERSON. No, but I think somebody named Glen King does.

Mr. TAUZIN. Who is Glen King?

Mr. ANDERSON. The one that sends most of the letters ignoring

what I am doing from Equifax.

Mr. TAUZIN. So Glen King is a guy in this credit reporting agency?

Mr. ANDERSON. For years.
44

Mr. TAUZIN. So you have a problem with one of your members.

Is that credit agency a member of your association?

Mr. CONNELLY. Yes, they are, sir.

Mr. TAUZIN. Do you have self-policing structures within your organization?

Mr. CONNELLY. The Fair Credit Reporting Act, as amended,

speaks very strongly to that. We do not have Mr. King’s side of the

story.

I think you will allow me to just make the point that what occurs

in the instance that we just discussed, Mr. Albright received the

example of a fraud notice at his company. Mr. Albright, who is a

regular contributor of data to us, notifies us that that information

is wrong, and it is not to be reported again. We have to stop reporting it, absolutely.

Mr. TAUZIN. What is wrong with this guy King?

Mr. CONNELLY. There are other circumstances.

Mr. TAUZIN. What are the other circumstances?

Mr. CONNELLY. Maybe Mr. Anderson came directly to the consumer reporting agency and said, the item on your report from

Household, we will use you as an example, is a fraud account. In

this case, the consumer reporting agency member of ours, under

the laws of the Fair Credit Reporting Act, is required within 30

days to go back to the credit grantor and reverify the information.

If they cannot reverify it, it must be deleted.

I am going to make an assumption here that Mr. King is getting

back a reverified piece of data from whoever he is going to, and,

therefore, he keeps reporting the data based on the reverification

from the furnisher of the data.

Mr. TAUZIN. So what you are saying, in Mr. Anderson’s case, the

credit supplier is still reporting to the credit bureau——

Mr. CONNELLY. Yes, sir.

Mr. TAUZIN. [continuing] that Mr. Anderson is a bad guy and not

paying his bills?

Mr. CONNELLY. They are reconfirming the data that the credit

bureau has.

Mr. TAUZIN. Mr. Albright, it sounds like your guys are not doing

their job here. Is that the case?

Mr. ALBRIGHT. If my guys are the credit grantors, it sounds like

that to me, yes, they are not. I picked up a comment very early in

Mr. Anderson’s testimony that he kept going back to the credit

grantor, and they kept saying that they had the Social Security

number, and there wasn’t anything that they could do, and it was

a legitimate Social Security number and whatever.

Mr. TAUZIN. Here is where we are going to leave it. I am going

to turn it over to the guy who knows more about this than anyone

on the committee, John Shadegg.

What I am pointing out is that a guy like Mr. Anderson just gets

bounced around. Not only does he get bounced around by the three

corners of this triangle but also by the enforcement agencies that

don’t necessarily take him seriously or prosecute people. So he is

left with the frustration that says maybe I am going to go egg the

guy’s house, and now I have to file a lawsuit and go after that $2

million claim. Maybe I ought to be one of those special people who

knows his congressman well enough to get him excited, like Mr.
45

Bliley. Are we going to leave it like this, where everybody in America has to know somebody in Washington to get some help?

Mr. Shadegg, take it.

Mr. SHADEGG. Thank you, Mr. Chairman. I think we had a great

illustration of the exact problem that exists and the frustration

that occurs. I appreciate your efforts, Mr. Chairman. It really is

true.

I think what we just described is that Mr. Anderson calls and

says, I am not the guy that did the bad thing, but the creditor does

not necessarily accept his word. There is a dispute, and the credit

bureau continues to hear from the creditor that this person with

this name and Social Security number is the bad credit risk, and

Mr. Anderson keeps fighting the fight.

Mr. Anderson, let me start with you. Your statement was eloquent in making the points that need to be made; and it might

even suggest, Mr. Chairman, that we ought to go to a new system.

On the front of Mr. Anderson’s statement he puts a little synopsis

that says major points. You did a marvelous job of putting forth the

major points, and our normal witnesses don’t do that. I want to

pick a couple of those points.

One point that I discovered is very true. It may have been more

true when you incurred this problem. You say, very little assistance forthcoming from Federal agencies. I will tell you very little

assistance is forthcoming for victims of this crime from either Federal agencies or State agencies. Because, even in the States where

we have it, I have discovered through the task force that we set

up this year in Arizona to try to make sure that the State law is

being implemented and the Federal law which I got passed last

year is being implemented, in point of fact, agencies are not providing assistance. I hope to get more heat on those agencies to provide

assistance, because someone has got to get in there and solve the

problem.

As an aside on that point, one thing I would like to offer to do

is to work with you in trying to get Virginia, the State of Virginia,

to pass a law like the State of Arizona did to deal with this problem. Because, in addition to having a Federal law, I think we need

a State law. Because we need to bring to bear all of the law enforcement agencies that are possible.

The second point I want to make is you said you contacted the

FBI and the Social Security Administration. Were there any other

law enforcement agencies that you contacted to say, hey, I am the

victim of a crime or I am being defrauded? Or were those the two

that you principally worked through?

Mr. ANDERSON. Yes. In my review I started with the local authorities in California. I thought that was appropriate.

Mr. SHADEGG. State authorities?

Mr. ANDERSON. County, actually, because it was clear where this

was happening.

Mr. SHADEGG. What was your experience?

Mr. ANDERSON. They referred me to the Virginia State Police. I

talked to the Virginia State Police and explained to them what was

going on; and they said, this is a Federal matter. You need to talk

to the Feds.
46

So I looked at the choices with the Feds, and I found out, well,

it wasn’t postal fraud, not a credit card, so it is not Secret Service.

The only thing I could come up with was that it might be Social

Security, and it might be interstate telephone fraud, and that is

why I contacted the agencies that I did.

But let me say this. I tend to be a stubborn person, and I can

throw out a possibility here. If I had not done a thing, let us assume for a minute that I don’t need credit, that I don’t care about

my credit report. If I had not done a thing in this case and I had

not notified anybody, the only thing that would have happened is

the department stores in California would be losing more money

and the hospitals in California would be losing more money treating somebody that they don’t know, that they don’t even understand the identity of. That is what would have happened had I

done nothing.

Mr. SHADEGG. I would argue that you are still a victim of the

crime. Many people don’t discover this until they pull a credit report.

When we introduced the bill last year, we held a press conference

here in the Capitol; and many Capitol Hill staffers related that

they had been victims of the crime. But one of the fascinating stories, a woman who lived in Northern Virginia, and I will tell the

story, she said she went home 1 day and a friend of hers called her.

The friend lived out of town and said, gee, I have been having a

hard time getting ahold of you. I would like to see you when I am

in town.

Why are you having a hard time getting ahold of me?

Your number is unlisted.

This woman said, no, my number is not unlisted.

And the woman said, yes, it is. I finally got it from a mutual

friend of ours.

That afternoon the woman calls the phone company and said, is

my phone unlisted?

They say, yes.

How did it get unlisted?

Well, your husband called and unlisted it.

So that night at the dinner table she turns to her husband,

honey, why did you unlist our phone number?

He says, what do you mean? I didn’t unlist our phone number.

What had happened was that the perpetrator of the crime who

was going out in Northern Virginia and applying for credit did not

want the credit issuers to be able to contact the real people, so the

perpetrator of the crime had called the phone company and had

their home phone number unlisted unbeknownst to them. The permutations of this crime are fascinating.

I guess the second point I want to make and that you make in

your statement is that identity theft violations may not rise to the

necessary dollar level to cause Federal law enforcement agency actions.

In the bill last year, we reduced the jurisdictional legal limit

from $25,000 down to under $1,000 to enable them to deal with

this problem; and I personally think your credit reputation is worth

more than a thousand dollars, as is any American’s. But the real
47

problem then becomes a resource problem, and that is something

that I want to talk with the other gentlemen about.

But before I do, Mrs. Bernstein, I want to ask you just very

quickly, the law that we passed last year gives you three specific

functions, and I understand that you are working on all three of

them and expect to meet the 1-year statutory deadline. My question is on funding. Has the FTC sought in the appropriation process the funding for these functions and are you receiving it?

Ms. BERNSTEIN. We have sought them. We have asked for $2.6

million over 3 years, which will provide us with probably not the

maximum amount to take the maximum number of calls and carry

out these duties, but we think it will allow us to be successful in

carrying out the first phases of this program.

Mr. SHADEGG. Well, I guess the only point I would want to make

is, if you are not successful or if you are having difficulty, please

come and see me.

Ms. BERNSTEIN. I would not hesitate for a minute.

Mr. SHADEGG. I want to now turn my questions to Mr. Albright

and Mr. Connelly.

Mr. Albright, in your testimony you, I think, hit the nail on the

head, or at least one of the nails, in that you say one problem is

that identity theft crimes are rarely prosecuted. We have just

heard Mr. Anderson describe it. When you contacted the FBI, Mr.

Anderson, and the Social Security Administration, that was before

the effective date of last year’s legislation? It was before last October?

Mr. ANDERSON. It was indeed. And the first letter that I wrote

after I saw that change to the 18 U.S. Code was to the Inspector

General of the Social Security Administration, and I asked point

blank if they were going to enforce the criminal law.

Mr. SHADEGG. If you did not get their attention, in addition to

perhaps using Mr. Bliley’s office to get their attention, I would be

happy to help.

Mr. Albright, the firsthand experience I had with this aspect of

the problem was when we convened the task force; and I literally

sat there with law enforcement agencies on one side of the room

and prosecutors’ offices on the other side and alphabet soup from

FBI to FTC in the room. You saw everybody do this. We cannot

prosecute this. This occurred in Virginia. The Virginia Police say

this occurred in California. I think that is where we have to go to

get to the heart of this problem, and I am not convinced that criminal law enforcement agencies are the answer.

You go on to say that greater criminal penalties should be placed

on those who perpetrate such crimes. On the one hand, I see the

criminal law as the proper method because a civil remedy may not

be effectual because these people have no resources. So perhaps a

criminal penalty is the right penalty.

But then the question is, how do we motivate law enforcement

agencies to go after a criminal penalty where what you have is

small dollar crimes like a $300 charge on a cell phone? The agency

says look, we have $200,000 frauds to deal with. We can’t devote

any resources to go after this.

On the one hand, I see criminal penalties being appropriate. On

the other hand, I see Mr. Anderson as the greatest victim and my
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own constituents, Mr. and Mrs. Hartle, as the victims. It is clear

that the people that you represent in this discussion, the creditors,

are the direct victims; and the credit reporting agencies are becoming victims because people are becoming angrier and angrier at

credit reporting agencies for their involvement.

Has any thought been given to something along the line of a

RICO-type enforcement or something along the line of empowering

creditors to collectively go after these people to stop their activity?

Or maybe even, turning to you, Mr. Connelly, maybe even a joint

effort where the credit industry and the credit reporting industry

go together and not just do the things that you talked about, Mr.

Connelly, but actually fund efforts by the private sector to go after

these people. Because while Mr. Anderson is the victim emotionally

and his credit is destroyed, and I personally know what that means

when you try to get credit and your credit is not in good shape,

that can be a serious problem.

What is the remedy? I am asking both Mr. Albright and Mr.

Connelly to comment on what other things can we do? Perhaps

make it a RICO predicate or something in that nature, something

that gives us the aggregate authority to go after these people?

Because while Mr. Anderson is in part the victim, and I worry

about him, the money that is being lost is coming from you, Mr.

Albright. And, quite frankly, I think it is ultimately coming from

us because, to the degree that they defraud you, your stores, the

people who you represent have to build into the prices of the goods

I buy the cost of the goods to cover for the people who don’t pay

for the goods that they are stealing.

Do either one of you have a response to that?

Mr. ALBRIGHT. No. 1, in my particular case, I don’t think it was

ever discovered who to go after in the first place. I think that probably happens a larger percentage of time, is you really don’t know

because the statements in Philadelphia were going to an empty lot

and everyone was, I am sure, long gone. The only thing I ever saw

was a copy of the driver’s license that was used and some of the

documentation.

Mr. SHADEGG. Let me ask, isn’t it possible if you were sufficiently

on top of this and if a law enforcement agency was sufficiently on

top of this, if someone walks in and applies for credit and they use

a Social Security number or some other personally identifying information which you have already established has been used elsewhere to get fraudulent credit, could they be told, could you just

wait here for a moment, and a law enforcement person could show

up and arrest that person on the site?

Mr. ALBRIGHT. At times, that happens. Everything has to come

together exactly.

Mr. SHADEGG. That would require greater awareness and effort

by the credit-extending institution and the law enforcement agency.

Mr. ALBRIGHT. Years ago, when I worked in the retail environment for retail stores, where you have point of sale credit, which

is really what we are dealing with here, I know even back in the

1970’s and in the 1980’s it was not unusual for us to call the Detroit Police Department or the Cleveland Police Department and

ask them to go to such a location of a store and arrest a person.
49

Another issue comes to mind and anecdotal from what I hear, I

believe the court systems are really overburdened, and there is tremendous case backlogs. That is one issue.

I think that, if possible, we are sort of getting into an area that

I don’t feel real comfortable telling you how to fix it. I don’t know

how to fix it. If I could discuss this with internal security people

who deal with this all the time and send you back a letter with my

thoughts, I would feel more comfortable, because I honestly don’t

know what the solution is. It is such a difficult issue to get our

arms around.

I do know that our people have continuously told me, even if they

have a situation, they can’t get law enforcement’s attention on it

because of the size and the volume.

Mr. SHADEGG. Well, just to interrupt you for a moment, I certainly want to let you know I want to figure out how to get law

enforcement’s attention. Because it does no good to pass a law to

help Mr. Anderson if law enforcement says they are penny-ante

crimes and I am not going to do anything about it. I assure you,

every victim feels it is a significant crime.

Mr. CONNELLY. Mr. Shadegg, I think I can safely say people like

Mr. Albright, Household, and my members would entertain any

ideas, like a RICO statute. I am not a good spokesperson on criminal prosecution, so I wouldn’t want to go beyond that, other than

to guarantee you that we would be open to entertain any suggestion like that.

I might, by example, show you another possible approach. It

doesn’t have the big hammer, but we were very frustrated after

about 25 years, from 1971 until just recently, during the existence

of the original Fair Credit Reporting Act, because there is a section

in there that makes it an impermissible purpose for you to obtain

my credit report fraudulently for a wrong purpose, and our members were getting hit with the reputation of letting anybody obtain

the credit report of a consumer, which was not the case. We would

go to local authorities to try to prosecute against the perpetrator

who has obtained a copy of the report. The experience was the

same. No enforcement.

When it came time to amend the Fair Credit Reporting Act that

went into effect in 1997, the Federal Trade Commission supported

us in this effort and everybody else did in making it a civil offense

for you to obtain my report for an impermissible purpose. And,

therefore, I can, as a consumer, sue you if you have anything to

sue for, and also the consumer reporting agency can sue you for

violating the Fair Credit Reporting Act.

There is a possibility that there is something to be said about

Mr. Anderson having the ability to sue if he can find the person

who perpetrated the crime and the credit grantors being able to

bring a civil action against the consumer. I think you and I both

know that the biggest deterrent here is the potential that that

might happen. The potential that I might get sued for obtaining a

consumer report for an impermissible purpose is more of a deterrent. It is a mild approach, but it is an approach.

Mr. SHADEGG. It is an interesting idea.

Let me ask the three of you not here in the role of victims, do

all three of you agree that a part of this problem is caused by credi-
50

tors extending credit without sufficiently verifying the identity of

individual?

Ms. Bernstein, do you agree with that?

Ms. BERNSTEIN. I do agree with that. I very much agree with

that and think that more attention really should be paid to that

aspect.

If I may add, in connection with your prior question, Mr. Shadegg, it has been our experience that the credit card companies have

developed investigative capacity and have developed things like a

profile so that the kinds of things Mr. Anderson was mentioning—

two addresses, for example, for a person—would immediately get

the attention before credit is granted.

So before I am too negative on credit grantors, which I don’t intend to be, they have in some instances given us information so we

can use it in our civil enforcement of the Fair Credit Reporting Act,

such as where they have an early indication before we do that

something is going on they notify us so we can investigate further.

Mr. SHADEGG. Do you agree that part of the problem is caused

by creditors?

Mr. ALBRIGHT. Not totally. In my situation, it was a driver’s license with a picture presented. There was an address. There was

probably a Social Security card, pretty standard type of information

to identify a real person there. All of the information was recorded

on the application. So, you know, we were dealing with some relatively sophisticated people who knew how to get this information.

In our particular situation, we have multiple traps in the bank

card operation which we are a pretty large player in, to try to catch

certain red flags.

For example, if a consumer changes an address on the response

coupon, that will be kicked out for someone to actually look at. If

there is some type of a mismatch with the Social Security number,

where a digit is off or the address is off by a digit, that is kicked

off for a human type of intervention. At that point in time, Mr.

Congressman, we don’t open up the account until we talk with a

customer and ascertain that we are dealing with the consumer.

Particularly in the bank card area, this is pretty sophisticated.

Fraud is a very large item on all of our income statements. We are

really trying to focus on making sure it is not eyeball to eyeball,

and it never will be, but that we are dealing with who we think

we are dealing with in the situation.

So I am sure there are some people out there who are lax, but

for those credit grantors who are doing most of the business, they

are really focused on trying to make sure that the right customer

is being served.

Mr. SHADEGG. Mr. Connelly, do you think that it is part of the

problem?

Mr. CONNELLY. I don’t think that there is any credit grantor that

is intentionally letting something occur in order to have a fraudulent account show up on their books.

I might say that, and I think Mr. Albright would agree with me,

that the competitive atmosphere for issuing of credit cards has

been such that perhaps it has invited or let in people who you

might otherwise not have had as a victim.
51

Mr. SHADEGG. Mr. Anderson, do you think that is a part of the

problem? Did you feel that those creditors in California who extended credit to this individual that is now using your name were

too lax in extending credit to him or her?

Mr. ANDERSON. In the case of the department stores, I can certainly understand the need to do business and the competitiveness.

They didn’t know who they were doing business with in this case.

In the case of the hospitals that performed surgery on the person,

I think it is absurd. The whole litany of medical things that are

on my report now, many are cleared up, I don’t understand how

you can perform medical services on somebody and not verify who

the person is. The department stores, maybe not. I don’t know.

Mr. SHADEGG. I am clearing exploring for a way to solve this

problem. And it seems to me that, with some reservation, if, in fact,

a part of the problem is that credit is extended too casually without

taking sufficient steps to verify who the individual is, one remedy,

which I am not saying that I would want necessarily to go to,

would be to give Mr. Anderson a specific remedy and perhaps enhanced penalties to go after anybody involved in this from a negligence standpoint, the Social Security Administration, which

should not have given out this card; or to go after a credit-issuing

agency, Mervyns department store, for example, in your testimony,

and give him a right to recover against them from the wrongful extension of credit to someone who wasn’t him.

Commerce will say that is a terrible thing to have happen. But,

by the same token, something has to be done to incent those involved in this to bring a halt to it.

My legislation tries to do this by making Mr. Anderson and Mr.

Hartle victims so they don’t have to actually suffer financial loss.

Mr. Anderson pointed out he never suffered any direct financial

loss, but something has to be done, and I am trying to figure out

a way to do it. It is true that the conduct of the Social Security Administration, in allowing his number to get out, and the conduct of

those other agencies, the department stores in your testimony and,

for that matter, the hospitals, we think of hospitals as different,

but they are in there to make money just like everybody else. They

perhaps could, I don’t know, perhaps could have done a more thorough job of verifying the identity of that particular victim and not

allowing you to be victimized.

Mr. ALBRIGHT. I would like to make one more comment.

I asked them specifically, Mr. Congressman, that question. How

will we fix this problem? That is the obvious question to ask. While

technology is not there today, as a consumer I hate to think about

it, one thing that they kept coming back to me with is biometrics,

fingerprints on credit cards, eyeball scans, and all types of things

like that. And eventually in this society we may move, unfortunately, to that type of security to make sure that consumers are

being protected.

Mr. SHADEGG. Yes. Retina scanners have been debated on the

floor of the House in other contexts, welfare and otherwise, as perhaps one of the next steps that we need to go to.

And, you know, somebody in their testimony made the point that

crimes of this nature—this is the crime today, but it will move forward just like less sophisticated crimes of 5, 10 years ago. And it
52

may be that, as a result of this law and as a result of other incentives imposed by Congress and, hopefully, rather than that as a result of your own initiative, we take steps which do not hamper

commerce but in fact do stop people from doing to Mr. Anderson

and my constituents what has happened to them.

I have used more than my 5 minutes. I yield back the balance

of my time I don’t have.

Mr. SHIMKUS [presiding]. I am not going to ask additional questions. I am going to reiterate what my colleague from Arizona stated.

I have been a member for 3 years, and I think it is safe to say

that the congressional majority would rather have the private sector solve these problems. You do not want us imposing new burdensome laws and regulations and regress through the courts, but we

will do that if we don’t see a change in some of these activities.

I see three things. I see approval, then immediately stopping the

undue harassment after the problem has been identified, and then

eventually the prosecution arena.

We have some Federal agencies that do a great job. The SEC

works with the industry to police itself. They work very closely. I

would just encourage those who are in the industry and with the

help of the Federal Government to sit down rapidly and talk since

you all are doing the work. You all know better than we do, and

I would suggest working with obviously the No. 1 champion here

on the House side, Mr. Shadegg, working with him to address this

before we do it with the heavy hand of government, work with us

to find a pro-business approach to solve these dilemmas, and I

would be happy to help in any way that I can.

With that, I am going to adjourn this hearing. Thank you very

much.

[Whereupon, at 12:25 p.m., the subcommittee was adjourned.]