```

[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]

 
     IDENTITY THEFT: ASSESSING THE PROBLEM AND EFFORTS TO COMBAT IT

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMBER 15, 2003

                               __________

                           Serial No. 108-60

                               __________

       Printed for the use of the Committee on Energy and Commerce

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________

                   U.S. GOVERNMENT PRINTING OFFICE
                          WASHINGTON : 2004
91-576PDF

For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                   Dan R. Brouillette, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

               JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida           PETER DEUTSCH, Florida
CLIFF STEARNS, Florida                 Ranking Member
RICHARD BURR, North Carolina         DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
  Vice Chairman                      HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey            BOBBY L. RUSH, Illinois
MIKE ROGERS, Michigan                JOHN D. DINGELL, Michigan,
W.J. ``BILLY'' TAUZIN, Louisiana       (Ex Officio)
  (Ex Officio)

                                  (ii)

                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Able, John M., Pennsylvania Attorney General.................    55
    Broder, Betsy, Assistant Director, Division of Planning and 
      Information, Bureau of Consumer Affairs, Federal Trade 
      Commission.................................................    42
    Burke, Kevin J., Deputy Chief Inspector, Eastern Field 
      Operations, U.S. Postal Inspector..........................    50
    Kane, Michelle...............................................    11
    Lenahan, Milissa J., Assistant VP/Assistant Operations 
      Officer, First National Band and Trust Company of Newtown..    30
    O'Neill, Hon. Bernard T., Pennsylvania State Representative..     5
    O'Neill-Lagier, Brigid, Red Cross, Chief Executive Officer, 
      American Red Cross Blood Services, Penn-Jersey Region......    13
    Periandi, Lt. Col. Ralph M., Deputy Commissioner, Operations, 
      Pennsylvania State Police..................................    61
    Ryan, Robert, Senior Director of Government Relations, 
      TransUnion.................................................    25

                                 (iii)

  

     IDENTITY THEFT: ASSESSING THE PROBLEM AND EFFORTS TO COMBAT IT

                              ----------                              

                       MONDAY, DECEMBER 15, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                     Langhorne, PA.
    The subcommittee met, pursuant to notice, at 10:12 a.m., in 
Middleton Township Municipal Building, Langhorne, Pennsylvania, 
Hon. James C. Greenwood (chairman) presiding.
    Members present: Representatives Greenwood and Gerlach.
    Staff present: Ann Washington, majority counsel and Billy 
Harvard, legislative clerk.
    Mr. Greenwood. Good morning, everyone. I am Congressman Jim 
Greenwood, and I am chairman of the Subcommittee on Oversight 
and Investigations of the Energy and Commerce Committee, and I 
would like call this hearing to order.
    We thank you all for being here. Welcome to this field 
hearing of the Subcommittee on Oversight and Investigations of 
the House Energy and Commerce Committee.
    We are here today to discuss the problem of identity theft, 
one of the fastest growing white collar crimes in the United 
States. The Federal Trade Commission estimates that each year, 
10 million Americans fall victim to identify theft, which 
translates into tremendous costs, both for the defrauded 
businesses and for the victimized consumers.
    What I hear from victims time and again is how draining the 
experience is, both emotionally and financially. Luckily, most 
victims are protected so that they usually do not incur any 
actual out of pocket loss. The problem lies in the other ways 
in which the theft of Social Security numbers, bank account 
numbers and related financial and personal information affects 
an individual's life.
    A victim's good credit can be severely damaged to the point 
of preventing the legitimate purchase of a new car or house, 
and the damage can take months to correct.
    What is astounding is the audacity of these thieves. They 
steal bill payments from your mailbox, they make scamming phone 
calls to banks. We have all heard some of the stories, but let 
me highlight a few particularly egregious ones.
    In 2001, a restaurant busboy in Brooklyn, New York used 
computers at a library, web-enabled cell phones, virtual 
voicemail and courier services to try to steal the identities 
of more than 200 CEOs, celebrities and tycoons. Their names 
were posted in a Forbes article on the 400 richest people in 
America. The crook was caught when one of the transactions he 
attempted drew attention because of its size, a transfer of $10 
million from an account owned by Thomas Siebel, founder of 
Siebel Systems.
    In 2002, the largest ring of identity thieves was 
apprehended for stealing tens of thousands of credit reports 
over a period of 3 years. The ring members allegedly stole 
credit reports from three major commercial credit reporting 
agencies and used that information to siphon funds from bank 
accounts and to make fraudulent purchases. Authorities have 
accounted for $2.7 million in losses from that ring so far.
    And just last month, a California man was arrested for 
stealing computers containing the personal information of 
thousands of Wells Fargo Bank customers. The man was 
apprehended at his home with the computer and equipment used 
for scanning identity cards and checks.
    According to the FTC's Identity Theft Clearinghouse Data 
base, in Pennsylvania alone, 5,080 consumers reported that they 
were victims of identify theft in 2002. People between the ages 
of 30 and 39 were hardest hit. This is the time in life when 
typically people are starting to accumulate good credit and 
considering some of those important life decisions like buying 
a home or having a child, decisions that can be greatly 
complicated if one's credit has been damaged.
    Today, we will hear testimony from several victims of 
identity theft, Michelle Kane, whom I had the pleasure of 
meeting recently, and State Representative Bernie O'Neill, who 
as a victim himself and how assists other victims with their 
plight.
    We will hear from the Red Cross, which has also fallen 
victim to identity theft. This is a double travesty. The 
services that a reputable organization like the Red Cross 
provides, are essential to us all in times of great need. For 
someone to put an organization of the Red Cross' caliber at 
jeopardy by attempting to steal personal information from its 
blood donors is deplorable. I hope the Federal law enforcement 
agencies currently pursuing such actions will quickly find the 
perpetrators and swiftly bring them to justice.
    We will also hear today testimony from representatives from 
the private sector organizations that have to contend with 
identity theft, Bob Ryan from TransUnion and Missy Lenahan from 
a local financial institution, First National Bank and Trust. 
Banks are on the front line of this type of fraud, fielding the 
initial calls from victims and taking most of the financial 
losses.
    We will hear from Betsy Broder of the Federal Trade 
Commission, and Kevin Burke of the U.S. Postal Inspection 
Service this morning. They will discuss their efforts to assist 
victims and to chase down the fraudsters who so callously use 
other people's identities for their own purposes.
    John Abel from the Pennsylvania Attorney General's Office 
and Lieutenant Colonel Ralph M. Periandi from the Pennsylvania 
State Police will testify about their offices' efforts to 
combat this problem here at home and what services they can 
offer to victims.
    I want to thank everybody for participating this morning. 
We want to provide the public with as much assistive 
information as we can this morning as to what steps they can 
take to avoid becoming victims, and in the event that they do 
fall victim to this fraud, what they can do to stop the 
financial bleeding as quickly as possible.
    We recognize and are pleased that the Fair and Accurate 
Credit Transaction Act, or the FACT Act, was just signed into 
law by President Bush on December 4. This will provide victims 
of identity theft with additional assistance and protections by 
giving national uniformity to industry best practices regarding 
identity theft prevention and aid. I am eager to see the 
benefits flowing from this implementation of this Act, but also 
believe it is prudent to build a record on this important issue 
in this Subcommittee in case it becomes necessary to consider 
additional legislation within our Committee's jurisdiction on 
this topic further down the road.
    So I thank all of the witnesses for being, and I would like 
to yield now to my Pennsylvania Congressman--colleague, 
Congressman Jim Gerlach, who while not a member of this 
Subcommittee, is an active participant in legislating on this 
issue. Mr. Gerlach, welcome to Bucks County, and the microphone 
is yours.
    Mr. Gerlach. Thank you, Mr. Chairman, and thank you very 
much for the opportunity to be here today and to listen to the 
testimony of those that present to us on this very important 
issue.
    In addition to the facts that you have set forth to give us 
a sort of broad opening view of this problem nationwide, I 
wanted to have an opportunity to submit some remarks for the 
record which we have here on the issue that I have been 
involved in since being contacted by the Montgomery County 
District Attorney, Bruce Castor, on this issue some time ago.
    And what I would like to do is just maybe highlight some of 
those remarks very briefly, and hopefully allow that to also 
set a stage for what we are going to hear today from our 
presenters. In Montgomery County, hundreds of individuals were 
victimized by the owner of an auto dealership in Limerick 
Township. The victims provided their personal information to 
the alleged thief in their efforts to buy a new car. He then 
allegedly used that information to obtain more than $4 million 
in loans, some of which were fraudulent on their face and some 
which were legitimate loans used for fraudulent purposes. For 
instance, the thief secured the loans as requested by the 
victims, but instead of paying off the liens on the victims' 
old cars, used the money for his own purposes.
    Civil and criminal cases were then brought in Montgomery 
County, and those are pending, as a result of that fraudulent 
conduct, and while these victims may eventually receive 
financial damages, they have found themselves in a quagmire 
when it comes to getting their credit record repaired. After 
receiving notification from the Montgomery County District 
Attorney that these loans were fraudulently obtained, many 
creditors refused to withdraw any negative notations or entries 
on the victims' credit record. Further, many of these victims 
continue to be harassed by creditors or collection agencies, 
and some face foreclosure on their belongings, loss of life 
savings, and an inability to get loans of any kind.
    As many of the Montgomery County victims have found, while 
the thief may be criminally prosecuted, the burden to repair 
the damage inflicted by an identity thief is on the one that is 
harmed, and the only method by which one can individually 
attempt to repair his or her good name and credit is by 
pursuing civil action against the creditors and debt 
collectors. This has proven very difficult, very time consuming 
and very expensive. That is why we have introduced legislation 
called PITFALL, Prevent Identity Theft From Affecting Lives and 
Livelihoods Act, which provides relief and alternatives to 
those who have already been victimized by an identity thief. 
While existing legislation primarily focuses on prevention or 
mitigation of the crime, this legislation is designed to aid 
those for whom prevention and mitigation is too late. When 
existing laws fail to protect identify theft victims, this 
legislation prevents creditors, debt collectors, consumer 
reporting agencies and financial institutions from harassing 
victims and further sabotaging their financial well-being.
    Once the State's highest law enforcement officer, or in 
this case, a District Attorney of one of the counties of the 
Commonwealth of Pennsylvania, has conclusively determined that 
the debt or loan was fraudulently incurred, under the 
legislation, once the law enforcement official determines that 
a person is, in fact, a victim, a no fault statement would be 
issued. This statement would cite the victim's lack of 
involvement in obtaining the debt or loan, and the victim may 
then forward the statement to creditors, debt collectors, 
credit reporting agencies and financial institutions.
    Upon receipt of the no fault statement, any business acting 
as a creditor, credit agency, or collector would be required to 
cease all collection activities and hold the victim harmless 
from any fraudulently incurred financial obligations. They 
would further be required to withdraw or correct any negative 
entries on the victim's credit history with regard to those 
transactions or obligations created by the identity theft.
    Failure to recognize this no fault statement by those 
institutions and to cease collection activities or remove 
negative entries from the credit record would result in State 
enforcement and civil liability. It would also, the 
legislation, fill gaps in the law such as that which has 
allowed creditors to continue harassing the Montgomery County 
victims despite a determination by the law enforcement 
officials in that locality that they were not involved in 
incurring the debt.
    This legislation makes enforcement provisions in the Truth 
in Lending Act, the Fair Credit Reporting Act, the Fair Debt 
Collections Practices Act and the Electronic Funds Transfer Act 
consistent. Each of these Acts currently provide for civil 
liability and administrative enforcement, and the Fair Credit 
Reporting Act also provides for State enforcement in Federal 
District Court, and the Electronic Funds Transfer Act provides 
for criminal liability. The Truth in Lending Act currently 
permits State enforcement, but only for predatory lending 
practices.
    To make these four important Acts consistent, this 
legislation, H.R. 2396, will amend the Fair Debt Collection 
Practices Act and Electronic Funds Transfer Act to permit a 
State to bring about an action against a person or entity 
acting in violation of the PITFALL provisions. The PITFALL 
legislation will also expand State action provisions in Truth 
in Lending Act and provide actual damages, monetary fines and 
in the severest cases, imprisonment for violations.
    So you can see that, given what is even happening in our 
local area, there is a lot of need for continued Federal 
oversight and legislative action on this issue, and I want to 
extend my appreciation for you for taking on this issue as 
chairman of the subcommittee, and look forward to all the 
important information and testimony we will receive today.
    Thank you.
    Mr. Greenwood. Thank you, Congressman Gerlach. Before we 
call our first witness, I thought it would be an interesting 
way to introduce this subject. We are going to present a video 
made by the Postal Inspection Services that outlines, rather 
dramatically, what the--how this crime takes place and what its 
consequences may be. Technical difficulties here. Is it 
rewound? Here we go.
    [Video shown.]
    Mr. Greenwood. Okay. Now playing the part of our first 
witness will be State Representative Bernie O'Neill, and Mr. 
O'Neill, will you please come forward.
    Welcome, thanks for being with us this morning.
    Mr. O'Neill. Thank you.
    Mr. Greenwood. You can have a seat. As you--and if you want 
to bring one of the black microphones in front of you. As you 
probably have been told, this is an investigative hearing, and 
when we----
    Mr. O'Neill. Sure.
    Mr. Greenwood. [continuing] take testimony at an 
investigative hearing, we do it under oath. Do you have any 
objections to giving your testimony under oath?
    Mr. O'Neill. Not at all.
    Mr. Greenwood. Okay. I also need to advise you you are 
entitled to counsel. This was something that was very important 
to our Enron witnesses, but probably not important to you. Do 
you wish to be advised by counsel?
    Mr. O'Neill. Not at all.
    Mr. Greenwood. Okay. Then if you would stand and raise your 
right hand.
    [Witnesses sworn.]
    Mr. Greenwood. You are under oath and you are recognized 
for your statement, sir.

   TESTIMONY OF HON. BERNARD T. O'NEILL, PENNSYLVANIA STATE 
 REPRESENTATIVE; MICHELLE KANE; AND BRIGID O'NEILL-LAGIER, RED 
    CROSS CHIEF EXECUTIVE OFFICER, AMERICAN RED CROSS BLOOD 
                            SERVICES

    Mr. O'Neill. Thank you, Mr. Chairman. Good morning. Good 
morning, Congressman Gerlach.
    Mr. Greenwood. Probably want to bring the microphone even a 
little closer than that. There.
    Mr. O'Neill. How is that? Here? I am State Representative 
Bernie O'Neill, from the 29th Legislative District here in 
Central Bucks County, and with me today is my legislative aide, 
Cindy Beck, who is leading the education effort on identify 
theft here in Bucks County.
    Identity thieves steal more than $1 billion a year from 
unsuspecting and unprepared consumers. In the bulk of cases, 
the consumers don't know their identity theft--were stolen. 
Credit card fraud accounts--or excuse me, credit card fraud 
accounts for 42 percent of the complaints, followed by scams 
where phone and utility accounts were created in a person's 
name without his or her knowledge.
    With these, criminals make thousands of dollars at their 
victim's expense. The victim is left with years of anguish and 
frustration trying to sort out and restore his good name and 
credit, or clear a criminal record.
    I am here today to share with you how identity theft has 
grown, especially here in Bucks County, and what we are trying 
to do to stop it. While the other witnesses today will go into 
the staggering statistics and efforts being undertaken to 
combat identity theft, I am here to put a face on this 
appalling crime.
    Anyone can become a target of identity theft. Thieves are 
stealing personal information from a number of different 
sources, including credit card receipts, birth certificates and 
Social Security cards. Just putting your bills in your mailbox 
to be sent out is a sign to a would-be identity thief that you 
are an easy target.
    To educate my constituents about this growing crime, I am 
holding public forums on identity theft throughout my 
legislative district. These forums will continue through the 
month of February. These forums have been very well attended. 
Our first forum was in Solebury Township on November 14. We 
have had presentations by local law enforcement officials, 
including Chief Richard Mangan of Solebury Township Police 
Department, Chief Henry ``Rick'' Pasqualini of the New Hope 
Borough Police Department and representatives from the 
Pennsylvania's Attorney General Office and the United States 
Postal Inspection Service.
    Dates are being finalized for the series of upcoming 
identity theft forums throughout the 29th Legislative District. 
January programs have been scheduled for Buckingham Township 
with Chief Daniels, Warminster Township with Chief Jim 
Gorczynski and a second evening forum in New Hope-Solebury with 
Chief Mangan and Pasqualini. February programs have been 
scheduled in Warwick Township with Chief Costello and Upper 
Southampton Township with Chief Schultz. Topics have included 
tips on avoiding identity theft, ways in which identity theft 
occurs and why students as well as senior citizens are 
targeted.
    It is sad that victims do not become aware that their 
identities have been stolen until they get an astronomical 
credit card statements, cell phone bills and other charges.
    I can personally attest that obtaining this information is 
far too easy. From my own personal experience, my phone number 
was stolen and for 3 to 4 months, my phone bill exceeded $300 
to $500 in total charges. That number was used from the same 
pay phone in New York City, and my case is minor compared to 
other stories that have been shared with me. Even local 
enforcement officials who I have been dealing with have been 
victims of identity theft themselves.
    As a State legislator, I have been involved in helping make 
identity theft less attractive to would-be thieves. Last year, 
a new law was enacted that escalates the penalties for this 
crime. Through legislation introduced by Representative Matt 
Baker of Wellsboro, Tioga County, the Pennsylvania House of 
Representatives has taken steps to increase the penalties for 
identity theft, making a first offense of the crime a felony of 
the third degree, carrying a maximum penalty of 7 years in 
prison and a $15,000 fine. A third or subsequent offense raises 
the crime to a felony of the second degree, with a maximum 
penalty of 10 years in prison or a $25,000 fine.
    I am hopeful these forums will help residents become more 
educated about identity theft and will learn how they can 
protect themselves and their identities. There is nothing more 
frustrating than finding out that your whole identity has been 
stolen and used for fraudulent purposes. And I can tell you 
since we began the forums, my wife and I have stopped putting 
our mail in our mailbox with the little red flag up, and we 
have purchased a shredder for our home. I have always used one 
in the office, but it never dawned on me of using one at home.
    So, I am more than welcome to answer any questions that you 
may have.
    [The prepared statement of Hon. Bernard T. O'Neill 
follows:]
Prepared Statement of Hon. Bernie O'Neill, Representative, Pennsylvania 
                              State House
    Good morning. I am State Rep. Bernie O'Neill from the 29th 
Legislative District in central Bucks County.
    Identity thieves steal more than $1 billion a year from 
unsuspecting and unprepared consumers. In the bulk of the cases, the 
consumers don't know how their identities were stolen. Credit card 
fraud accounts for 42 percent of the complaints, followed by scams 
where phone or utility accounts were created in a person's name without 
his or her knowledge.
    While these criminals make thousands of dollars at their victim's 
expense, the victim is left with years of anguish and frustration 
trying to sort out and restore his good name and credit or clear a 
criminal record.
    I'm here today to share with you how identity theft has grown, 
especially here in Bucks County and what we're trying to do to stop it. 
While the other witnesses today will go into the staggering statistics 
and efforts being undertaken to combat identity theft, I'm here to put 
a face on this appalling crime.
    Anyone can become a target of identity theft. Thieves are stealing 
personal information from a number of different sources, including 
credit card receipts, birth certificates and Social Security cards. 
Just putting your bills in your mailbox to be sent out is a sign to a 
would-be identity thief that you are an easy target.
    To educate my constituents about this growing crime, I am holding 
public forums on identity theft throughout my legislative district. 
These forums will continue through February.
    These forums have been very well attended, with 50 to 60 people 
coming out for our first forum in Solebury on Nov. 14, 2003. We have 
had presentations by local law enforcement officials, including Chief 
Richard Mangan of Solebury Township Police Department, Chief Henry 
``Rick'' Pasqualini of the New Hope Borough Police Department, and 
representatives from the Pennsylvania Attorney General's Office and the 
United States Postal Inspection Service.
    Dates are being finalized for the series of upcoming identity theft 
forums throughout the 29th legislative district. January programs have 
been scheduled in Buckingham Township with Police Chief Stephen 
Daniels, Warminster Township with Police Chief Jim Gorczynski, and a 
second evening forum in New Hope-Solebury, with Chief Richard Mangan 
and Chief Henry ``Rick'' Pasqualini. February programs have been 
scheduled in Warwick Township with Police Chief Joe Costello, and Upper 
Southampton Township with Police Chief David Schultz.
    Topics have included tips on avoiding identity theft, ways in which 
identity theft occurs, and why students as well as senior citizens are 
targeted.
    It is sad that victims do not become aware their identities have 
been stolen until they get astronomical credit card statements, cell 
phone bills, or other charges.
    I can personally attest that obtaining this information is far too 
easy. From personal experience, my phone number was stolen and for 
three months my phone bill exceeded $300 in toll charges. That number 
was used from a pay phone in New York City. And my case is minor 
compared to other stories that have been shared with me. Even local law 
enforcement officials are identity theft victims.
    As a state legislator, I have been involved in helping make 
identity theft less attractive to would-be thieves. Last year, a new 
law was enacted that escalates the penalties for this crime. Through 
legislation introduced by Rep. Matt Baker from Wellsboro, Tioga County, 
the Pennsylvania House of Representatives has taken steps to increase 
the penalties for identity theft, making a first offense of the crime a 
felony of the third degree, carrying a maximum penalty of seven years 
in prison and a $15,000 fine. A third or subsequent offense raises the 
crime to a felony of the second degree with a maximum penalty of 10 
years in prison and a $25,000 fine.
    I am hopeful these forums will help residents become more educated 
about identity theft and will learn how they can protect themselves and 
their identities. There's nothing more frustrating than finding out 
that your whole identity has been stolen and used for fraudulent 
purposes.

    Mr. Greenwood. Thank you, Representative O'Neill. The Chair 
will recognize himself for questioning. Tell us about after you 
discovered that your telephone bill was inflated and calls were 
being made from a pay phone in New York City. Was it difficult 
for you to--what did you go through with the phone company so 
that they would accept the fact that these were not your 
obligations?
    Mr. O'Neill. Right. The first thing I did was I--when I got 
the first phone bill, which exceeded $300, I called the phone 
company and I explained to them that these weren't my charges 
and I didn't understand where they were coming from, and they 
said they would investigate it, and they actually sent me some 
paperwork to fill out.
    It continued for several months after that, and they 
eventually were able to find out that what was actually stolen 
was my phone card ID number, which is very interesting, because 
I didn't carry the card with me. I never had the card. I knew 
it by rote memory, so what is really appalling is how they were 
able to get that number and use it.
    Mr. Greenwood. Did you ever figure out how they did that?
    Mr. O'Neill. To this day, we have never figured out how 
they ever got the number. The number was subsequently canceled, 
and that is when the charges certainly stopped. I believe, if I 
am not mistaken, I was held accountable for $50 each month for 
those expenses, and I did receive a phone call from the phone 
company several months later telling me that they finally 
tracked that all the phone calls were--every one of them were 
made from the same pay phone in--somewhere in the city of New 
York.
    Mr. Greenwood. And they were never able to catch the 
perpetrator?
    Mr. O'Neill. No, they never did catch him or her, no.
    Mr. Greenwood. And of course, you were personally 
responsible for the $50.
    Mr. O'Neill. Yes.
    Mr. Greenwood. The phone company picked up the rest. That 
means we all----
    Mr. O'Neill. Yes.
    Mr. Greenwood. [continuing] picked up the rest.
    Mr. O'Neill. Everyone paid for it. That is correct.
    Mr. Greenwood. And I think that is an interesting thing 
that we found, is that frequently, as I mentioned in my opening 
statement, the victim him or himself may have limited financial 
exposure, and the credit card companies frequently have limited 
exposure, and it frequently falls to the--if it is a retail 
purchase, the retail store ends up absorbing the loss, which 
again means that in terms of the billions of dollars that are 
stolen in this method, that it is built into the prices that we 
all pay for goods and services.
    One of the issues that the Congress wrestles with in 
general, but in this case specifically, is whether to act 
Federal legislation, given the fact that obviously, here in 
your case, it was a crime perpetrated--you could say it was 
perpetrated in New York, you could say it was perpetrated in 
Pennsylvania.
    Mr. O'Neill. Correct.
    Mr. Greenwood. Or both. And the need for interstate 
cooperation is--and harmonization is important. On the other 
hand, some states, particularly California, which has a very 
strict law, doesn't like the fact that the U.S. Congress, most 
notably just on the bill signed by the President on December 4, 
superseded State law.
    Now, you are a State legislator. Do you have a view on 
whether you think it is appropriate for the Congress to 
supersede State laws, or do you think the states need to have 
their own----
    Mr. O'Neill. Well, I would think--I think each State needs 
to certainly enact their own laws and make them as stiff as 
possible for what happens within the confines of their own 
state, but I would agree with you that I think the Congress has 
to--I can tell you that I am the guardian of my aunt, who is 
well along in Alzheimer's. And I am now dealing with her credit 
cards, which we are beginning to think they were fraudulently 
used, because we are talking about $28,000 were run up on her 
charge cards and not in this state, and we have no idea how 
these numbers ever got out, other than the fact that, you know, 
when she----
    Mr. Greenwood. Is your credit card number, which was what 
was stolen from you, is that printed on your phone bill?
    Mr. O'Neill. No.
    Mr. Greenwood. That doesn't show up on your phone bill.
    Mr. O'Neill. Not that I am aware of, no. No.
    Mr. Greenwood. And certainly the PIN number does not.
    Mr. O'Neill. No.
    Mr. Greenwood. So someone would have either----
    Mr. O'Neill. Yeah, I----
    Mr. Greenwood. [continuing] I guess just hacked into the 
system to get your--to match your phone number----
    Mr. O'Neill. Somehow, I actually saw on--a couple years 
ago, I saw on--it was either 20/20 or one of those type of 
shows on television, ways that they were stealing numbers at 
airports and that sort of thing when you were using them, and 
that may have been how it was taken. We are not really sure.
    Mr. Greenwood. And I suppose also someone could 
theoretically stand next to you at a phone and watch and listen 
as you----
    Mr. O'Neill. Well, that is basically what they do in an 
airport, in a busy airport. They sit there and--they make--
pretend they are making a phone call, and they are standing 
right next to you and you are punching in your number and they 
are just watching your numbers go in, which is also your PIN 
number as well, after you----
    Mr. Greenwood. Right.
    Mr. O'Neill. [continuing] punch in the number.
    Mr. Greenwood. Thank you. Congressman Gerlach?
    Mr. Gerlach. No questions, but the exact same thing 
happened to me.
    Mr. O'Neill. Oh, jeez.
    Mr. Gerlach. With my long distance credit card number, 
phone number, and----
    Mr. O'Neill. Right.
    Mr. Gerlach. [continuing] had about 2 months worth of 
couple hundred dollars charges, calls to Europe, which I know 
I----
    Mr. O'Neill. Yeah.
    Mr. Gerlach. [continuing] wouldn't have made, and you know, 
the phone company resolved it, but the exact same situation as 
yours.
    Mr. O'Neill. Right.
    Mr. Gerlach. And I had no idea how they got the numbers to 
do that, other than maybe, you know, the service plaza on the 
turnpike. I went back from Harrisburg at that time, and maybe 
somebody was standing next to me, but you know, you punch those 
numbers pretty darn quick.
    Mr. O'Neill. Yeah.
    Mr. Gerlach. You wonder how they can even keep track of it, 
but it is a bad problem, so I know exactly what you mean. But 
thank you.
    Mr. O'Neill. Thank you.
    Mr. Greenwood. Thank you. We have no further questions for 
you.
    Mr. O'Neill. Thank you.
    Mr. Greenwood. We appreciate your appearance here this 
morning. Thank you.
    Mr. O'Neill. Have a good day.
    Mr. Greenwood. And the Chair would now call forward our two 
next witnesses for the first panel, Mrs. Michael Kane of 
Warminster and Brigid O'Neill-LaGier, Chief Executive Officer 
of the American Red Cross Blood Services for the Penn-Jersey 
Region.
    Welcome. And I think we need you to make sure you pull 
those--each pull your microphone quite close to you as you 
testify, because they are apparently very directional. As--
welcome and thank you again for being here this morning, both 
of you.
    As you heard me indicate to Mr. O'Neill, we take our 
testimony under oath in this Committee. Do either of you have 
any objections to giving your testimony under oath?
    Ms. O'Neill-LaGier. No.
    Mrs. Kane. No.
    Mr. Greenwood. Okay. And you are both represented--entitled 
to be represented by counsel. Do either of you wish to be 
represented by counsel this morning?
    Ms. O'Neill-LaGier. No.
    Mrs. Kane. No need.
    Mr. Greenwood. Okay. If you would stand, then, and raise 
your right hands.
    [Witnesses sworn.]
    Mr. Greenwood. You are under oath, and I think we will 
start alphabetically with Mrs. Kane. Welcome, and----
    Mrs. Kane. Good morning. How are you?
    Mr. Greenwood. I am very well. How are you?
    Mrs. Kane. Nervous.
    Mr. Greenwood. Nervous. No need to be nervous. And you have 
as much time as you would like to make a statement for us this 
morning.
    Mrs. Kane. Okay. Can you hear me? No? Okay.
    Mr. Greenwood. All right. Tap on your--on that--okay. We 
have some ability to control the volume of the microphone. It 
seems to be on, but not----
    Mrs. Kane. Okay. Is that better?
    Mr. Greenwood. Can you hear in the back yet?

                   TESTIMONY OF MICHELLE KANE

    Mrs. Kane. All right. Identity theft has been referred to 
as an invisible assault, and I should know, because unbeknownst 
to me, a woman from Schenectady, New York was able to steal my 
good name.
    A little over 2 years ago, I was offered a free credit 
report. My credit was perfect, and I was expecting to receive a 
report that reflected that. Imagine my surprise when my report 
history came back 33 pages thick. I assumed there must be some 
sort of mistake of the credit agencies. Perhaps my name was 
mingled with another Michelle Kane. I had heard of that 
happening. After all, I had always been very careful with the 
use of my credit cards and my Social Security number. Boy, was 
I wrong.
    Unfortunately, the credit agencies were not mistaken. A 
woman from Schenectady, New York had been using my Social 
Security number for approximately 2 years, and managed to 
charge over $70,000 in my name. She started out small, opening 
a few credit cards, and then gained more confidence, obtaining 
a car loan and eventually a mortgage.
    The perpetrator, who is also named Michelle Kane, said she 
received the Social Security number from a friend and just 
thought she was able to use it. However, investigators believed 
that she obtained it through her place of employment. She 
worked for a vision company and had access to insurance company 
data bases. The Schenectady, New York Michelle Kane did get 
caught and served a year in prison, thank to the fact that 
investigators hired by the mortgage company worked so 
diligently.
    Even though the woman went to jail, the task of clearing my 
credit history still existed. The red tape and jumping through 
hoops started from the very beginning. The first step of 
reporting the crime was not very simple. I first called the 
Schenectady Police Department, and they were unable to do 
anything because I could not file a report in person. It was 5 
hours away.
    When I called my local police department and they were 
unable to do much, because it was not in their jurisdiction. It 
did not get much easier with the three credit agencies, 
TransUnion, Experian and Equifax. They did send the information 
to me in my credit reports, but it was up to me to decipher it. 
The agencies' listed the creditors. However, many times as an 
abbreviation, and the biggest hassle was getting a phone number 
to go along with the bank. Sometimes, it was listed and 
sometimes, it was not. To get a number that was a 1-800 number 
that corresponded to the correct department in the bank was a 
rarity. For example, my husband and I spent countless hours 
trying to contact one of the names that was on the list, which 
was Verizon NE. It sounds simple enough until you try and 
actually find them. No one in the company knew who Verizon NE 
was when you called Verizon. Was it Northeast, New England, 
Nebraska? Which division did Verizon--which division of Verizon 
were we trying to contact? A wireless line, a land line, the 
Internet? So the countless hours of trying to figure out who 
you are contacting was very hassle-some.
    Aside from the financial burden of huge phone bills and 
trying to track down the banks, and the countless hours wasted 
trying to sort through the red tape, the biggest problem is 
proving your identity to the creditors and convincing them that 
you did not make the charges. Over 2 years have passed, and I 
am hopeful that my credit history will soon be clear. I am 
hopeful that this does not come back to haunt me, and I am 
hopeful that there will be some improvements for the rest of 
the victims out there.
    Now, I was told if I wanted to make some suggestions, which 
I did.
    [The prepared statement of Michelle Kane follows:]
                  Prepared Statement of Michelle Kane
    Identity Theft has been referred to as the ``invisible assault'', 
and I should know because unbeknownst to me, a woman was able to steal 
my good name.
    A little over two years ago, I was offered a free credit report. My 
credit was perfect and I was expecting to receive a report that 
reflected that. Imagine my surprise when my report history came back 33 
pages thick.
    I assumed there must be some sort of mistake with the credit 
agencies. Perhaps my name was mingled with another Michelle Kane; I 
have heard of that happening. After all, I have always been very 
careful with the use of my credit cards and Social Security Number. 
Boy, was I wrong!
    Unfortunately, the credit agencies were not mistaken. A woman from 
Schenectady, New York had been using my Social Security Number fro 
approximately two years and had managed to charge over $70,000 in my 
name. She stated out small, opening a few credit cards, then gained 
more confidence obtaining a car loan and eventually a mortgage.
    The perpetrator, who is also named Michelle Kane, said she received 
the Social Security Number from a friend and thought she was able to 
use it. However, investigators believe she obtained it through her 
place of employment. She worked for a vision company and had access to 
insurance company databases. The Schenectady, New York Michelle Kane 
did get caught and served a year in prison thanks to the fact 
investigators hired by the mortgage company work so diligently.
    Even though this woman went to jail, the task of clearing my credit 
history still existed. The red tape and the jumping though hoops 
started from the very beginning. The first step of reporting the crime 
was not very simple. I first called the Schenectady Police Department 
and they were unable to do anything unless I filed a police report in 
person. I then called my local police department they were unable to do 
much because it was not in their jurisdiction.
    It did not get any easier with the three credit agencies 
(Transunion, Experian and Equifax). They sent the information, but it 
was up to me to decipher it. The agencies listed the creditors, however 
many times just as an abbreviation. One of the biggest hassles was 
getting a phone number to the bank. Sometimes it was listed and 
sometimes it was not. To get a phone number that was a 1-800 number 
that corresponded to the correct department in the bank was a rarity. 
I.e., My husband and I spent countless hours trying to contact Verizon 
NE. No one in the company knew who this was; did NE stand for North 
East, New England, Nebraska? Which division of Verizon was this; 
wireless, landline or Internet?
    Aside from the financial burden of huge phone bills trying to track 
down the banks, and the countless hours wasted trying to sort though 
the red tape, the biggest problem is proving your identity to the 
creditors and convincing them you didn't make the charges.
    Over two years have passed and I am hopeful that my credit history 
will soon be cleared. I am hopeful that this does not come back to 
haunt me. And I am hopeful that there will be improvements for the rest 
of the victims out there.
    My Suggestions for Improvement:

 Free yearly credit reports
 Transunion, Experian and Equifax list a local advocates phone number 
        on the credit report. (Consumer Protection Number).
 Mandatory listing of all creditors' phone numbers that appears on 
        credit report. (1-800).

    Mr. Greenwood. Go ahead.
    Mrs. Kane. Okay. My first suggestion is that there be some 
sort of legislation, which I know there are some people working 
on this for a free credit report from the credit agency, 
whether it be via email or, you know, it is expensive to send 
postage to thousands and thousands of people, but I think in 
the long run, it could save lots of money.
    TransUnion, Experian and Equifax, I think should list a 
local advocate, a phone number on their credit report, which I 
was just going blindly through this, and I think it would save 
a lot of hassle if maybe at the end of the credit report, they 
say you can contact your local consumer report person and here 
is the steps which you follow, so you just don't go blindly 
through this.
    And last, a mandatory listing of all of the creditors' 
phone numbers that appear on your credit report, so you don't 
have to, once again, track down these people and try and clear 
your credit. They don't even give you, for security purposes, 
your account number. So when you are trying to tell them who 
you are, the first thing they say is your account number, 
please, and you don't have it, so.
    Anyway, they are my suggestions, oh, and, of course, a 1-
800 number at which to contact them, so.
    Mr. Greenwood. Those are very good suggestions, and that is 
why we are holding this hearing, to learn things like that. 
Thank you.
    Mrs. Kane. You are welcome.
    Mr. Greenwood. Ms. O'Neill-LaGier, am I pronouncing that 
right?
    Ms. O'Neill-LaGier. Yes, you are.
    Mr. Greenwood. Okay.
    Ms. O'Neill-LaGier. Thank you.
    Mr. Greenwood. Make sure you speak directly into the 
microphone, please.
    Ms. O'Neill-LaGier. I will try to do that.
    Mr. Greenwood. You are recognized for your testimony.

               TESTIMONY OF BRIGID O'NEILL-LAGIER

    Ms. O'Neill-LaGier. Good morning, Mr. Chairman, and 
Congressman Gerlach. Thank you for your invitation to testify 
on the important subject of identity theft.
    I am Brigid O'Neill-LaGier, Chief Executive Officer of the 
Penn-Jersey Blood Services Region of the American Red Cross, 
headquartered in Philadelphia. I would respectfully ask that my 
entire statement and attachments be included in the record.
    Mr. Greenwood. And will be without objection.
    Ms. O'Neill-LaGier. The Red Cross has been helping people 
since 1881. You can see us at work in communities across the 
country and here in southeastern Pennsylvania and New Jersey, 
thousands of times a day, teaching first aid or CPR classes, 
keeping members of the military and their families connected 
through emergency communications, caring for disaster victims, 
and collecting and delivering blood.
    Thousands of area residents participate in that work as 
volunteers, blood donors and financial contributors. As one of 
36 Red Cross regional blood services, the Penn-Jersey region is 
the major supplier of blood in southeastern Pennsylvania and 
New Jersey.
    Continuing a tradition begun more than 50 years ago, the 
mission of the Penn-Jersey region is to fulfill the community's 
need for the safest, most reliable and cost-effective blood 
products and transfusion services.
    In 1994, the Red Cross dedicated the Musser Blood Center, 
which houses the blood supply for more than 125 southeastern 
Pennsylvania and New Jersey hospitals; the Philadelphia 
National Testing Laboratory, which provides infectious disease 
and type testing of blood donations for 4 Red Cross blood 
centers and several non-Red Cross blood centers; and the 
National Reference Laboratory for Blood Group Serology, serving 
more than 3,000 hospitals nationwide.
    Hospitals and patients in southeastern Pennsylvania and New 
Jersey benefit from an array of transfusion support services 
including lifesaving blood products delivered 24 hours a day, 
365 days a year, and physicians and technical experts available 
for consultation around the clock.
    Mr. Chairman, last year, the Penn-Jersey Region collected 
more than 262,000 whole blood donations and nearly 11,000 
platelet and granulocyte donations, and additionally imported 
135,000 blood products to meet the local community transfusion 
needs of over 800,000 blood products.
    In southeastern Pennsylvania and New Jersey, the Red Cross 
conducted over 11,000 blood drive operations, which assisted 
over 300,000 volunteer blood donors who stepped forward to save 
lives. The Red Cross takes the confidentiality of our blood 
donors very seriously. As a regulated service, blood collection 
is a very detailed process designed to ensure the safety and 
security of the blood donor, the blood supply and those who are 
trained to collect, manufacture and distribute blood products.
    The Food and Drug Administration Center for Biologics 
Evaluation and Research is responsible for regulatory oversight 
of the U.S. blood supply. FDA promulgates and enforces 
standards for blood collection and for the manufacturing of 
blood products, including both transfusable components of whole 
blood, pharmaceuticals derived from blood cells or plasma, and 
related medical devices. The American Red Cross Penn-Jersey 
Blood Region activity is regulated not only by the FDA, but 
also, on a local level, by the State of Pennsylvania, the State 
of New Jersey, AABB, as well as national American Red Cross 
standards, policies and procedures.
    As you may know, an investigation is currently being 
conducted by Federal authorities into identity theft at the 
American Red Cross Penn-Jersey Blood Region. Investigators 
learned that several individuals' personal identification 
information, such as names and Social Security numbers, had 
been used to obtain credit and make purchases. A common 
denominator was that they had all donated at one of four Red 
Cross blood drives held in the southeastern Pennsylvania area 
in November and December 2002.
    We have recently learned that several donors at two 
additional blood drives during the same period were victims of 
identity theft. Social Security numbers are utilized during the 
donation process to uniquely identify each blood donor and help 
us accurately connect the donor with his or her donation 
history, which is important for both donor and patient safety. 
While advances in technology and record keeping have afforded 
us increased security options, Social Security numbers remain 
the universally accepted means of identification.
    Upon learning of the problem in February 2003, we 
immediately contacted the U.S. Attorney's Office for the 
Eastern District of Pennsylvania and requested that an 
investigation be opened and a task force of Federal law 
enforcement officials be developed to fully investigate the 
matter. We are also working closely with the Federal Bureau of 
Investigation and the U.S. Postal Inspection Service. We have 
acted aggressively and cooperated fully with investigators to 
assist them in resolving this matter quickly and thoroughly. We 
have also launched a rigorous review of our security 
procedures. We have no reason to believe that our electronic 
data base has been compromised. This continues to be an open 
case, and consequently, I am sharing with you only the details 
that have been made public and will not hinder the ongoing 
investigation. We want to make clear that the safety of the 
blood supply has in no way been compromised.
    To date, the investigation has been contained in the 
southeastern Pennsylvania area, and limited to six blood drives 
in the November through December 2002 timeframe. We are aware 
of at least 23 individuals who were blood donors and were also 
victims of identity theft. Our first concern is for those who 
may have been victimized. I have personally contacted 
representatives of the four blood drive sponsor groups, and I 
am in the process of contacting the two new groups we learned 
about last week. We have notified 1,400 donors in writing who 
participated in the first four blood drives, and letters are 
going out to all donors from the two additional identified 
blood drives. I have attached a generic copy of that 
correspondence for the record. This letter gives step by step 
actions they should take if they are concerned about the 
security of their personal information. The information was 
provided to us by Federal law enforcement officials.
    In addition to the information in the letter, we have set 
up a special Red Cross toll-free telephone number to assist 
donors who believe they may have been victims. This line is 
answered by specially trained staff to provide more detailed 
information about security of donor information and to assist 
donors in checking their credit reports.
    Despite this isolated situation, you can be certain that 
specific steps are taken throughout the Penn-Jersey Region's 
blood donor centers to ensure that blood donor information is 
secure. Some of them include that donor records are handled 
exclusively by authorized personnel trained to deal with 
confidential information. Before interacting with the public, 
our blood service region employees go through in-depth training 
that also requires signing a confidentiality agreement and a 
Code of Conduct agreement.
    Information entered on the blood donation record form 
completed by donors at the blood drive is protected from view 
by others during the donation process, and access to 
information is limited to authorized staff who need it in order 
to process the blood donation.
    Every person who handles this information is known and 
identified to us. Also, once donor information is entered into 
a computer at the blood center, the blood donation record form 
is shredded, and access to our computers and computer data 
bases is strictly limited.
    Mr. Chairman, the Red Cross relies on voluntary donations 
to ensure a safe and adequate blood supply. We regret that any 
donor has had to question his or her desire to give blood 
because of security concerns. We are committed to ensuring the 
safety and privacy of our donors and are working diligently to 
ensure that this situation is not repeated. We are appreciative 
of the thousands of donors who continue to support us every 
day. Without their generous donation of the gift of life, lives 
would be lost.
    Finally, we are proud of our people and the job they do. We 
hope that the details surrounding this case will not discourage 
people from donating blood in the future. Increasing the 
available supply of blood is critical to health care in our 
community, because much of modern medicine is only made 
possible because of blood donations. Yet, donations do not 
always keep pace with demand.
    Philadelphia is a major regional medical center with 
teaching hospitals that provide advanced care, such as organ 
transplants, specialized pediatric and neonatal care, cancer 
and cardiac care, all of which require a stable blood supply.
    For our region, blood donations given locally only meet 70 
percent of our true need. Through planning and coordination, 
the Red Cross is able to ship blood from communities where 
there is an excess to those where there is a need. Still, 
history shows that our reserves of blood are not--have not been 
strong enough to compensate for seasonal swings in donations 
and weather-related disruptions of normal blood collection 
activities. Additionally, blood shortages seriously affect 
patient care. As the population ages, the need for blood is 
predicted to grow.
    Experts agree that a stronger blood supply is an essential 
part of community preparedness. After the terrorist attacks of 
September 11, 2001, a multidisciplinary task force of 
representatives from government agencies and the blood banking 
community was formed to study this issue. The task force 
concluded that the single biggest determinant of the success of 
the blood community's first response to a disaster, is the 
blood already on the shelves of blood centers and hospitals. It 
recommended that planning for future disasters include the 
requirement that all blood centers have available a 7-day 
supply of all blood types at all times.
    To meet our responsibility to the people we serve, the 
Penn-Jersey Region will continue to increase our blood supply 
by asking more people to donate blood, asking those already 
giving blood to donate more often and asking business and 
community groups to increase their support.
    On behalf of the Red Cross, thank you again, Chairman 
Greenwood, for the opportunity to testify before this 
Subcommittee. It is imperative for our national preparedness 
and the daily treatment of those with life-threatening 
conditions that Americans generously donate blood. This act can 
and does save lives. I would be happy to respond to your 
questions.
    [The prepared statement of Brigid O'Neill-LaGier follows:]
 Prepared Statement of Brigid O'Neill LaGier, Chief Executive Officer, 
         Penn-Jersey Blood Services Region, American Red Cross
    Good morning, Mr. Chairman, Congresswoman Hart and Congressman 
Gerlach. Thank you for your invitation to testify on the important 
subject of identity theft. I am Brigid O'Neill LaGier, Chief Executive 
Officer of the Penn Jersey Blood Services Region of the American Red 
Cross headquartered in Philadelphia.
    The Red Cross has been helping people since 1881. You can see us at 
work in communities across the country, and here in southeastern 
Pennsylvania and New Jersey, thousands of times a day--teaching first 
aid or CPR classes, keeping members of the military and their families 
connected through emergency communications, caring for disaster 
victims, and collecting and delivering blood. Thousands of area 
residents participate in that work as volunteers, blood donors and 
financial contributors.
    As one of 36 Red Cross regional blood services, the Penn-Jersey 
Region is the major supplier of blood in southeastern Pennsylvania and 
New Jersey.
    Continuing a tradition begun more than 50 years ago, the mission of 
the Penn-Jersey Region is to fulfill the community's need for the 
safest, most reliable and cost-effective blood products and transfusion 
support services. In 1994, the Red Cross dedicated the Musser Blood 
Center, which houses:

 The blood supply for more than 125 southeastern Pennsylvania and New 
        Jersey hospitals;
 The Philadelphia National Testing Laboratory, which provides 
        infectious disease and type-testing of blood donations for four 
        Red Cross blood centers and several non-Red Cross blood 
        centers; and
 The National Reference Laboratory for Blood Group Serology, serving 
        more than 3,000 hospitals nationwide.
    Hospitals and patients in southeastern Pennsylvania and New Jersey 
benefit from an array of transfusion support services, including:

 Lifesaving blood products delivered 24 hours a day, 365 days a year, 
        and physicians and technical experts available for consultation 
        around the clock;
 Products to meet special patient needs such as Granulocytes 
        (infection fighting white cells) and HLA-matched platelets;
 Self-donation for planned surgery;
 Perioperative autologous cell salvage--a transfusion option 
        benefiting orthopedic and other surgical patients;
 Reference laboratory services that identify and locate compatible 
        units of platelets and red cells for patients;
 The American Rare Donor Registry--a joint American Association of 
        Blood Banks (AABB) and Red Cross program that assists patients 
        who need rare blood across the country and world;
 Stem cell and therapeutic apheresis services to help patients with 
        cancer and other diseases;
 National Marrow Donor Program participation that helps cancer and 
        other patients through donor recruitment and education; and
 Research activities in support of--
     Cellular therapies to help cancer patients;
     Pathogen inactivation techniques that may prevent the 
            transmission of AIDS, hepatitis or bacterial contamination; 
            and
     Preservation and storage techniques for donated blood platelets 
            so patients will receive the optimal benefit from their 
            transfusion.
    Mr. Chairman, last year the Penn-Jersey Region collected more than 
262,000 whole blood donations and nearly 11,000 platelet and 
Granulocyte donations and additionally imported 135,000 blood products 
to meet the local community transfusion needs of over 800,000 blood 
products. In southeastern Pennsylvania and New Jersey, the Red Cross 
conducted over 11,000 blood drive operations, which assisted over 
300,000 volunteer blood donors who stepped forward to save lives. The 
Red Cross takes the confidentiality of our blood donors very seriously. 
As a regulated service, blood collection is a very detailed process 
designed to ensure the safety and security of the blood donor, the 
blood supply, and those who are trained to collect, manufacture and 
distribute blood products.
    The Food and Drug Administration (FDA)'s Center for Biologics 
Evaluation and Research (CBER) is responsible for regulatory oversight 
of the U.S. blood supply. FDA promulgates and enforces standards for 
blood collection and for the manufacturing of blood products, including 
both transfusable components of whole blood, pharmaceuticals derived 
from blood cells or plasma, and related medical devices. The American 
Red Cross, Penn-Jersey Blood Region activity is regulated not only by 
the FDA, but also on a local level by the State of Pennsylvania, the 
State of New Jersey, AABB as well as national American Red Cross 
standards, policies and procedures.
    As you may know, an investigation is currently being conducted by 
federal authorities into identity theft at the American Red Cross, 
Penn-Jersey Blood Region. Investigators learned that several 
individual's personal identification information, such as names and 
social security numbers, had been used to obtain credit and make 
purchases. A common denominator was that they had all donated at one of 
four Red Cross blood drives held in the southeastern Pennsylvania area 
in November and December 2002. We have recently learned that several 
donors at two additional blood drives during the same period were 
victims of identity theft.
    Social security numbers are utilized during the donation process to 
uniquely identify each blood donor and help us accurately connect the 
donor with his or her donation history, which is important for both 
donor and patient safety. While advances in technology and record 
keeping have afforded us increased security options, social security 
numbers remain the universally accepted means of identification.
    Upon learning of the problem in February 2003, we immediately 
contacted the U.S. Attorney's Office for the Eastern District of 
Pennsylvania, and requested that an investigation be opened and a task 
force of federal law enforcement officials be developed to fully 
investigate the matter. We are also working closely with the Federal 
Bureau of Investigation and the U.S. Postal Inspection Service. We have 
acted aggressively and cooperated fully with investigators to assist 
them in resolving this matter quickly and thoroughly. We also launched 
a rigorous review of our security procedures. We have no reason to 
believe that our electronic database has been compromised. This 
continues to be an open case and, consequently, I am sharing with you 
only the details that have been made public and will not hinder the 
ongoing investigation. We want to make clear that the safety of the 
blood supply has in no way been compromised.
    To date, the investigation has been contained to the southeastern 
Pennsylvania area and limited to six blood drives in the November 
through December 2002 timeframe. We are aware of at least 23 
individuals who were blood donors and were also victims of identity 
theft. Our first concern is for those who may have been victimized. I 
have personally contacted representatives of four blood drive sponsor 
groups and I am in the process of contacting the two new groups we 
learned about last week. We have notified 1,400 donors in writing who 
participated in the first four blood drives and letters are going out 
to all donors from the two additionally identified blood drives. I have 
attached a generic copy of that correspondence for the record. This 
letter gives step by step actions they should take if they are 
concerned about the security of their personal information. The 
information was provided to us by federal law enforcement officials.
    In addition to the information in the letter, we have set up a 
special Red Cross toll-free telephone number to assist donors who 
believe they may have been victims. This line is answered by specially-
trained staff to provide more detailed information about security of 
donor information and to assist donors in checking their credit 
reports.
    Despite this isolated situation, you can be certain that specific 
steps are taken throughout the Penn-Jersey Region's blood donor centers 
to ensure that blood donor information is secure. Some of them include:

 Donor records are handled exclusively by authorized personnel trained 
        to deal with confidential information. Before interacting with 
        the public, our Blood Services Region employees go through in-
        depth training that also requires signing a confidentiality 
        agreement and a Code of Conduct agreement.
 Information entered on the blood donation record form completed by 
        donors at the blood drive is protected from view by others 
        during the donation process.
 Access to information is limited to authorized staff who need it in 
        order to process the blood donation.
 Every person who handles this information is known/identified to us.
 Once donor information is entered into a computer at the blood 
        center, the blood donation record form is shredded.
 Access to our computers and computer databases is strictly limited.
    Mr. Chairman, the Red Cross relies on voluntary donations to ensure 
a safe and adequate blood supply. We regret that any donor has had to 
question his or her desire to give blood because of security concerns. 
We are committed to ensuring the safety and privacy of our donors and 
are working diligently to ensure that this situation is not repeated. 
We are appreciative of the thousands of donors who continue to support 
us everyday. Without their generous donation of the gift of life, lives 
would be lost. Finally, we are proud of our people, and the job they 
do. We hope that the details surrounding this case will not discourage 
people from donating in the future.
    Increasing the available supply of blood is critical to healthcare 
in our community, because much of modern medicine is only made possible 
because of blood donations. Yet, donations do not always keep pace with 
demand.
    Philadelphia is a major regional medical center with teaching 
hospitals that provide advanced care, such as organ transplants, 
specialized pediatric and neonatal care, cancer and cardiac are, all of 
which require a stable blood supply.
    For our region, blood donations given locally only meet 70 percent 
of our true need. Through planning and coordination, the Red Cross is 
able to ship blood from communities where there is an excess to those 
where there is a need. Still, history shows that our reserves of blood 
have not been strong enough to compensate for seasonal swings in 
donations and weather-related disruptions of normal blood collection 
activities. Additionally, blood shortages seriously affect patient 
care. As the population ages, the need for blood is predicted to grow.
    Experts agree that a stronger blood supply is an essential part of 
community preparedness. After the terrorist attacks of September 11, 
2001, a multi-disciplinary task force of representatives from 
government agencies and the blood banking community was formed to study 
this issue. The task force concluded that the single biggest 
determinant of the success of the blood community's first response to a 
disaster is the blood already on the shelves of blood centers and 
hospitals. It recommended that planning for future disasters include 
the requirement that all blood centers have available a seven-day 
supply of all blood types at all times.
    To meet our responsibility to the people we serve, the Penn-Jersey 
Region will continue to increase our blood supply by asking more people 
to donate blood, asking those already giving blood to donate more 
often, and asking business and community groups to increase their 
support.
    On behalf of the Red Cross, thank you again, Chairman Greenwood, 
for the opportunity to testify before this subcommittee. It is 
imperative for our national preparedness, and the daily treatment of 
those with life-threatening conditions, that Americans generously 
donate blood. This act can, and does, save lives. I would be happy to 
respond to your questions.

    Mr. Greenwood. Thank you very much. Thank you for your 
testimony, and we are very sensitive to the fact that, as you 
said, the supply of blood in this area, blood products, is a 
life and death matter, and we hope that it is helpful to let 
people know in this region that the precautions that you have 
taken now to fully their secure their personal identity and 
that that will encourage more donation and not less, because it 
is a matter of life and death.
    Let me recognize myself for some questions, and start with 
Mrs. Kane. Did the other Mrs. Kane, the bad Mrs. Kane.
    Mrs. Kane. The evil one, yes.
    Mr. Greenwood. The evil one. Went to jail for a year, you 
said. Did she serve that entire year, do you know, or----
    Mrs. Kane. Yes. She was supposed to get 2 to 7 originally, 
but she served about a year.
    Mr. Greenwood. She served about 1 year of a 2 to 7, but it 
might have been a 2 to 7 year sentence.
    Mrs. Kane. Right. Well, she----
    Mr. Greenwood. Do you know if she was ever required to make 
financial compensation to--either to yourself or to any of the 
businesses that were defrauded by her?
    Mrs. Kane. I have no idea if she was required to do that. I 
don't know.
    Mr. Greenwood. You didn't attend her trial or sentencing, 
or----
    Mrs. Kane. I wasn't even notified until after she was sent 
to prison.
    Mr. Greenwood. Well, that is interesting in and of itself, 
isn't it, that you were the victim and you weren't notified of 
what--you weren't kept abreast of what was going on with her 
prosecution.
    Mrs. Kane. It was mostly the banks that were the victim, 
not me. So the banks knew about it and I found out after the 
fact.
    Mr. Greenwood. Now, you indicated in your testimony that 
your--this happened--this--you discovered this how long ago?
    Mrs. Kane. A little over 2 years ago.
    Mr. Greenwood. A little over 2 years ago. And you are still 
not finished cleaning up your mess.
    Mrs. Kane. We are about 95 percent.
    Mr. Greenwood. Okay. What remains to be done?
    Mrs. Kane. We just received the latest with our lovely 
Verizon. But we just received the third credit report of the 
three, and now they just have to take the 90 days or 30 to 90 
days to make certain everything does come off. So hopefully, we 
are down to the last stretch.
    Mr. Greenwood. All right. And it is interesting you said 
that the banks were the victims, not you. I mean, one of the 
things that we are trying to make clear here is yes, the banks 
were holding the financial bag as a result of this, but you and 
your husband obviously were victimized, because of the----
    Mrs. Kane. Well, I certainly think so.
    Mr. Greenwood. Right. Because--have you ever estimated how 
many hours of your time this has consumed?
    Mrs. Kane. Countless.
    Mr. Greenwood. Countless hours of your time.
    Mrs. Kane. Countless. I have----
    Mr. Greenwood. And you have had some phone bills, 
obviously, because you didn't have 800 numbers.
    Mrs. Kane. The phone bills were a lot, and just the nitty-
gritty daily grind of having to get the $8 credit reports again 
and again and again, and the notarized--every time you had to 
send a bank a notarized statement that this was not you, the 
$10 charge or whatever the nominal fee is, but it adds up.
    Mr. Greenwood. And were there periods of time where you 
couldn't use your own credit, your own credit cards and so 
forth to----
    Mrs. Kane. No, I was never----
    Mr. Greenwood. That was not disrupted. Okay. Let me see 
what else I was going to ask you. What would you say was the 
best resource for you in trying to get this identity theft 
problem taken care of? Who was most helpful to you?
    Mrs. Kane. It wasn't until I staggered through that I found 
out, through my own relatives, or people that I knew that had 
gone through this, which way to go. My one relative worked for 
the Social Security office and said, oh, make certain you check 
Social Security, or my neighbor was a police officer that said 
oh, make certain you do this. But it was not from the banks, it 
was not from the credit agencies. It was networking and a 
little bit of luck that we found our way through it, and I 
hopefully don't find out more. We just 2 years after the fact, 
I figured out that there was a credit protection agency that 
could have helped me through this. I wish I would have known at 
the beginning.
    Mr. Greenwood. Well, that gives me an opportunity to segue 
into the fact that for anyone in the room, there are materials 
at the front desk here that give some information about how to 
protect against--how to avoid identity theft, and also how to 
respond to it should it happen to you.
    Let me ask a question or two of the representative from the 
Red Cross. You said that the Penn-Jersey Regional operation 
office has changed significantly, and you illustrated some of 
the ways that you changed your practices so that your staff is 
trained to protect identities, that only select people are able 
to view the identifying information for donated blood.
    Do you know if those practices have been put into place in 
the Red Cross' activities throughout--in other regions of the 
country as well?
    Ms. O'Neill-LaGier. Well, just to clarify, Mr. Chairman, 
those processes were in place prior to us knowing of the 
identity theft, so that is our standard practice.
    Mr. Greenwood. Okay. It is--would--did you make changes--
did you find that there were changes you had to make as a 
result or this, or not?
    Ms. O'Neill-LaGier. We did a thorough review of our 
security, and there were very few changes that we made. There 
were a few things that we thought we could tighten up, but for 
the most part, we felt that our system was very secure.
    Mr. Greenwood. Are you able to speculate, and we want to be 
sensitive to the fact that there is an ongoing investigation, 
and so you are perfectly free to say that you can't answer any 
of the questions, but have you been able to identify yet 
whether this was an inside job, so to speak, someone who worked 
for Red Cross, or whether it was someone who got access to this 
information who was not part of your organization?
    Ms. O'Neill-LaGier. I would respectfully have to decline 
answering that.
    Mr. Greenwood. Okay.
    Ms. O'Neill-LaGier. As it is part of the investigation.
    Mr. Greenwood. I understand that a person's Social Security 
number is still considered as--you mentioned in your testimony, 
the universally accepted means of ID, but in light of these 
recent events, has the Red Cross considered using other 
tracking methods besides the Social Security number?
    Ms. O'Neill-LaGier. And that I can answer----
    Mr. Greenwood. Okay.
    Mr. O'Neill-LaGier. [continuing] with a positive yes. We 
are currently--the Red Cross, the entire organization, is 
currently producing a new donor card, which will have a unique 
donor identification number, and the new card will replace the 
Social Security number as the primary donor identifier, and 
will eliminate the need for the donor to verbally communicate 
their Social Security number at the blood drive. So, we expect 
that this initial distribution will begin in March 2004, and we 
expect to be fully implemented in the Red Cross system by the 
summer. So, we are very----
    Mr. Greenwood. And that would be nationwide?
    Ms. O'Neill-LaGier. Yes.
    Mr. Greenwood. Okay.
    Ms. O'Neill-LaGier. For the Red Cross.
    Mr. Greenwood. That is very good. So therefore, if somebody 
needs access to that, knows the numerals, there is nothing----
    Ms. O'Neill-LaGier. Right. It will be----
    Mr. Greenwood. [continuing] they could do with them to----
    Ms. O'Neill-LaGier. [continuing] just unique to their blood 
donation----
    Mr. Greenwood. Okay.
    Ms. O'Neill-LaGier. [continuing] history.
    Mr. Greenwood. The FDA oversees our Nation's blood supply, 
and the Red Cross is therefore subject to its regulations. Are 
there steps that the FDA should be taking to assist in 
protecting the blood donors and their personal information, 
because obviously, the Red Cross isn't the outfit involved in 
the blood supply.
    Ms. O'Neill-LaGier. Well, the FDA requires that we are 
always able to track the blood donation back to the blood 
donor, and that is for many safety and security reasons, so we 
have to have a mechanism in place to always be able to take 
that donation back to the donor. An example of something that 
might require us to look back and be able to identify that 
donor is if a subsequent--a positive test on that donor would 
come up. We have to be able to go back to all of that donor's 
donations and recall them from the inventory, so it is 
critically important.
    That is the requirement of the FDA, so when we moved to 
this unique Red Cross identifier, that will allow us to do that 
in the same way that the Social Security does.
    Mr. Greenwood. But to your knowledge, the FDA hasn't come 
up with a regulatory scheme that says that all of the Nation's 
blood supplies should use these kind of non-Social Security 
identifying numbers.
    Ms. O'Neill-LaGier. Not to my knowledge.
    Mr. Greenwood. Okay. The FTC is tasked with being the 
flagship Federal Government agency for monitoring identity 
theft and providing guidance to victims. Did the Red Cross 
contact the FTC when this first happened?
    Ms. O'Neill-LaGier. Well, we worked with the U.S. 
Attorney's Office, the FBI and the Postal Inspector Office, and 
they took care of any of that notification. We took their 
advice on the information to send out to the blood donors, 
which I have included, giving them some guidance on how to 
contact the credit agencies and to put fraud alerts on the 
credit reports.
    Mr. Greenwood. Well, I think both of these cases illustrate 
the depravity of people who would take these numbers with total 
disregard to the impacts, in one case, very personal impact 
within a family and in another case, an impact, a series of 
impacts that could really be life and death matters, in terms 
of keeping a secure supply of blood.
    The Chair recognizes Mr. Gerlach for questions.
    Mr. Gerlach. Thank you. Just as a follow-up to that last 
comment. What has been the anecdotal feedback from those that 
have been identity theft victims that come through the blood 
drives that you have narrowed down as to be those that--
potentially, was where the fraudulent activity generated from. 
What has been the anecdotal feedback as to what they have 
experienced after being victimized that way?
    Ms. O'Neill-LaGier. Well, the victims that we--the Red 
Cross have talked to, you know, are very upset, very concerned. 
And very concerned that this would happen to the American Red 
Cross, because we truly have been victimized also. There has 
been a variety of amounts of money that were stolen. This is 
anecdotal to me. I mean, you could check with the investigators 
for better information, but it is really quite devastating to 
them and to us, because we just feel terrible about it.
    Remarkably, many people have returned to donate again, and 
feel that it is their obligation as members of the community 
and are willing to work through this, and we have shared with 
the victims our intent to move away from Social Security 
number, and so they are willing to wait for us to get that in 
place.
    Mr. Gerlach. Okay. And Mrs. Kane, on your--in your 
situation, the person that stole your identity was also named 
Michelle Kane, and do you know whether or not she, in fact, 
used other Michelle Kanes around the country, in addition to 
yourself as being the basis for which she undertook that 
fraudulent activity?
    Mrs. Kane. I don't know if she found any other Michelle 
Kanes in her medical data base that she was able to find their 
Social Security numbers as well. All I know is my account.
    Mr. Gerlach. Okay. When did you find out her identity as 
being the person that stole your identity? When in relation to 
the criminal prosecution she underwent and was convicted of and 
thereafter served time, when did you learn of her identity, so 
that you knew that was the person that stole your identity?
    Mrs. Kane. When she applied for a mortgage and took out a 
$40,000 loan, that is when it became big enough for the banks 
to get involved, and the bank that was involved hired an 
investigator.
    Mr. Gerlach. Okay.
    Mrs. Kane. And it was through the investigator, he asked me 
did I wear glasses, which I thought was an odd question, 
because I only wore them for college, and I rarely wore them. I 
think I have worn them 10 times total, and at first, I said no, 
because it was so long ago, and then I said well, I do have a 
pair, and here, she worked for a vision company, and she was 
able to go through the medical data bases. According to the 
investigator, she denies that this is how it came to be, but--
so it was once the mortgage company got involved that they told 
me how they think it went down.
    Mr. Gerlach. And that information was passed along to law 
enforcement where she resided?
    Mrs. Kane. Yes. They were----
    Mr. Gerlach. And that was where?
    Mrs. Kane. Schenectady, New York.
    Mr. Gerlach. Schenectady. And then you had no contact 
yourself, however, with the Schenectady Police Department or 
the prosecuting attorney in that county----
    Mrs. Kane. No.
    Mr. Gerlach. [continuing] where Schenectady is located.
    Mrs. Kane. No, I did not. I had only had contact with the 
investigator, who kept me abreast of the information.
    Mr. Gerlach. Okay. And after these activities occurred, was 
anybody coming to you, either credit reporting agencies, with 
information? Obviously, you saw that it was inappropriate, but 
were any debt collectors or anybody coming, financial 
institutions coming after you for payment on loans or 
indebtedness that had been incurred in your name?
    Mrs. Kane. Up until--once we got in touch with the credit 
agencies and once we told them we were victims, our number must 
have gotten onto the credit reports. Obviously, our phone 
number, our address, and then the debt collectors started 
calling us, but not beforehand, because she had her own Post 
Office box set up.
    Mr. Gerlach. Okay.
    Mrs. Kane. So once we got in the system, you would think 
the credit agencies would help. Instead, they put us down as--
they--just mistaken. It was a mistake of which Michelle Kane 
they should call, and they started calling us to pay off these 
debts.
    Mr. Gerlach. And what was your experience with those debt 
collectors?
    Mrs. Kane. Well, it was not pleasant.
    Mr. Gerlach. Did they accept your explanation that you were 
a victim?
    Mrs. Kane. No, they just denied--they said, I am sorry, we 
don't believe you. You know, pay up, honey.
    Mr. Gerlach. Okay.
    Mrs. Kane. So.
    Mr. Gerlach. And how long did that--how many different 
collectors were after you in that fashion?
    Mrs. Kane. Well, it was----
    Mr. Gerlach. And how long did it take them to realize 
that----
    Mrs. Kane. It wasn't very long. It was only two banks, and 
it did eventually get cleared up, but it was still not 
something I was expecting.
    Mr. Gerlach. Okay. And upon what information, if you know, 
did they rely upon to understand that you were a victim in this 
situation, and therefore should not be harassed with dunning 
notes or telephone calls? Did they receive information from 
some other source, either law enforcement in Schenectady or the 
private investigator hired by the one bank? Do you know how it 
was that they finally let you off the hook in terms of their 
thought that you should be paying on the debt?
    Mrs. Kane. I think, and this is just my own personal 
thoughts, I don't think that they got any information from any 
other outside sources. I think they just probably did their 
homework and looked at the information that was in front of 
them and realized----
    Mr. Gerlach. That you were telling the truth.
    Mrs. Kane. That we were telling the truth.
    Mr. Gerlach. Yeah.
    Mrs. Kane. By looking at their information that we had sent 
through our credit--our criminal record. What did we send? The 
police reports and the ID and the notarized forms that they 
probably just put two and two together once we persisted enough 
and said that this is not us. But it took a few phone calls.
    Mr. Gerlach. Okay. Thank you.
    Mr. Greenwood. Thank you. One more question for Ms. 
O'Neill-LaGier. Are blood collection activities subject to the 
Act that protects the privacy of health information, HIPAA?
    Ms. O'Neill-LaGier. The HIPAA. We are not obligated to 
HIPAA, but I would have to check on that for you and get back 
to you on that.
    Mr. Greenwood. Okay. Would you do that and----
    Ms. O'Neill-LaGier. Yeah. I will do that.
    Mr. Greenwood. [continuing] communicate with the committee 
staff on that. Okay. We thank you both for being here and for 
your testimony and for your willingness to help us in our 
investigation, and you are both excused.
    Mrs. Kane. Thank you.
    Ms. O'Neill-LaGier. Thank you.
    Mr. Greenwood. For the rest of the day. And we will now 
call forward the second panel, consisting of Mr. Robert Ryan 
from--he is the Senior Director of Government Relations for 
TransUnion, which is out of Chicago; and also Milissa Lenahan, 
who is the Assistant Vice President and Assistant Operations 
Officer for First National Bank and Trust, nearby in Newtown, 
Pennsylvania. Welcome, both of you.
    Mr. Ryan. Thank you.
    Ms. Lenahan. Thank you.
    Mr. Greenwood. You may sit down. Then I will ask you to 
stand up. As you have heard me say to the other witnesses that 
we take testimony here under oath, and so I need to ask if 
either of you objects to taking--giving your testimony under 
oath.
    Mr. Ryan. No.
    Mr. Greenwood. Okay. And you are both entitled to be 
represented by counsel. Do either of you choose to be 
represented by counsel?
    Ms. Lenahan. No.
    Mr. Ryan. No, Mr. Chairman.
    Mr. Greenwood. Okay. Now, if you would stand up again and 
raise your right hands.
    [Witnesses sworn.]
    Mr. Greenwood. Okay. You are both under oath, and I am 
going to start with you, Mr. Ryan. You are recognized to give 
your testimony.

    TESTIMONY OF ROBERT RYAN, SENIOR DIRECTOR OF GOVERNMENT 
  RELATIONS, TRANSUNION; AND MILISSA J. LENAHAN, ASSISTANT VP/
  ASSISTANT OPERATIONS OFFICER, FIRST NATIONAL BANK AND TRUST 
                       COMPANY OF NEWTOWN

    Mr. Ryan. Good morning, Mr. Chairman Greenwood, Congressman 
Gerlach. My name is Bob Ryan, and I am the Senior Director of 
Government Relations for TransUnion. We are a leading global 
provider of consumer report information supported by more than 
4,100 employees in more than 24 countries worldwide. I 
appreciate the opportunity to appear before you here today to 
discuss the role of TransUnion in the credit granting process, 
and in assisting consumers, and our business customers in 
preventing and remediating identity theft.
    I would like to explain briefly how TransUnion plays a 
critical role in the economic engine of credit availability. We 
provide the information necessary to lenders, regardless of 
where they are located, to make credit available to consumers 
all across the United States. In order for a lender to extend a 
loan to a consumer, the lender needs to evaluate the credit 
risks inherent in lending to that consumer, and the proper 
evaluation of the consumer's credit risks allows the lender to 
determine whether to provide credit to the consumer and at what 
price.
    We believe that the most accurate and predictive piece of 
information a lender can use in evaluating credit risk is a 
consumer report, also commonly called a credit report, and we 
take great pride in our ability to collect and disseminate 
credit report information. We receive and process approximately 
2 billion updates to consumers' credit files each month.
    Now, let me turn to our role in thwarting identity theft. 
Identify theft is a serious problem and TransUnion is part of 
the solution. Since the 1980's, when TransUnion developed the 
first application fraud detection services for credit grantors, 
we have been helping our business customers detect and avoid 
application fraud, thus reducing the number of consumers 
affected by identity theft. In the mid-1980's, we were the 
first consumer reporting agency to initiate the development of 
special procedures to assist identity theft victims, including 
expedited dispute verification processes. In the late 1980's, 
we developed the innovation of a security alert flag on credit 
reports, to alert our customers to use extra caution in opening 
new accounts in the cases of prospective victims or actual 
victims of identity theft.
    In 1992, we were the first consumer reporting agency to 
establish a special Fraud Victim Assistance group within our 
organization that is solely dedicated to identify theft 
problems. In 1997, we began immediate suppression at the same 
time the dispute investigation process was initiated, of fraud-
related information on a consumer's file, upon their 
presentation to us of a police report or other documentation, 
such as a Postal Service report confirming the fraud. In March 
2000, this process became an industry standard.
    Our identify fraud specialists work with consumers, 
industry and government agencies to remediate damaged credit 
files as quickly as possible, to take preventative steps that 
reduce further victimization and to cooperate with law 
enforcement authorities in their investigations and 
prosecutions of this crime. Our processes include posting a 
security alert to the victim's file, opting the victim out of 
prescreened, pre-approved offers of credit or insurance, if he 
or she wishes, providing the victim a free credit report and 
notifying credit grantors and others, whose inquiries on the 
victim's file are due to fraud.
    Congress, as you noted, Mr. Chairman, is also taking 
important steps with respect to identity theft. We applaud 
Congress for enacting the Fair and Accurate Credit Transactions 
Act, or the FACT Act, which makes permanent important national 
standards in the credit reporting system and includes a 
comprehensive set of provisions pertaining to identity theft.
    A significant provision of the new law is a requirement to 
provide a free credit report annually to consumers upon their 
request, so that was item one on Ms. Kane's suggestions. For 
many years, we have provided free credit reports to victims, 
and to individuals who think they may be--there may be 
fraudulent information on their reports.
    The new law also provides for three types of security 
alerts in credit reports: an initial alert, for cases of 
potential fraud; an extended alert, in cases of actual identity 
theft; and a special active duty alert for our men and women 
serving in the armed forces stationed away from home.
    TransUnion was a pioneer in giving consumers the 
opportunity to place security alerts in their credit files, as 
I noted a moment ago. The FACT Act also codifies what has been 
our industry's voluntary practice concerning the immediate 
blocking of information related to identity theft upon the 
consumer's providing us with an identity theft report. The FACT 
Act will also benefit consumers by requiring the Federal Trade 
Commission to develop a summary of consumer rights with respect 
to the procedures for remedying the effects of fraud or 
identity theft. The FACT Act also requires the consumer 
reporting agency to provide a heads-up, a notice, to a credit 
grantor if the grantor submits to a consumer reporting agency 
an address for a consumer that doesn't match an address in the 
consumer reporting agency's files.
    At TransUnion, we are proud of our leadership in the 
development of processes and procedures to prevent and 
remediate identity theft. We applaud the 108th Congress for 
enacting the FACT Act, creating important, new national 
standards to help remediate identity theft, and we are 
gratified that many of the provisions of the bill were based on 
credit reporting industry standards that TransUnion helped to 
put in place.
    Mr. Chairman, Congressman Gerlach, I sincerely appreciate 
your invitation to testify today on identity theft. TransUnion 
looks forward to continuing to be part of the solution to this 
terrible crime, and I would be pleased to answer any questions 
that you may have.
    [The prepared statement of Robert Ryan follows:]
   Prepared Statement of Robert Ryan, Senior Director of Government 
                         Relations, TransUnion
                              introduction
    Good morning, Chairman Greenwood, Congressman Deutsch, and Members 
of the Subcommittee. My name is Robert Ryan, and I am Senior Director 
of Government Relations for TransUnion, LLC. TransUnion is a leading 
global provider of consumer report information supported by more than 
4,100 employees in more than 24 countries worldwide. I appreciate the 
opportunity to appear before you today to discuss the role of 
TransUnion in the credit granting process and in assisting consumers 
and our business customers in preventing and remediating identity 
theft.
         the role of transunion in the credit granting process
    Consumer spending makes up approximately two-thirds of the U.S. 
gross domestic product. A critical component of this economic driver is 
the availability of consumer credit. Consumers in the United States 
have access to a wide variety of credit from a number of sources at 
extremely competitive prices. Consumers rely on the availability of 
credit for a variety of purposes, such as the purchase of homes, cars, 
education, and daily needs. In fact, there is approximately $7 trillion 
in outstanding mortgages and other consumer loans in the United States. 
There is no question that our economy would suffer if consumers could 
not easily access credit as they do today.
    It is my pleasure to explain how TransUnion plays a critical role 
in the economic engine of credit availability. In sum, we provide the 
information necessary for lenders, regardless of where they are 
located, to make credit available to consumers all across the United 
States. In order for a lender to extend a loan to a consumer, the 
lender must evaluate the credit risks inherent in lending to that 
consumer. The proper evaluation of the consumer's credit risks allows 
the lender to determine whether to provide credit to the consumer and 
at what price. We believe that the most accurate and predictive piece 
of information a lender can use in evaluating a consumer's credit risk 
is a consumer report (also commonly called a credit report). TransUnion 
is in the business of providing lenders with this critical information.
The Credit Reporting Process
    In order to more fully understand TransUnion's role in the credit 
availability process, it is important to understand the credit 
reporting process itself. TransUnion is a national consumer reporting 
agency. We are a nationwide repository of consumer report information 
with files on approximately 200--million individuals in the United 
States. The information in our files generally consists of: (i)--
identification information (including social security numbers); (ii)--
credit history; (iii)--public records (e.g. tax liens, judgments, 
etc.); and (iv)--a list of entities that have received the consumer's 
credit report from us. It is also important to clarify what is not in a 
credit report. A TransUnion credit report does not include checking or 
savings account information, medical histories, purchases paid in full 
with cash or check, business accounts (unless the consumer is 
personally liable for the debt), criminal histories, or race, gender, 
religion, or national origin.
    Most of the information in our files is provided to us voluntarily 
by a variety of sources. Although the Fair Credit Reporting Act (FCRA) 
does not require anyone to furnish information to consumer reporting 
agencies, or have any rules on the scope or nature of such information, 
the law does establish certain important guidelines for those who 
voluntarily furnish information to consumer reporting agencies. For 
example, furnishers must meet certain accuracy standards when providing 
information to consumer reporting agencies. Furnishers must also meet 
requirements ensuring that the information the furnishers have reported 
to consumer reporting agencies remains complete and accurate. Despite 
these legal obligations imposed on data furnishers, lenders and others 
participate in the credit reporting process due to the recognized value 
of complete and up-to-date credit reporting. In essence, if lenders 
want accurate, complete, and up-to-date information on which they are 
to base credit decisions, they must ensure a continuing supply of such 
data to consumer reporting agencies.
    We take great pride in our ability to collect and disseminate 
credit report information. In fact, TransUnion receives and processes 
approximately 2 billion updates to consumers' credit files each month. 
However, we do not distribute credit reports to just anyone. Under the 
FCRA, we may not provide a credit report to anyone who does not certify 
to us that they have a permissible purpose for such information. This 
protection ensures that the distribution of credit reports is made only 
to those with a need for such information (e.g. granting credit).
  the role of transunion in identity theft prevention and remediation
TransUnion Is Part of the Solution
    Identity theft is a serious problem and TransUnion is part of the 
solution. Since the 1980s, when TransUnion developed the first 
application fraud detection suite of services for credit grantors (our 
HAWK ' products, introduced in 1983), we have recognized 
that fraud through identity theft is a problem for which we can be part 
of the solution. We have been helping our customers detect and avoid 
application fraud for over 20 years, thus reducing the number of 
consumers affected by identity theft. In the mid-1980s we were the 
first consumer reporting agency to initiate the development of special 
procedures to assist identity theft victims, including expedited 
dispute verification processes and the deletion of fraudulent 
information. In the late 1980s we developed the innovation of a 
``security alert'' flag on credit reports, to alert our customers to 
use extra caution in opening new accounts.
    In 1992, we were the first national consumer reporting agency to 
establish a special Fraud Victim Assistance group within our 
organization that is solely dedicated to identity theft problems. In 
the 1997 we began immediate suppression, at the same time the dispute 
investigation process was initiated, of fraud-related information on a 
consumer's file upon their presentation of a police report or other 
documentation confirming the fraud. In March 2000, this process became 
an industry standard.
    Our identity fraud specialists work with consumers, industry, and 
government agencies to remediate damaged credit files as quickly as 
possible, to take preventive steps that reduce further victimization, 
and to cooperate with law enforcement authorities in their 
investigations and prosecutions of this crime. As we explain on our 
website, www.transunion.com, our process includes posting a security 
alert, opting the victim out of prescreening if the victim wishes, 
providing the victim a free credit report, and notifying inquirers 
whose inquiries were due to fraud. We are proud to have played a 
leadership role in the development of processes that have become 
national standards today and expect to continue this leadership to 
combat this growing crime.
 the importance of national standards in combating identity theft: the 
                            fact act of 2003
The Fair and Accurate Credit Transactions Act of 2003
    As you know, on December 4, 2003, President Bush signed into law 
the Fair and Accurate Credit Transactions Act of 2003, or the FACT Act. 
We applaud Congress for enacting the FACT Act, which makes permanent 
important national standards in the credit reporting system, and 
includes a comprehensive set of provisions pertaining to identity 
theft. I am pleased to note that many of the identity theft provisions 
in the FACT Act are based on innovations that TransUnion and other 
consumer reporting agencies have developed to help consumers in the 
fight against identity theft.
    A significant provision in the new law is a requirement to provide 
free credit report annually to consumers upon request. This new 
obligation springs from the idea that if the credit report is free 
there will be increased access to credit histories by more people, and 
that increased access will improve accuracy and reduce identity theft 
by encouraging individuals to regularly review their credit reports. 
There remains significant debate as to the validity of this logic since 
credit reports were always accessible for a modest fee (currently $9) 
and for many years all national consumer reporting agencies have 
provided free credit reports, upon request, to identity theft victims 
and to individuals who think there may be fraudulent information on 
their reports.
    The new law also provides for three types of security alerts in 
credit reports--an initial alert (upon a good faith suspicion that the 
individual may be subject to identity theft), a ``military'' alert (for 
our men and women serving in the military away from home), and an 
extended alert (in cases of actual identity theft). As a general 
matter, certain users of consumer reports (e.g. creditors) are required 
to take steps to confirm a consumer's identity prior to extending 
credit when these alerts are present on credit reports. As I mentioned 
above, TransUnion was a pioneer in giving consumers the opportunity to 
place security alerts in their credit files.
    The FACT Act also codifies what has been our industry's voluntary 
practice concerning the immediate blocking of information related to 
identity theft upon the consumer's providing us with an identity theft 
report--usually a police report. This practice is also known as 
``tradeline blocking.'' The national consumer reporting agencies are 
required to share information about security alerts and blocked data 
among themselves, so that a consumer's actions with one consumer 
reporting agency will flow to the others, and be reflected on their 
credit reports.
    The FACT Act will also benefit consumers by requiring the Federal 
Trade Commission to develop a summary of consumer rights under the FCRA 
with respect to the procedures for remedying the effects of fraud or 
identity theft involving credit or other financial accounts or 
transactions. This provision is designed to assist identity theft 
victims in understanding the numerous tools at their disposal, such as 
the use of security alerts or tradeline blocking, to mitigate the harms 
of identity theft. Consumer reporting agencies will provide a summary 
of these rights to any consumer who contacts them and expresses a 
belief that he or she is a victim of fraud or identity theft involving 
a financial transaction.
    The FACT Act also requires a consumer reporting agency to provide a 
``heads up'' to a user of credit reports if the user submits to a 
consumer reporting agency an address for a consumer that does not match 
an address in the consumer reporting agency's files. This provision is 
based on existing practices used by TransUnion to notify creditors and 
others that the consumer's address does not match one we have on file. 
This serves as another protection against identity theft, where the 
criminal may use a victim's identification information but the 
criminal's address in order to obtain credit or other goods or 
services. Under the FACT Act, the user of a credit report that contains 
such a notice of discrepancy will need to take certain steps to reduce 
the risk that the transaction is the result of identity theft.
    The issue of data furnishers providing the consumer reporting 
agency information that has been identified as fraudulent by the 
consumer reporting agency, and has been ``blocked'' by the consumer 
reporting agency, has been addressed by the FACT Act in two ways. 
First, in certain circumstances, the law prohibits the sale to third 
parties of accounts on which the creditor has received a notice of 
identity theft from either the consumer directly, or from the consumer 
reporting agency. The intent is to prevent the fraudulent information 
from finding its way back onto the credit report in the form of a 
report from a third party collection agency. Second, the FACT Act 
prohibits data furnishers from providing information to a consumer 
reporting agency if the consumer provides them an identity theft report 
identifying the relevant information as resulting from identity theft, 
or if the furnishers are notified by a consumer reporting agency that 
an identity theft report has been filed with respect to such 
information.
Furnisher Obligations
    Because the FACT Act makes permanent the national standards 
pertaining to data furnisher obligations, it removed the danger that 
state laws pertaining to furnisher obligations could have reduced the 
number of entities willing to provide information to consumer reporting 
agencies. Withdrawal of data furnishers from the system would result 
not only in a loss of the credit information they provide but would 
also result in the loss of the address updates they provide. 
TransUnion's database relies on addresses that are in active use by 
creditors in mailing monthly statements to their customers. The fact 
that most data furnishers today also provide us with the social 
security number of their customers allows us to bridge address changes 
and name variations that commonly occur in our society. Businesses and 
government agencies with a permissible purpose to obtain a consumer 
report rely on our robust national database of names, social security 
numbers, and up to date addresses for a variety of fraud prevention and 
identity authentication services. With less current identification or 
address information coming into the database, the performance of these 
services would suffer.
Reinvestigation Timeframes
    In identity theft cases, the consumer reporting agency is tasked 
with sorting out accurate and inaccurate information about the 
consumer. This is a difficult process and, if not done properly, could 
affect not only the consumer's ability to obtain credit but the safety 
and soundness of our financial institutions. We were gratified that the 
FACT Act preserved the national standard for reinvestigation processes 
and timeframes. In this regard, identity theft victims in Pennsylvania 
will continue to be treated no differently than victims from California 
to Florida. As a nation, we cannot have any other result.
                               conclusion
    At TransUnion, we are proud of our leadership in the development of 
processes and procedures to prevent and remediate identity theft. We 
applaud the 108th Congress for enacting the FACT Act, creating 
important new national standards that will help remediate identity 
theft. We are gratified that many of the provisions in the bill were 
based on credit reporting industry standards that TransUnion helped put 
in place.
    Mr. Chairman, Congressman Deutsch, and members of the Subcommittee, 
I sincerely appreciate your invitation to testify today on identity 
theft. TransUnion looks forward to continuing to be part of the 
solution to this terrible crime.

    Mr. Greenwood. Thank you very much, Mr. Ryan. Ms. Lenahan.

                  TESTIMONY OF MILISSA LENAHAN

    Ms. Lenahan. Hi. Thank you for the opportunity, and I would 
like to recognize American Bankers Association for giving me 
the opportunity to speak and they provided some materials, 
including a video, and I would just like for the record to 
recognize that.
    Mr. Greenwood. Okay.
    Ms. Lenahan. My name is Milissa Lenahan. I have been 
employed by First National Bank and Trust Company of Newtown 
for 20 years. My current position is Assistant Vice President 
and Assistant Operations Officer, Security Officer and 
Custodian of Records.
    Mr. Greenwood. Can you hear all right in the back, then? 
Okay.
    Ms. Lenahan. Okay. One of my primary functions as a 
Security Officer is researching and responding to fraud. I am 
currently working 20 cases of fraud that involve some form of 
identity theft. Twenty cases may not seem like a large number. 
However, First National Bank is a community bank, with our 
service area being in central and lower Bucks County. To us, 
one fraud is too many.
    Identify theft is on the rise and no one is exempt from the 
possibilities of having their identity compromised. Identity 
theft takes several forms, from a stolen piece of mail to a 
wealth of counterfeit documents with unknowing victims' 
information.
    My definition of identity theft is any time a person's 
information is used by someone other than themself. You don't 
have to have a fake driver's license to impersonate somebody 
and purchase something online with their stolen credit card. It 
has been my experience that retail locations rarely check the 
signature on the back of a credit card.
    Our bank takes pride in its customer service and we will 
use our abilities and resources to assist our customers who 
have victimized by identity theft. We provide whatever 
assistance is necessary to stop any further damage to our 
customer's good name.
    The following is a summary of the steps we take. Once 
notified by the customer, a hold is placed on all accounts. 
Notification is then broadcasted to every computer within the 
bank, tellers as well as back offices, as an alert. It is our 
practice to close customers' accounts and open new ones to 
prevent any future loss. We work with the customer in making 
sure legitimate payments are honored. We assist our customers 
with the paperwork necessary to credit back any missing funds 
as a result of the fraud, and in addition, we provide the 
customer with information on each credit reporting agency with 
the appropriate phone numbers, so that they can have an alert 
placed on their credit report.
    We recommend that our customers file a police report, and 
we will cooperate with police in an attempt to catch the 
fraudster and bring them to justice. Training and education is 
a large part of what we do. It is an ongoing process and we 
will pool any and all resources available to us that is put out 
by organizations such as the American Bankers Association. We 
will use these resources in training, as well as provide them 
to our customers in their monthly statement. We post security 
alerts on our website as another type of warning to our 
customers, and we will speak to organizations and schools when 
asked.
    The tellers on the front line are the most vulnerable to a 
perpetrator of identity theft. Split deposit fraud is one of 
the more common ways to pass yourself off as a customer by 
using a counterfeit or stolen check, presenting a portion for 
deposit and receiving a larger portion in cash back. The 
fraudster is usually prepared to present identification. The 
problem is there is no way for the teller to know that this 
identification is legitimate or not.
    Our new accounts people are also at risk. Technology has 
broadened the spectrum for someone intent on committing fraud. 
The only equipment you need is a home computer and a printer. A 
fake ID on the street would cost maybe $50. Check stock is 
readily available at stores that sell office supplies. All you 
need now is to take information off of someone's check. That 
check alone is a wealth of information, name, address, phone 
number, bank name, bank routing number and account number.
    When I started my career in banking in 1983, the only way 
you could get a supply of checks was by submitting your order 
to your bank. A bank would have the tools necessary to 
determine if this order is fraudulent, as would the check 
printing company they contracted their business with. 
Unfortunately, resources necessary are not always available or 
practical. We no sooner put tools and policies into place and 
then you are hit with a fraud with a new twist.
    Prevention is the key, but how do you prevent someone from 
stealing? If you are lucky enough to get an arrest, what is the 
punishment? Credit for time served and restitution that could 
take years. Our bank has a very good working relationship with 
local police departments, but police also have limited 
resources and tools to pursue these types of criminals. When 
our customer needs to file a police report, it is not clear 
which department they need to file with. Do you file in the 
municipality you live, or do you have a file in each location 
that an item was negotiated? One example of this that I had 
recently was our customer had to file a report in three 
separate municipalities after being turned away by their home 
municipality.
    The consumer is depending on the police to help. Identity 
theft leaves consumers with the feeling of total personal 
violation regardless of the dollar amount. The consumer spends 
countless hours trying to repair the damage. That is why we 
depend on organizations such as the ABA, the FBI, the FTC and 
local law enforcement to communicate and provide new tools to 
assist us in educating not only ourselves but our customers as 
well.
    Identity theft is one form of fraud that is extremely hard 
to prevent without access to certain tools only available to 
law enforcement. We can't call the police every time someone 
presents us with a driver's license to verify the validity of 
the document and the picture to the person in front of the 
teller. New technology is being made available in some states 
for this type of verification. Unfortunately, not in all 
states.
    New regulations and policies, such as the PATRIOT Act and 
the Customer Identification Program will help in the prevention 
of new account identity theft, but for how long? If the people 
responsible for the crime are not punished for their actions, 
regardless of the dollar amount, it is only a matter of time 
before a new type of fraud surfaces. Government organizations, 
law enforcement, financial institutions and consumers all need 
to work together to stop this growing fraud.
    Thank you.
    [The prepared statement of Milissa Lenahan follows:]
Prepared Statement of Milissa J. Lenahan, First National Bank and Trust
    My name is Milissa J. Lenahan, I have been employed by The First 
National Bank and Trust Company of Newtown for 20 years. My current 
position is Assistant Vice President, Assistant Operations Officer, 
Security Officer and Custodian of Records. One of my primary functions 
as a Security Officer is researching and responding to fraud. I am 
currently working 20 cases of fraud that involve some form of Identity 
Theft. 20 cases may not seem like a large number however, First 
National Bank is a Community Bank with our service area being within 
Central and Lower Bucks County. To us one fraud is too many.
    Identity Theft is on the rise and no one is exempt from the 
possibilities of having their identity compromised. Identity Theft 
takes several forms from a stolen piece of mail to a wealth of 
counterfeit documents with unknowing victims information. My definition 
of Identity Theft is any time a persons information is used by someone 
other than them self. You don't have to have a fake Drivers License to 
impersonate someone and purchase something online with their stolen 
credit card. It has been my experience that retail locations rarely 
check the signature on the back of a credit card. Our bank takes pride 
in it customer service and we will use our abilities and resources to 
assist our customers who have been victimized by Identity Theft. We 
provide what ever assistance is necessary to stop any further damage to 
our customers good name. The following is a summary of the steps we 
take: Once notified by the customer, a hold is placed on all accounts. 
Notification is broadcasted to every computer, tellers as well as back 
offices as an alert throughout the bank. It is our practice to close 
the customers account and open new to prevent any further loss. We work 
with the customer in making sure legitimate payments are honored. We 
assist our customers with the paperwork necessary to credit back any 
funds missing as a result of the fraud. In addition we provide the 
customer with information on each credit reporting agency with the 
appropriate phone numbers so that they can have an alert placed on 
their credit report. We recommend that the customer file a police 
report. We will cooperate with police in an attempt to catch the 
``Fraudster'' and bring them to justice.
    Training and education is a large part of what we do. It is an on 
going process and we will pull any and all resources available to us 
that is put out by organizations such as American Bankers Association. 
We will use these resources in training as well as providing them to 
our customers in their monthly statement. We post security alerts on 
our web site as another type of warming to our customers, and will 
speak to organizations and schools when asked.
    The tellers on the front line are the most vulnerable to a 
perpetrator of Identity Theft, split deposit fraud is one of the more 
common ways to pass yourself off as a customer by using a counterfeit 
or stolen check and presenting a portion for deposit and receiving a 
larger portion in cash back.
    The ``Fraudster'' is usually prepared to present identification. 
The problem is there is no way for the teller to know if this 
identification is legitimate or not.
    Our new accounts people are also at risk. Technology has broadened 
the spectrum for someone intent on committing fraud. The only equipment 
you need is a home computer and a printer.
    A fake ID on the street would cost maybe $50.00. Check stock is 
readily available at stores that sell office supplies. All you need now 
is to take information off of someone's check. That check alone is a 
wealth of information, name, address, phone number, bank name, bank 
routing number and account number. When I started my career in banking 
in 1983, the only way you could get a supply of checks was by 
submitting your order to your bank. A bank would have the tools 
necessary to determine if this order is fraudulent as would the check 
printing company they contracted their business with.
    Unfortunately resources necessary are not always available or 
practical. We no sooner put new tools and policies in place and then 
you are hit with a fraud with a new twist. Prevention is the key, but 
how do you prevent someone from stealing? If you are lucky enough to 
get an arrest, what is the punishment, credit for time served and 
restitution that could take years?
    Our bank has a very good working relationship with local Police 
departments. But Police also have limited resources and tools to pursue 
these types of criminals. When our customer needs to file a Police 
Report it is not clear which department they need to file with. Do you 
file in the municipality you live in or do you have to file in each 
location that an item was negotiated.
    One example of this I had recently was our customer had to file a 
report in three separate municipalities after being turned away by his 
home municipality. The consumer is depending on the Police to help. 
Identity Theft leaves consumers with the feeling of total personal 
violation regardless of the dollar amount. The consumer spends 
countless hours trying to repair the damage. That is why we depend on 
organizations such as the ABA, FBI, FTC and local Law Enforcement to 
communicate and provide new tools to assist us in educating not only 
ourselves but consumer as well.
    Identity Theft is one form of fraud that is extremely hard to 
prevent without access to certain tools only available to Law 
Enforcement. We can't call the Police every time someone presents us 
with a drivers license to verify the validity of the document and the 
picture to the person in front of the teller. New technology is being 
made available in some States for this type of verification, 
unfortunately not in all States.
    New regulations and policies such as the Patriot Act and Customer 
Identification Program will help in the prevention of new account 
Identity Theft but for how long? If the people responsible for the 
crime are not punished for their actions regardless of the dollar 
amount, it is only a matter of time before a new type of fraud 
surfaces.
    Government, Organizations, Law Enforcement, Financial Institutions 
and Consumers all need to work together to stop this growing fraud 
trend.

    Mr. Greenwood. Thank you very much. The Chair recognizes 
himself for questioning. And we will start with you, Mr. Ryan.
    You have heard the stories, including from Ms. Kane 
particularly this morning, that victims of identity theft find 
that the portion of their recovery that takes the longest is 
getting the fraudulent information off the victim's credit 
bureau. Can you explain what part of the process can take--why 
this part of the process can take such a long time, and what if 
anything is being done to shorten the time? Because I think Ms. 
Kane said that she was still trying to get--and one of the 
things she was--and I am a little bit confused, because you 
talked about free reports, and she said it was annoying to her 
to have to keep paying the $8 for the credit report. Was she 
not aware--do you think that she could get these for free?
    Mr. Ryan. I can't--I can only speak, Mr. Chairman, for 
TransUnion, and to identity theft victims----
    Mr. Greenwood. She mentioned TransUnion by name, I think, 
in her testimony.
    Mr. Ryan. Our policy is to provide free disclosures to 
identity theft victims and has been for years, so I----
    Mr. Greenwood. Well, let me--let us pursue that. If I am a 
victim of identity theft, and I say to myself, I better get my 
credit report, how would I--ordinarily, if I just go about the 
normal process of seeking a copy of my credit report, I would 
pay a fee unless--how would I know that I could get it for 
free?
    Mr. Ryan. Well, no, that is part of our script--part of the 
VRU, part of our--both our 1-800 telephone toll-free number 
that is provided to consumers for calling in for your credit 
disclosure, for your credit report, and part of our Internet 
website disclosure is that under certain circumstances, you can 
be entitled--you are--may be entitled to a free disclosure. 
Obviously, in the case of any adverse action, under the Fair 
Credit Reporting Act, but also under Fair Credit Reporting Act 
and our longstanding policy, you are entitled to a free 
disclosure if you believe there may be fraudulent information 
on your credit report as a result of identity theft or other 
fraud, and so that is part of our phone script and part of our 
Internet scripting as well. So, I can't, you know, reply in 
particular. Obviously, we will be happy to follow up and--if, I 
mean, if it was our company, we would be happy to refund or 
whatever.
    Mr. Greenwood. Is a credit bureau report easy for a 
layperson to read and understand? You heard Ms. Kane saying 
that sometimes there are abbreviations, there aren't 
necessarily numbers, toll-free numbers that can be gleaned from 
the report. Would I really know what to look for on my credit 
bureau report to determine whether I had been a victim of 
identity theft?
    Mr. Ryan. I may be a bit biased, Mr. Chairman, because I 
have been in the business so long, but when I--we have done a 
lot of work and testing of our consumer disclosure form. It is 
not the same credit report that would go to a bank, or you 
know, other financial institutions, so it is recast in English, 
and we do explain the different sections, so it is as clear as 
a very--typically long, 6, 7, 8 page, rather arcane listing of 
financial information, dates and dollar amounts can be, in my 
opinion.
    Mr. Greenwood. Okay. Another one of the major problems we 
hear regarding victims of identity theft is that they usually 
did not discover the theft for a long time, in some cases, for 
over a year. The question is what type of fraud detection 
systems or services could the credit bureaus provide to try and 
identify the fraud before the victim even becomes aware of it?
    Mr. Ryan. We are, as an ongoing matter of our business 
practice, we are looking at better ways to alert all of our 
constituents to possible fraud. We maintain, though, again, 
files on 220 million--all the credit active people in the 
United States, and so, I don't--we have not identified a way to 
proactively notify individual consumers. We certainly do--we 
are very available, you know, we are very open. And the new 
FACT Act, again, provides a free annual disclosure to everybody 
in the country, plus, as again, as I said, we have been open 
and available to providing free disclosures to consumers who 
even think there may be fraudulent information on their file. 
But--and that's the state-of-the-art pretty much today on this.
    Mr. Greenwood. Are there provisions that you would have 
preferred to see get into the FACT Act that were not?
    Mr. Ryan. I think that--no, the FACT Act is--it is a very 
comprehensive law. If, Mr. Chairman, you are asking if there 
are other issues pertaining to identity theft, that as a matter 
of public policy or legislation, were not addressed in the FACT 
Act, you--the committee has heard some of those earlier today. 
One is the issue of the robustness of our State identification, 
the driver's license system and ID cards and there is certainly 
legislation in Congress or it has been considered in Congress, 
aid to the states in making--providing for a more robust, 
perhaps biometric base identification system.
    Mr. Greenwood. I think that is where we are headed. That 
has been what has been going through my mind this morning is 
that eventually, we are going to have to--as a technological 
response that we are going to have to go to a more 
sophisticated system, that uses some kind of biometrics in 
order to really protect our financial security. Is that where 
you think we are headed?
    Mr. Ryan. That is where--that is at least one public policy 
issue that certainly is appropriate for Congress and perhaps 
this Committee to consider. Another issue that you heard 
mentioned earlier that I--we fully support are more resources 
for law enforcement for both data sharing, the FTC and the FBI, 
the Postal Inspector are all doing a lot, and as you also 
heard, the record is more uneven in the states. You know, some 
are doing more than others, but data sharing----
    Mr. Greenwood. Do you think some states are doing too much? 
You know, there is an issue that I asked Representative 
O'Neill, which is how he felt about the Federal Government 
superseding the State laws, and I know California particularly 
felt that their law was more stringent and they weren't happy 
about having it superseded by the Federal Law. Is that your 
experience?
    Mr. Ryan. Well, I think the FACT Act got the preemptions on 
identity theft about right, Mr. Chairman. The preemptions were 
very narrow. They only--what got preempted by the FACT Act were 
the national standards for the security alerts, for example, or 
the national standards for the trade line blocking with a 
police report, and to us, it makes a lot of sense to have one 
national standard for how security alerts work.
    And apart from the benefits to business, the benefit is to 
consumer empowerment, consumer education. So this way, what 
gets published in the FTC education program that they will--
they are going to be working on in the next year or so, we will 
have a national standard, and one way security alerts and 
military active duty alerts operate one way. But in other 
areas, the preemptions were not there. The preemptions were 
narrow. I think they got it about right.
    Mr. Greenwood. Let me--before I turn to Mr. Gerlach, let me 
just ask some questions of Ms. Lenahan. When you look at the 20 
cases that you are investigating, could you give us a sense 
of--you mentioned one specific act where someone will come in 
to one of your branches with a stolen check, let us say, and 
write the check to himself for $500 and then deposit $50 and 
take $450. Are the crimes that you are investigating, do they 
tend to actually occur in your branches where people walk in 
and do that, or is it more the case that they are just figuring 
out how to drain someone's account from an ATM machine, for 
instance?
    Ms. Lenahan. I would say that it is probably about even. We 
have about--we have 12 locations in Bucks County only, and 
usually, what happens is if we happen to be unfortunate enough 
to get hit inside the branch, it is all within a day. And they 
go from location to location, and----
    Mr. Greenwood. Have your video cameras or your security 
cameras ever assisted in the----
    Ms. Lenahan. Yes. Yes, they have.
    Mr. Greenwood. That is interesting.
    Ms. Lenahan. We have an excellent system called AccuTrack, 
and it provides beautiful pictures.
    Mr. Greenwood. So you can match, obviously, the transaction 
with the----
    Ms. Lenahan. Yes, we can.
    Mr. Greenwood. [continuing] time of the transaction?
    Ms. Lenahan. Yes, we can.
    Mr. Greenwood. To the place with the--that moment in your 
videotape and try to identify the person on there.
    Ms. Lenahan. Yes, we can.
    Mr. Greenwood. When I go to an ATM machine and forget to 
say no, I don't want a receipt and a receipt comes out, and I 
crumple it up and stick it in that little slot that says trash. 
Do I have to worry about that receipt being used for 
fraudulently?
    Ms. Lenahan. No, you do not. It only lists the last four 
digits of the debit card number.
    Mr. Greenwood. Which brings me to another point. One of the 
things I have learned in this investigation is that, of course, 
the ideal is to have a truncated--in every transaction, to have 
a truncated credit card number, so you just have the last four 
numbers indicated and then lots of Xes, but not every vendor 
uses that, because it can be costly to have equipment that does 
that. And so, the perpetrator can make a purchase--well, it 
is--a purchase can be made in a--let us say, a smaller retail 
shop that doesn't truncate that information. That receipt can 
be picked up by a perpetrator, taken to a department store, and 
that number used there to perpetrate a crime on another 
retailer, and so the retailer who may have a truncated system 
is being victimized as a result of the fact that the smaller 
retailers don't.
    Ms. Lenahan. Right.
    Mr. Greenwood. And that is a problem. And it is not easily 
solved, because it is tough--because of the cost of that 
equipment, it is tough to mandate that all retailers do that. 
It is tempting to do that, but it is expensive for the----
    Ms. Lenahan. You only need the credit card number. If that 
happened in a location, you wouldn't be able to take that piece 
of carbon number, or the number and go make a physical 
purchase.
    Mr. Greenwood. Right. You don't need to.
    Ms. Lenahan. But----
    Mr. Greenwood. You can go online and go to Macy's and----
    Ms. Lenahan. Online, telephone.
    Mr. Greenwood. [continuing] buy stuff all day long.
    Ms. Lenahan. Right.
    Mr. Greenwood. What types of security measures does your 
make take to ensure that your bank employees who have access to 
customers' personal information, are not abusing that 
information and potentially committing identity theft?
    Ms. Lenahan. Well, we are all bound to a code of ethics, 
and I don't think that there is anybody that is scrutinized 
more closely than our own employees. I am not going to say that 
is 100 percent foolproof, but in my experience, I have not had 
any experience in the last--since May 2002, of any negativity 
on an employee's end. Everything is security code and password 
sensitive. There is reports that we receive on a daily basis 
that are security department reviews, which includes employees' 
account activity. So it is watched.
    Mr. Greenwood. Okay. Mr. Gerlach, questions?
    Mr. Gerlach. A couple questions, thank you. Mr. Ryan, 
first, I am just looking at your testimony. On page 4, ``The 
FACT Act also codifies what has been our industry's voluntary 
practice concerning the immediate blocking of information 
related to identity theft upon the consumer's providing us with 
an identity theft report--usually a police report. This 
practice is also known as `tradeline blocking' ''. Can you 
describe that a little bit more fully for me, what ``tradeline 
blocking'' is, when a consumer says he or she is a victim of 
theft, perhaps gives you a police report? What do you do at 
that point?
    Mr. Ryan. Yes. Yes, I can, Congressman. The process 
typically begins when we provide the consumer a free copy of 
their complete credit report, so they--so in other words, the 
first step is the prospective identity theft victim, or the 
victim contacts us. We give them a copy of the free report. 
They may or may not at that point have a police report, but 
then at some point thereafter, or if they don't already have 
it, they get a police report, or a report by the U.S. Postal 
Service, or some other official document documenting the--make 
sure the fact of the identity theft. At that point, our 
consumer relations department, our Fraud Victim Assistance 
folks will receive from--the consumer tells us this, this, this 
and this item either trade--a trade line is a record of an 
account, so a Citibank, a record of the Citibank charge account 
or a Sears charge account.
    Mr. Gerlach. Right.
    Mr. Ryan. Or an inquiry could be associated--on the file 
could be associated with fraud. In other words, an--just the 
record of an inquiry by an institution that again, the consumer 
informs us is not a place they applied to, and therefore 
associated with a fraud. What happens in those cases of each 
element of information that is identified by the consumer, at 
that point gets suppressed from display. It gets blocked from 
display, so that it does not appear, can not appear on any 
future credit report, and we initiate a notice to the furnisher 
of each of those--the institution that furnished each of those 
elements of information, informing them that the data has been 
blocked from display, won't appear on future credit reports, 
has been associated to be connected with identity theft, and 
then they are--they have an opportunity, or an obligation, 
under the Fair Credit Reporting Act, to initiate their own 
investigation and take steps to not reintroduce it in 
subsequent reports to the credit reporting agency. Obviously, 
if they have--in their investigation, feel there is--that it 
was not identity theft, or it was some other kind of fraud 
going on there, there may be--they may come back to us, but the 
ordinary process stops there with our notice to them and their 
prevention of having it reintroduced.
    Mr. Gerlach. Okay. So, at this point, the consumer can 
initiate that simply by having noticed this information on the 
report, and you take that individual's objection to that 
information on face value, and you block it.
    Mr. Ryan. Once they have a police report. Yes, with a 
police report.
    Mr. Gerlach. Okay. And the police report being simply an 
incident report that they have gone, made contact with the 
local police, explained the situation to the police, issues a 
report, not necessarily a finding of----
    Mr. Ryan. No.
    Mr. Gerlach. [continuing] criminality, or any of that sort, 
but that is--that paper is sufficient for you then to block 
that item for future use of that report by some other entity.
    Mr. Ryan. Yes, Congressman.
    Mr. Gerlach. Okay.
    Mr. Ryan. And again, that has been our practice for several 
years, and that is now codified under the FACT Act.
    Mr. Gerlach. Right. Okay. Real quick, Ms. Lenahan. We have 
heard information where the Mexican consulate could issue what 
is called a matricula consular card to those coming from Mexico 
and to have that card be the basis for coming into a bank and 
establishing an account and starting transactions through that 
account, but the individual that went into the consulate to say 
I am so and so uses a birth certificate that may or may not be 
valid or genuine or authentic and nonetheless gets that 
consular card that is then used to open up accounts. Are you 
aware of any problems with that in your area? I know you are 
out of Newtown Square. Are you aware of any problems with banks 
and how they, if at all, try to further evaluate the proper 
identity of the person that tries to open up an account and 
start undertaking financial transactions on that basis of that 
card that was used initially?
    Ms. Lenahan. I am not familiar with that particular 
instance, but I would have to say that the Customer 
Identification Program would eliminate somebody being able to 
come in and just use that one card only. They would have to 
come up with several other forms of identification to conduct 
any type of business like that.
    Mr. Gerlach. Okay. So the card itself is not a sufficient 
enough basis for opening an account. At least at your bank?
    Ms. Lenahan. Not at my bank.
    Mr. Gerlach. Or are you aware of any other----
    Ms. Lenahan. I can't speak for the industry. American 
Bankers Association may be able to get back to you for the 
record.
    Mr. Gerlach. Okay.
    Ms. Lenahan. In reference to the industry. But in my bank, 
they would need more than that.
    Mr. Gerlach. Okay. Good. Thanks. Just a couple more 
questions. Do either of you, from your association or personal 
experience, use an estimate or see numbers that would estimate 
either how much it is costing the Nation as a whole a year from 
identity theft, or what theft comes down to as a household? 
Seen these numbers?
    Mr. Ryan. The--I think, Mr. Chairman, the RTC will--the 
recent report had some number--figures there, but they don't 
stick--it is millions and millions, but----
    Mr. Gerlach. Well, the numbers that I have seen----
    Mr. Ryan. [continuing] I don't have that number in my head.
    Mr. Gerlach. [continuing] are credit card theft, about $33 
billion a year, and total identity theft numbers on an order of 
magnitude of $50 billion a year, and my math tells me that that 
is several hundred dollars a household, that every household in 
America is paying several hundred dollars more a year, which 
would be good about this time of year to have in your pocket 
instead of having to put out, but that is what we are paying to 
go shopping in the extra cost of goods that comes from this.
    Just a couple more questions. Ms. Lenahan, what is the 
banking industry as a whole doing about this? Do you have a 
sense of that? Is this the kind of thing that financial 
institutions are either--do you talk to your other--your fellow 
bankers from Bucks County or national conventions, is this a 
big part of what participants might be engaged in in educating 
themselves about?
    Ms. Lenahan. It is all of the above. I just attended a 
large security conference in Texas, and it covered several 
things, including the biometrics that you were speaking of, 
which we see that as a future trend. Banks are continually 
researching new software that would be compatible with their 
own to combat these types of things and catch them before they 
accelerate. My bank does not offer a credit card, so we don't 
see what the rest of the industry is seeing in reference to the 
credit card theft. However, we do offer the Visa check card, 
and that in itself, you know, we do have our fraud instances 
with those, but we are a little more fortunate than the bigger 
guys, because we don't offer the credit card, per se. But----
    Mr. Gerlach. Well, somebody--suppose somebody does what is 
very easy now, every--most of us in this room probably, when 
you go home today, will find at least a couple of lovely offers 
of free credit cards that we don't even open any more and just 
throw in the trash, and they become pretty easy for somebody to 
pick up and fill out and send in and get a credit card. If 
somebody fills one of those out with my name on it and gets a 
credit card with my name in it and walks into your bank, and 
says I would like to put $1,000 on my Visa card, what does your 
bank do to make sure that that doesn't happen to me?
    Ms. Lenahan. If it is an outside credit card, we are 
relying on the credit card company to give us the appropriate 
authorization, because that is the only tool that we have. For 
our own card, we would have had to have identified them through 
the Customer Identification Program before we would even 
process their application, so----
    Mr. Gerlach. If someone gets--suppose if someone gets an 
extra copy, it wouldn't be difficult for someone to report to--
taking my place, that I--they lost a credit card, and ask for 
copies to be sent, or pick up my credit card when it comes in 
the--when it is renewed and it comes in the mailbox, to pick 
that up and then go into a bank and it--I would assume that the 
authorization would sail through.
    Ms. Lenahan. Well, any new cards that are coming through 
the mail have a sticker on it with an 800 number for activation 
that you can only use from your home telephone. So that is one 
feature that is in place to protect the consumer.
    Mr. Gerlach. Okay, so that seems to work pretty well, then, 
I guess.
    Ms. Lenahan. Right. I think that the most difficulty right 
now with credit card mailing is the ready access checks, get 0 
percent if you use these checks. If the consumer doesn't open 
the envelope, they are throwing away a checkbook, you know, 
which is very easy for somebody else to pick up and try and 
use.
    Mr. Gerlach. That is an interesting point. Nowadays, I can 
tell--there are things I can do so that I don't get certain 
kinds of junk phone calls. Are there things that consumers can 
do if you don't want to get any more of these checks, for 
instance, because I get them all the time, and I try to 
remember to tear them up before I discard them, but I don't 
always open the envelopes, and I am not giving my address out 
at this hearing, but--can you--can a consumer avoid being sent 
those kinds of free checks?
    Ms. Lenahan. Well, the--they can contact their credit card 
company and just simply ask them to stop, and you don't usually 
receive those types of checks until you already have an account 
with that credit card company. It is after that that you start 
to get a lot of the mailing, use the checks, get this 
percentage rate. But there is----
    Mr. Gerlach. I get checks from credit cards I haven't had 
in 10 years.
    Ms. Lenahan. Well, that is--they still have you--you didn't 
close the account.
    Mr. Gerlach. Right.
    Ms. Lenahan. I would recommend closing an account for any 
card that you are not using. But the State has the Do Not Call 
list, which is supposed to include mailing as well, but I do 
not believe that that covers an existing account, an open 
account.
    Mr. Gerlach. Mr. Ryan, did you have any comment on any of 
that?
    Mr. Ryan. No, I think that is exactly my sense.
    Mr. Gerlach. Okay. Well, that is it. Okay. Thank you both--
--
    Ms. Lenahan. Thank you.
    Mr. Gerlach. [continuing] very much for your testimony. It 
has been very helpful.
    Mr. Greenwood. We are going to take about a 5-minute break 
before we call our next panel.
    [Brief recess]
    Mr. Greenwood. Okay. The committee will come to order, and 
I see that our third panel has arrived, and they are Ms. Betsy 
Broder of the Federal Trade Commission. She is the Assistant 
Director of the Division of Planning and Information of the 
Bureau of Consumer Protection from Washington; Mr. Kevin Burke, 
who is the Deputy Chief Postal Inspector for Eastern Field 
Operations, here in the--he is a U.S. Postal Inspector here in 
Langhorne, Pennsylvania, welcome; Mr. John M. Abel is the 
Pennsylvania Attorney General--from the Pennsylvania Attorney 
General's Office, Senior Deputy Attorney General, Bureau of 
Consumer Protection, welcome, sir thank you for coming here 
from Philadelphia; and from the State Police, we have 
Lieutenant Colonel Ralph M. Periandi. Am I saying that right?
    Mr. Periandi. Yes, sir.
    Mr. Greenwood. Okay. He is a Deputy Commissioner of 
Operations from Harrisburg, and we thank you for coming. As you 
have heard me say to the other witnesses, we take testimony in 
this Subcommittee under oath, and I have to ask if any of you 
object to giving your testimony under oath. Okay. You are, also 
pursuant to the rules of the committee and the House of 
Representatives, entitled to be represented by counsel. Any of 
you wish to be represented by counsel? You all have good clear 
consciences. No need for that. Okay, in that case, if you would 
stand and raise your right hands, please.
    [Witnesses sworn.]
    Mr. Greenwood. Okay. You are all under oath, and we will 
begin with Ms. Broder. Welcome and thank you for your 
testimony. You want to take that microphone there, not that 
one. You want them both near. The stenographer needs the one on 
the little white triangle, but you need to speak clearly into 
that one.
    Ms. Broder. Thank you, and----
    Mr. Greenwood. And it is--thank you.

  TESTIMONY OF BETSY BRODER, ASSISTANT DIRECTOR, DIVISION OF 
 PLANNING AND INFORMATION, BUREAU OF CONSUMER AFFAIRS, FEDERAL 
 TRADE COMMISSION; KEVIN J. BURKE, DEPUTY CHIEF INSPECTOR FOR 
EASTERN FIELD OPERATIONS, U.S. POSTAL INSPECTOR; JOHN M. ABLE, 
PENNSYLVANIA ATTORNEY GENERAL; AND LT. COL. RALPH M. PERIANDI, 
   DEPUTY COMMISSIONER, OPERATIONS, PENNSYLVANIA STATE POLICE

    Ms. Broder. Good morning, Mr. Chairman and Congressman 
Gerlach.
    Identify theft has become a consumer protection issue of 
dramatic proportions. As has been earlier stated, the numbers 
are staggering. Within the space of 1 year, almost 10 million 
persons suffered some form of identity fraud, from the misuse 
of an existing account to the complete takeover of their 
identity by opening new accounts, obtaining government 
benefits, or even filing for bankruptcy.
    In addition to the trauma to the victims, which cannot be 
underestimated, this crime costs our society over $53 billion 
in the space of 1 year, with an additional 300 million hours 
spent by victims trying to undo the damage. We appreciate the 
opportunity to describe today some of the initiatives the FTC 
has undertaken to respond to this growing problem.
    The Federal Trade Commission has been playing a key role in 
addressing identity theft and the problem it spawns well before 
the enactment of the Identity Theft and Assumption Deterrence 
Act of 1998, but that Act directed us to take a more central 
role in working with victims, educating the public, 
coordinating with law enforcement, criminal law enforcement in 
particular, and working with the private sector.
    For consumers, we offer victim assistance through our toll-
free hotline at 877-IDTHEFT and our online complaint form and 
other resources at consumer.gov/idtheft. Through either of 
these portals, consumers provide us with information concerning 
the episode of identity theft, and our trained phone counselors 
guide them through the steps that they need to take to start 
repairing the damage done by the theft and reducing the risk of 
any additional harm. Online consumers can obtain the same 
information from the materials we have posted on our website. 
The ID Theft site also links to our identity theft affidavit, a 
uniformly accepted affidavit that victims can use to dispute 
fraudulently opened accounts. This takes the place of the 
cumbersome process which I think Ms. Kane referred to, of 
filling out separate and distinct forms for each of the 
fraudulently opened accounts. It makes the recovery that much 
easier, and a copy of the affidavit is contained in our 
identity theft book, When Bad Things Happen to Your Good Name. 
We have an additional identity theft piece, What's It All 
About, which is a practical guide for identity theft, a 
condensed version of our identity theft major publication, both 
of which are available in both English and Spanish.
    We want consumers to be empowered to take the steps that 
they need to to safeguard their identity, to be mindful of how 
they make information about themselves available online and 
off, to take care in how they make their personally identifying 
information available, how they handle our trash to whether 
they put firewalls up and engage in commerce on the Internet 
carefully and with due regard for their identifying 
information.
    I would just like to point out, Mr. Chairman, that you have 
made great use of our resources online by linking directly from 
your home site to our identity theft information, the booklets 
and the affidavit. This is exactly what we are trying to do, to 
leverage our resources, so that others make them available to 
audiences that we might not be able to reach. We appreciate 
very much all of your fine efforts in that regard.
    The FTC's role also extends to supporting criminal law 
enforcement and prosecution of these crimes. The FTC is a civil 
agency. We do not have jurisdiction to enforce the identity 
theft law, but our colleagues, some of whom are represented at 
this table, do.
    I mentioned that identity theft victims, when they contact 
us either by the phone or online, provide information about the 
incident of identity theft. That information we enter into our 
Identity Theft Data Clearinghouse, and we share it with law 
enforcement agencies around the country. Almost 800 individual 
agencies, representing thousands of investigators, can log on 
to this site through a secure Internet connection and get 
access to the more than 400,000 identity theft complaints that 
we have received and also that have been sent to us by the 
Social Security Administration Office of Inspector General.
    So law enforcement agencies from the Bucks County and 
Montgomery County District Attorney's Office, to the U.S. 
Postal Inspection Service nationwide, to a cop in the Los 
Angeles Police Department can see the big picture. They are all 
logging on to the same data at the same time. This aggregated 
data takes the place of the individual complaints that may have 
come across their desks, so rather than just seeing that one 
complaint from the one person, they are able to add to that 
complaint by searching the data base, and seeing how pervasive 
the problem is, making ID theft more attractive for 
prosecution.
    We have also teamed with the Inspection Service, the Secret 
Service and the U.S. Department of Justice to conduct training 
for law enforcement around the country. We have reached more 
than 1,000 of these first responders--with guidance on how to 
deal with identity theft victims, and how to build a case for 
prosecutors. So hopefully, what this means is that the story 
that we heard from Mrs. Kane about how the law enforcement 
would not listen to her, hopefully that tide is changing. They 
are looking at the individual as a victim of this crime, not 
simply the financial institutions that may have ultimately to 
carry the financial weight, but also, the person whose 
information has been misused are victims.
    The International Association of Chiefs of Police have 
passed a resolution urging their members to take police reports 
in the jurisdiction where the victim resides. That is the one 
thing that remains constant. The thief may be operating in many 
jurisdictions, making it very hard for law enforcement to nail 
it down, but the victim always remains where she is, and so the 
police departments in the municipality of the victim are urged 
to issue police reports. That is of even greater importance now 
that we have the Police Report Blocking Initiative. The police 
report is an essential piece of recovery for victims of 
identity theft.
    One other point on law enforcement. We provide our data in 
the central data base that can be accessed by investigators one 
by one, but we also reach out with more specialized assistance. 
For example, the Identity Theft Task Force in Philadelphia 
requested, and we provided, a set of data from our data base 
that matched their jurisdictional range, so what we did was we 
took from our data base the complaints pertaining to that 
jurisdiction in the Philadelphia area, and I think there are 
other jurisdictions represented on that Task Force. They add to 
that some of their own data, so they have richer resources to 
drill further into this crime and build better cases. We work 
both in the collective and the individual groups on rooting out 
this pervasive crime.
    And finally, the business community plays a key role in 
reducing the incidence of identity theft and working with 
victims. In addition to using and accepting the identity theft 
affidavit, the FTC has worked with companies who themselves 
have had their customers' or clients' data stolen, for example, 
the Red Cross. We provide direction to those companies on how 
to contact the persons whose information has fallen into the 
hands of criminals. The FTC staff also guides them to the 
appropriate law enforcement agency, and to work with the credit 
reporting agencies, so they can build together a mechanism to 
facilitate the recovery for the victims, and to provide them 
with the appropriate notice.
    We also have drafted a standard letter for these companies 
to use in sending out to the people whose information has been 
compromised, so they get all of the appropriate contact 
information. They don't have to do their own homework or 
discover it for themselves. It also provides them with a link 
to our identity theft materials.
    We know that these sorts of wholesale incidents of identity 
theft are becoming more commonplace, so rather than have our 
staff on the phone each and every time this happened, we have 
built an Identity Theft Response Kit that is posted on our home 
site that companies can go to to download the contact letter to 
see how to contact the credit reporting agencies and law 
enforcement as well, to make it easier for them to do their 
job.
    Finally, the recent amendments to the FCRA, the FACT Act, 
including the codification of the fraud alert process with the 
credit reporting agencies, and the development of what are 
called red flag indicators of identity theft for financial 
institutions will certainly have an impact on this daunting 
crime. But clearly there is much that remains to be done, and 
the FTC will continue to make this a priority of its work.
    We thank you very much for the opportunity to testify 
today.
    [The prepared statement of Betsy Broder follows:]
  Prepared Statement of Betsy Broder, Assistant Director, Division of 
Planning and Information, Bureau of Consumer Protection, Federal Trade 
                               Commission
                            i. introduction
    Mr. Chairman, and members of the Subcommittee, I am Betsy Broder, 
Assistant Director of the Division of Planning and Information, Bureau 
of Consumer Protection, Federal Trade Commission (``FTC'' or 
``Commission'').1 I appreciate the opportunity to present 
the Commission's views on the impact of identity theft on consumers.
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    \1\ The views expressed in this statement represent the views of 
the Commission. My oral presentation and responses to questions are my 
own and do not necessarily represent the views of the Commission or any 
Commissioner.
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    The Federal Trade Commission has a broad mandate to protect 
consumers, and controlling identity theft is an important issue of 
concern to all consumers. The FTC's role in combating identity theft 
derives from the 1998 Identity Theft Assumption and Deterrence Act 
(``the Identity Theft Act'' or ``the Act'').2 The Act 
directed the Federal Trade Commission to establish the federal 
government's central repository for identity theft complaints, to make 
available and to refer these complaints to law enforcement for their 
investigations, and to provide victim assistance and consumer 
education. Thus, the FTC's role under the Act is primarily one of 
facilitating information sharing among public and private 
entities.3 The Commission also works extensively with 
industry on ways to improve victim assistance, including providing 
direct advice and assistance in cases of security breaches involving 
sensitive information of customers or employees.
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    \2\ Pub. L. No. 105-318, 112 Stat. 3007 (1998) (codified at 18 
U.S.C.  1028).
    \3\ Most 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. See, e.g., FTC v. Corporate Marketing Solutions, Inc., CIV-02 
1256 PHX RCB (D. Ariz. Feb. 3, 2003) (final order) (defendants 
``pretexted'' personal information from consumers and engaged in 
unauthorized billing of consumers' credit cards) and FTC v. C.J., CIV-
03 5275 GHK (RZx) (C.D. Cal. July 24, 2003) (final order) (defendant 
sent spam purporting to come from AOL and created an AOL look-alike 
website in order to obtain credit card numbers and other financial data 
from consumers which defendant used for unauthorized online 
purchases.). In addition, the FTC brought six complaints against 
marketers for purporting to sell international driver's permits that 
could be used to facilitate identity theft. Press Release, Federal 
Trade Commission, FTC Targets Sellers Who Deceptively Marketed 
International Driver's Permits over the Internet and via Spam (Jan. 16, 
2003), available at http://www.ftc.gov/opa/2003/01/idpfinal.htm.
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  ii. the federal trade commission's role in combating identity theft
    The Identity Theft Act strengthened the criminal laws governing 
identity theft 4 and focused on consumers as 
victims.5 In so doing, Congress recognized that coordinated 
efforts are essential to best serve the needs of identity theft victims 
because these fraud victims often need assistance both from government 
agencies at the national and state or local level and from businesses. 
To fulfill the Act's mandate, the Commission implemented a program that 
focuses on three principal components: (1) collecting complaints and 
providing victim assistance through a telephone hotline and a dedicated 
website; (2) maintaining and promoting the Identity Theft Data 
Clearinghouse (the ``Clearinghouse''), a centralized database of victim 
complaints that serves as an investigative tool for law enforcement; 
and (3) providing outreach and education to consumers, law enforcement, 
and private industry on prevention of identity theft.
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    \4\ 18 U.S.C.  1028(a)(7). The statute broadly 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.
    \5\ 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).
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A. Understanding Identity Theft
    On November 1, 1999, the Commission began collecting complaints 
from consumers via a toll-free telephone number, 1-877-ID THEFT (438-
4338) (``ID Theft hotline''). Every year since has seen an increase in 
complaints.6 The Clearinghouse now contains over 400,000 
identity theft complaints from victims across the country. By itself, 
though, this self-reported data does not allow the FTC to draw 
conclusions about the incidence of identity theft in the general 
population. Consequently, the FTC commissioned a survey to get a better 
picture of the incidence of identity theft and the impact of the crime 
on its victims.7 The results are startling. Identity theft 
is more widespread and pernicious than previously realized. The data 
show that within the 12 months preceding the survey, 3.2 million people 
discovered that an identity thief opened new accounts in their name. An 
additional 6.6 million consumers learned of the misuse of an existing 
account. Overall, nearly 10 million people--or 4.6 percent of the adult 
population--discovered that they were victims of some form of identity 
theft. These numbers translate to nearly $48 billion in losses to 
businesses, nearly $5 billion in losses to victims, and almost 300 
million hours spent by victims trying to resolve the problem. Moreover, 
according to the researchers, identity theft is a growing crime. The 
survey indicates a significant increase in the past 2-3 years--nearly a 
doubling from one year to the next, although the research shows that 
the rate of increase slowed during the past 1-2 years. It also is worth 
noting that most of the recent increase primarily involves the account 
takeover form of identity theft that tends to cause less economic 
injury to victims and is generally easier for them to identify and fix. 
Overall, the survey puts the problem of identity theft into sharper 
focus, and has spurred the FTC to even greater efforts to help victims 
and support law enforcement in its aggressive prosecution of identity 
thieves.
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    \6\ Charts that summarize data from the Clearinghouse can be found 
at http://www.consumer.gov/idtheft/stats.html and
    \7\ The research took place during March and April 2003. It was 
conducted by Synovate, a private research firm, and involved a random 
sample telephone survey of over 4,000 U.S. adults. The full report of 
the survey can be found at http://www.consumer.gov/idtheft/stats.html.
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B. Assisting Identity Theft Victims
    In addition to taking complaints from victims, the FTC provides 
advice on recovery from identity theft. Callers to the ID Theft hotline 
receive telephone counseling from specially trained personnel who 
provide general information about identity theft and help guide victims 
through the steps needed to resolve the problems resulting from the 
misuse of their identities.8 Victims are advised to: (1) 
obtain copies of their credit reports from the three national consumer 
reporting agencies and have a fraud alert placed on their credit 
reports; 9 (2) contact each of the creditors or service 
providers where the identity thief has established or accessed an 
account, to request that the account be closed and to dispute any 
associated charges; and (3) report the identity theft to the police and 
get a police report, which is very helpful in demonstrating to would-be 
creditors and debt collectors that the consumers are genuine victims of 
identity theft.
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    \8\ Spanish speaking counselors are available for callers who are 
not fluent in English.
    \9\ These fraud alerts indicate that the consumer is to be 
contacted before new credit is issued in that consumer's name. See 
Section II.D.(3)(b) infra for a discussion of the credit reporting 
agencies ``joint fraud alert'' initiative.
---------------------------------------------------------------------------
    Counselors also advise victims having particular problems about 
their rights under relevant consumer credit laws including the Fair 
Credit Reporting Act, 10 the Fair Credit Billing Act, 
11 the Truth in Lending Act, 12 and the Fair Debt 
Collection Practices Act.13 If the investigation and 
resolution of the identity theft falls under the jurisdiction of 
another regulatory agency that has a program in place to assist 
consumers, callers also are referred to those agencies.
---------------------------------------------------------------------------
    \10\ 15 U.S.C.  1681 et seq.
    \11\ Id.  1666. The Fair Credit Billing Act generally applies to 
``open end'' credit accounts, such as credit cards, revolving charge 
accounts, and overdraft checking accounts. It does not cover 
installment contracts, such as loans or extensions of credit that are 
repaid on a fixed schedule.
    \12\ Id.  1601 et seq.
    \13\ Id.  1692 et seq.
---------------------------------------------------------------------------
    The FTC's identity theft website, located at www.consumer.gov/
idtheft, provides equivalent service for those who prefer the immediacy 
of an online interaction. The site contains a secure complaint form 
that allows victims to enter their identity theft information for input 
into the Clearinghouse. Victims also can read and download all of the 
resources necessary for reclaiming their credit record and good name. 
One resource in particular is the FTC's tremendously successful 
consumer education booklet, Identity Theft: When Bad Things Happen to 
Your Good Name. The 26-page booklet, now in its fourth edition, 
comprehensively covers a range of topics, including the first steps to 
take for victims, how to correct credit-related and other problems that 
may result from identity theft, tips for those having trouble getting a 
police report taken, and advice on ways to protect personal 
information. It also describes federal and state resources that are 
available to victims who may be having particular problems as a result 
of the identity theft. The FTC alone has distributed more than 1.2 
million copies of the booklet since its release in February 2000, and 
recorded over 1.2 million visits to the web version.14 Last 
year, the FTC released a Spanish language version of the Identity Theft 
booklet, Robo de Identidad: Algo malo puede pasarle a su buen nombre.
---------------------------------------------------------------------------
    \14\ Other government agencies, including the Social Security 
Administration, the SEC, and the FDIC also have printed and distributed 
copies of Identity Theft: When Bad Things Happen to Your Good Name.
---------------------------------------------------------------------------
C. The Identity Theft Data Clearinghouse
    Because one of the primary purposes of the Identity Theft Act was 
for criminal law enforcement agencies to use the database of victim 
complaints to support their investigations, the Commission took a 
number of steps to ensure that the database would meet the needs of law 
enforcement, before launching it. Initially, the FTC met with a host of 
law enforcement and regulatory agencies to obtain feedback on what the 
database should contain. Law enforcement access to the Clearinghouse 
via the FTC's secure website became available in July of 2000. To 
ensure that the database operates as a national clearinghouse for 
complaints, the FTC has solicited complaints from other sources. For 
example, in February 2001, the Social Security Administration Office of 
Inspector General (SSA-OIG) began providing the FTC with complaints 
from its fraud hotline, significantly enriching the FTC's database.
    The Clearinghouse provides a picture of the nature, prevalence, and 
trends of the identity theft victims who submit complaints. FTC data 
analysts aggregate the data and develop them into charts and 
statistics.15 For instance, the Commission publishes charts 
showing the prevalence of identity theft by states and by cities. Law 
enforcement and policy makers at all levels of government use these 
reports to better understand the challenges identity theft presents.
---------------------------------------------------------------------------
    \15\ Charts that summarize data from the Clearinghouse can be found 
at http://www.consumer.gov/idtheft/stats.html and http://
www.consumer.gov/sentinel/index.html.
---------------------------------------------------------------------------
    Since the inception of the Clearinghouse, more than 770 law 
enforcement agencies, from the federal to the local level, have signed 
up for access to the database. Individual investigators within those 
agencies have the ability to access the system from their desktop 
computers 24 hours a day, seven days a week. The Commission actively 
encourages even greater participation.
    As previously stated, one of the goals of the Clearinghouse and the 
FTC's identity theft program is to support identity theft prosecutions 
nationwide.16 Last year, in an effort to further expand the 
use of the Clearinghouse among law enforcement, the FTC, in cooperation 
with the Department of Justice, the United States Postal Inspection 
Service, and the United States Secret Service, initiated full-day 
identity theft training seminars for state and local law enforcement 
officers. To date, sessions have been held in Washington, D.C., Des 
Moines, Chicago, San Francisco, Las Vegas, Dallas, Phoenix, New York, 
Seattle, and San Antonio. The FTC also helped the Kansas and Missouri 
offices of the U.S. Attorney and State Attorney General conduct a 
training seminar in Kansas City. More than 1200 officers have attended 
these seminars, representing more than 300 different agencies. A 
session to be held in Orlando in January will commence next year's 
round of seminars.
---------------------------------------------------------------------------
    \16\ The Commission testified last year in support of S. 2541, the 
Identity Theft Penalty Enhancement Act of 2002, which would increase 
penalties and streamline proof requirements for prosecution of many of 
the most harmful forms of identity theft. See Testimony of Bureau 
Director J. Howard Beales, Senate Judiciary Committee, Subcommittee on 
Terrorism, Technology and Government Information (July 11, 2002). S. 
2541 has been reintroduced in the 108th Congress as S. 153.
---------------------------------------------------------------------------
    The FTC staff also developed an identity theft case referral 
program.17 The staff creates preliminary investigative 
reports by examining significant patterns of identity theft activity in 
the Clearinghouse and refining the data through the use of additional 
investigative resources. Then the staff refers the investigative 
reports to appropriate Financial Crimes Task Forces and other law 
enforcers located throughout the country for further investigation and 
potential prosecution. The FTC is aided in this work by its federal law 
enforcement partners including the United States Secret Service, the 
Federal Bureau of Investigation, and the United States Postal 
Inspection Service who provide staff and other resources.
---------------------------------------------------------------------------
    \17\ The referral program complements the regular use of the 
database by all law enforcers from their desktop computers.
---------------------------------------------------------------------------
D. Outreach and Education
    The Identity Theft Act also directed the FTC to provide information 
to consumers about identity theft. Recognizing that law enforcement and 
private industry each play an important role in the ability of 
consumers both to minimize their risk and to recover from identity 
theft, the FTC expanded its outreach and education mission to include 
these sectors.
    (1) Consumers: The FTC has taken the lead in coordinating with 
other government agencies and organizations in the development and 
dissemination of comprehensive consumer education materials for victims 
of identity theft and those concerned with preventing this crime. The 
FTC's extensive consumer and business education campaign includes print 
materials, media mailings, and radio and television interviews. The FTC 
also maintains the identity theft website, which includes the 
publications and links to testimony, reports, press releases, identity 
theft-related state laws, and other resources.
    To increase identity theft awareness for the average consumer, the 
FTC recently developed a new primer on identity theft, ID Theft: What's 
It All About? This publication discusses the common methods of identity 
thieves, how consumers can best minimize their risk of being 
victimized, how to identify the signs of victimization, and the basic 
first steps for victims. Since its release in May 2003, the FTC has 
distributed almost 268,000 paper copies, and over 15,000 web versions. 
With the detailed victim recovery guide, Identity Theft: When Bad 
Things Happen to Your Good Name, the publication helps to fully educate 
consumers.
    (2) Law Enforcement: Because law enforcement at the state and local 
level can provide significant practical assistance to victims, the FTC 
places a premium on outreach to such agencies. In addition to the 
training described previously (see supra Section II.C.), the FTC staff 
joined with North Carolina's Attorney General Roy Cooper to send 
letters to every other Attorney General letting him or her know about 
the FTC's identity theft program and how each Attorney General could 
use the resources of the program to better assist residents of his or 
her state. The letter encouraged each Attorney General to link to the 
consumer information and complaint form on the FTC's website and to let 
residents know about the hotline, stressed the importance of the 
Clearinghouse as a central database, and described all of the 
educational materials that each Attorney General can distribute to 
residents. North Carolina took the lead in availing itself of the 
Commission's resources in putting together for its resident victims a 
package of assistance that includes the ID Theft Affidavit (see Section 
II.D.(3)(b)), links to the FTC website and www.consumer.gov/idtheft. 
Through this initiative, the FTC hopes to make the most efficient use 
of federal resources by allowing states to take advantage of the work 
the FTC already has accomplished and at the same time continuing to 
expand the centralized database of victim complaints and increase its 
use by law enforcement nationwide. Other outreach initiatives include: 
(i) Participation in a ``Roll Call'' video produced by the Secret 
Service, which has been sent to thousands of law enforcement 
departments across the country to instruct officers on identity theft, 
investigative resources, and assisting victims and (ii) the redesign of 
the FTC's website to include a section for law enforcement with tips on 
how to help victims as well as resources for investigations.
    (3) Industry: The private sector can help with the problem of 
identity theft in a number of ways. For instance, businesses can 
prevent identity theft by keeping their customers' or employees' 
sensitive information secure and out of the wrong hands. In addition, 
businesses can implement procedures to assist identity theft victims in 
the recovery process.
    (a) Information Security Breaches: The FTC works with institutions 
that maintain personal information to identify ways to help keep that 
information safe from identity theft. Last year, the FTC invited 
representatives from financial institutions, credit issuers, 
universities, and retailers to an informal roundtable discussion of how 
to prevent unauthorized access to personal information in employee and 
customer records. The FTC will soon publish a self-assessment guide to 
make businesses and organizations of all sizes more aware of how they 
manage personal information and to aid them in assessing their security 
protocols.
    As awareness of the FTC's role in identity theft has grown, 
businesses and organizations that have suffered compromises of personal 
information have begun to contact the FTC for assistance. For example, 
in the cases of TriWest 18 and Ford/Experian, 19 
in which tens of thousands of consumers' files were compromised, the 
Commission gave advice on how to notify those individuals and how to 
protect the data in the future. To provide better assistance in these 
types of cases, the FTC developed a kit, Information Compromise and the 
Risk of Identity Theft: Guidance for Your Business, that will be posted 
on the identity theft website in the coming weeks. The kit provides 
advice on which law enforcement agency to contact, business contact 
information for the three major credit reporting agencies, suggestions 
for establishing an internal communication protocol, information about 
contacting the FTC for assistance, and a detailed explanation of what 
information individuals need to know. The kit also includes a model 
letter for notifying individuals when their names and Social Security 
numbers have been taken. Organizations are encouraged to print and 
include copies of Identity Theft: When Bad Things Happen to Your Good 
Name with the letter to individuals.
---------------------------------------------------------------------------
    \18\ Adam Clymer, Officials Say Troops Risk Identity Theft After 
Burglary, N.Y. Times, Jan. 12, 2003,  1 (Late Edition), at 12.
    \19\ Kathy M. Kristof and John J. Goldman, 3 Charged in Identity 
Theft Case, LA Times, Nov. 6, 2002, Main News, Part 1 (Home Edition), 
at 1.
---------------------------------------------------------------------------
    The FTC particularly stresses the importance of notifying 
individuals as soon as possible when information has been taken that 
may put them at risk for identity theft. They can then begin to take 
steps to limit the potential damage to themselves. For example, 
individuals whose Social Security numbers have been compromised, and 
who place a fraud alert promptly have a good chance of preventing, or 
at least reducing, the likelihood that the theft or release of this 
information will turn into actual misuse. Prompt notification also 
alerts these individuals to review their credit reports and to watch 
for the signs of identity theft. In the event that they should become 
victims, they can quickly take action to clear their records before any 
long-term damage is done. Besides providing Information Compromise and 
the Risk of Identity Theft: Guidance for Your Business, the FTC staff 
can provide individual assistance and advice, including review of 
consumer information materials for the organization and coordination of 
searches of the Clearinghouse for complaints with the law enforcement 
officer working the case.
    (b) Victim Assistance: Identity theft victims spend significant 
time and effort restoring their good name and financial records. As a 
result, the FTC devotes significant resources to conducting outreach 
with the private sector on ways to improve victim assistance 
procedures. One such initiative arose from the burdensome requirement 
that victims complete a different fraud affidavit for each different 
creditor with whom the identity thief had opened an 
account.20 To reduce that burden, the FTC worked with 
industry and consumer advocates to create a standard form for victims 
to use in resolving identity theft debts. From its release in August 
2001 through October 2003, the FTC has distributed more than 293,000 
print copies of the ID Theft Affidavit. There have also been nearly 
479,000 hits to the web version. The affidavit is available in both 
English and Spanish.
---------------------------------------------------------------------------
    \20\ See ID Theft: When Bad Things Happen to Your Good Name: 
Hearing Before the Subcomm. on Technology, Terrorism and Government 
Information of the Senate Judiciary Comm. 106th Cong. (2000) (statement 
of Mrs. Maureen Mitchell, Identity Theft Victim).
---------------------------------------------------------------------------
    Another initiative designed to assist victims is the ``joint fraud 
alert'' administered by the three major credit reporting agencies 
(``CRAs''). After receiving a request from an identity theft victim for 
the placement of a fraud alert on his or her consumer report and for a 
copy of that report, each CRA now shares that request with the other 
two CRAs, thereby eliminating the requirement that the victim contact 
each of the three major CRAs separately.
            iii. new protections for identity theft victims
    On December 4, President Bush signed the Fair and Accurate Credit 
Transactions Act of 2003.21 Many of the provisions amend the 
Fair Credit Reporting Act (``FCRA'') 22 and provide new and 
important measures to prevent identity theft, enhance consumer ability 
to detect it when it does occur, and facilitate identity theft victims' 
recovery.23
---------------------------------------------------------------------------
    \21\ Pub. L. No. 108-396 (2003) (codified at 15 U.S.C.  1681 et 
seq.).
    \22\ 15 U.S.C.  1681 et seq.
    \23\ The Commission testified on July 9 and 10, 2003 before the 
House Committee on Financial Services and the Senate Committee on 
Banking, Housing, and Urban Affairs respectively. The testimony can be 
found at http://www.ftc.gov/os/2003/07/fcratest.html and http:///
www.ftc.gov/os/2003/07/fcrasenatettest.htm.
---------------------------------------------------------------------------
A. Access to free consumer reports 24
---------------------------------------------------------------------------
    \24\ Pub. L. No. 108-396,  211 (2003).
---------------------------------------------------------------------------
    Previously, under the FCRA consumers were entitled to a free 
consumer report only under limited circumstances.25 Now 
consumers have the right to request a free consumer report annually 
from nationwide CRAs. This benefit will enhance consumers' ability to 
discover and correct errors, thereby improving the accuracy of the 
system, and also can provide an early alert to identity theft victims 
about crimes committed in their names.
---------------------------------------------------------------------------
    \25\ Previously, free reports were available only pursuant to the 
FCRA when the consumer suffered adverse action, believed that 
fraudulent information may be in his or her credit file, was 
unemployed, or was receiving welfare benefits. Absent one of these 
exceptions, consumers had to pay a statutory ``reasonable charge'' for 
a file disclosure; this fee is set each year by the Commission and is 
currently $9. See 15 U.S.C.  1681j. In addition, a small number of 
states required the CRAs to provide free annual reports to consumers at 
their request.
---------------------------------------------------------------------------
B. National fraud alert system 26
---------------------------------------------------------------------------
    \26\ Pub. L. No. 108-396,  112 (2003).
---------------------------------------------------------------------------
    Under this provision, consumers who reasonably suspect they have 
been or may be victimized by identity theft, or who are military 
personnel on active duty away from home, can place an alert on their 
credit files. The alert will put potential creditors on notice that 
they must proceed with caution when granting credit in the consumer's 
name. The provision also codified and standardized the industry's 
``joint fraud alert'' initiative (see Section II.D.(3)(b) supra).
C. Identity theft account blocking 27
---------------------------------------------------------------------------
    \27\ Id.  152.
---------------------------------------------------------------------------
    This provision requires CRAs immediately to cease reporting, or 
block, allegedly fraudulent account information on consumer reports 
when the consumer submits a police report or similar document, unless 
there is reason to believe the report is false. Blocking would mitigate 
the harm to consumers' credit records that can result from identity 
theft.
D. Truncation of credit and debit card receipts 28
---------------------------------------------------------------------------
    \28\ Id.  113.
---------------------------------------------------------------------------
    In many instances, identity theft results from thieves obtaining 
access to account numbers on credit card receipts. This source of fraud 
could be reduced by requiring merchants to truncate the full card 
number on the receipt. The use of truncation technology is becoming 
widespread, and some card issuers already require merchants to 
truncate. This law now requires truncation of credit and debit card 
numbers on electronic receipts, but creates a phase-in period to allow 
for the replacement of existing equipment.E. ``Red flag'' indicators of 
identity theft 29
---------------------------------------------------------------------------
    \29\ Id.  114.
---------------------------------------------------------------------------
    Under this provision, the banking regulators and the FTC will 
jointly develop guidelines for ``red flag'' indicators of identity 
theft. The goal of this provision is to give financial institutions and 
creditors up-to-date information on identity theft patterns and 
practices so that they can take appropriate action to prevent this 
crime.
                             iv. conclusion
    Identity theft places substantial costs on individuals and 
businesses. The Commission, through its education and enforcement 
capabilities, is committed to reducing identity theft as much as 
possible. The Commission will continue its efforts to assist criminal 
law enforcement with their investigations. Prosecuting perpetrators 
sends the message that identity theft is not cost-free. Finally, the 
Commission knows that as with any crime, identity theft can never be 
completely eradicated. Thus, the Commission's program to assist victims 
and work with the private sector on ways to facilitate the process for 
regaining victims' good names will always remain a priority.

    Mr. Greenwood. Thank you very much, Ms. Broder. Mr. Burke.

                   TESTIMONY OF KEVIN J. BURKE

    Mr. Burke. Good morning, Mr. Chairman and Congressman 
Gerlach. On behalf of the United States Postal Inspection 
Service, thank you for holding this hearing and giving me the 
opportunity to discuss the subject of identity crimes and the 
significant role postal inspectors play in combating it.
    I am Kevin Burke, Deputy Chief Inspector for Eastern Field 
Operations for the Postal Inspection Service. The 
responsibility of safeguarding 200 billion pieces of mail and 
ensuring America's trust in the postal system falls squarely on 
the shoulders of the United States Postal Inspectors. As 
Federal law enforcement officers, we enforce over 200 Federal 
statutes. Primary among those are the theft or possession of 
stolen mail statute and the oldest, and still the most 
effective consumer protection law, the mail fraud statute.
    Mr. Greenwood. I am sorry, we are going to need you to pull 
that microphone up.
    Mr. Burke. Last year, Postal Inspectors made over 11,000 
arrests. 3,000 of those arrests were made for identity theft. 
Identity theft arrests have increased in each of the past 3 
years.
    I am sure all of you have received pre-approved credit 
applications in the mail. In the past, those mailings were 
prime targets for an identity thief, because they simply 
required the thief to sign the application and return it to the 
company. But times have changed, due to our efforts in raising 
awareness of the problem. For example, credit card companies 
have adopted recommendations we have made and have begun 
automatically discarding suspicious looking applications for 
credit, especially when there are differences between where the 
consumer claims they reside and what address their customer 
file indicates. In addition, credit card companies have changed 
another of their practices. Credit offers sent through the mail 
now contain much less information.
    Another favorite vehicle for thieves used to be the 
fraudulent change of address scheme, directing the Post Office 
to forward a victim's mail to an address the thief controlled. 
Not any more. A proactive effort by the Postal Service to 
prevent a false change of address is the Move Validation 
Letter. Now, whenever a change of address is filed, the Postal 
Service sends a letter to both the new and old addresses. The 
letter instructs the recipient to call an 800 number if they 
have not recently requested a change. This simple measure has 
virtually eliminated the placing of false change of address 
with the Postal Service as an avenue for committing identity 
theft.
    According to a report released by the FTC this past 
September, mail theft as a source of identity theft happened in 
only 4 percent of the cases surveyed. As we have made it more 
difficult for mail theft to be a component of identity theft, 
criminals have turned to other means, oftentimes recruiting the 
assistance of insiders, employees who have access to personal 
information of clients or other employees. Personal information 
contained in corporate and government records and computer data 
bases is a fertile area for dishonest employees working in 
conjunction with identity thieves.
    Three years ago, a Philadelphia resident reported to police 
that after her father's death, she continued receiving credit 
card bills showing changes made in her father's name. The 
statements even reflected a request for a new account. U.S. 
Postal Inspectors and detectives from the Philadelphia Police 
Department determined that her father's identity had been 
stolen when his body was processed through the Medical 
Examiner's Office. 16 suspects were ultimately identified, 10 
of them employees working within the Medical Examiner's Office. 
The employees used the credit cards to make purchases for 
themselves or passed the credit cards on and other personal 
information they found to outsiders. The scheme went on for 3 
years before they got caught. All 16 defendants were caught and 
convicted. Postal Inspectors were called in to participate in 
the investigation as bills for illegally purchased items were 
sent through the mail, as was financial information for newly 
and fraudulently opened accounts.
    Just last month, in a separate investigation, Postal 
Inspectors in Philadelphia and other task force member arrested 
the ringleader of an identity theft gang. A search of his 
Chester residence found a commercial grade credit card 
embossing machine that the suspect had purchased over the 
Internet. The suspect used a fictitious name and had his 
purchase delivered by private courier to an abandoned 
Philadelphia area address, all without arousing suspicion. When 
searching his house, we also recovered 2,500 blank credit 
cards, numerous counterfeited credit cards, valid credit cards 
that had been stolen from the mail and counterfeit 
Pennsylvania, Virginia, Florida and District of Columbia 
drivers' licenses.
    Postal Inspectors together with the FBI are also 
investigating the identity theft of about 30 Montgomery and 
Delaware County residents who donated blood to the American Red 
Cross in November or December of last year. Donors are required 
to supply their names, as was previously mentioned, Social 
Security number and other identifying information before giving 
blood. As was previously mentioned, this is a still active 
investigation, and I am not at liberty to discuss any details. 
However, I would like to commend the American Red Cross for 
their efforts in proactively--and assisting in this 
investigation.
    In 2002, Patrick J. Meehan, U.S. Attorney for the Eastern 
District of Pennsylvania, formed a regional working group to 
facilitate the sharing of intelligence and investigative 
resources in combating identity theft in and around the 
Philadelphia area. As a member of the Group, the Postal 
Inspection Service has taken the lead in developing a web-based 
data base that tracks customer and financial industry reports 
of mail theft and identity theft. The data base allows all 
Group members to track loss information and perform advanced 
searches on victims' names. The data base also performs what is 
known as ``link analysis,'' by automatically matching common 
addresses used by thieves.
    One of the most insidious aspects of identity theft is the 
length of time the scheme can be carried out before it is even 
detected. It may be months before a victim realizes they have 
been targeted. It is not until a consumer gets turned down for 
credit, a car loan, or a mortgage on that dream house because 
of bad credit ratings that they realize what has taken place. 
Damaged credit ratings may take years to restore. Victims run 
the gamut of society. They are wealthy, they are poor, they are 
old and they are young. No one is immune. Anyone is a potential 
victim.
    Aggressive law enforcement efforts are a key component of 
our mission. But arrests are not the only solution. We have 
found that creating awareness and prevention programs for 
consumers can go a long way to lessen the impact of this crime 
on the public.
    Over the past 10 years, the Inspection Service has 
published and distributed a series of brochures and posters and 
newsletters to enhance and raise public awareness. Our 
publication Identity Theft--Safeguard Your Personal Information 
has been distributed to over 2 million consumers and 
businesses. Detecting and Preventing Account Takeover Fraud, 
another of our publications, advises credit card companies on 
steps they can take to detect and prevent takeover schemes.
    Our most recent document is not going to be published, 
because it is an ever-changing, evolving document. It is called 
Fighting Identity Theft, and will be provided as a best 
practices to the financial industry, to law enforcement 
agencies and consumer groups and prosecutors throughout the 
United States.
    Just this past September, the Postal Inspection Service, 
along with our partners in the FTC and the Postal Service, 
launched a nationwide awareness campaign on identity theft. We 
used a two-pronged approach, providing prevention and awareness 
information to consumers and informing businesses on the need 
to safeguard their files and data bases containing customer 
information. Actor Jerry Orbach, or television's Law and Order 
fame, who himself was a victim of identity theft, was the 
campaign's spokesman.
    The Mullen agency of Pittsburgh provided support for this 
year's campaign on a pro bono basis. But what really makes this 
campaign unique is the funding source. We have all the saying 
``crime doesn't pay.'' In the case of this awareness campaign, 
it does pay. The campaign was funded with a unique application 
of fines and forfeitures paid by criminals in past fraud cased.
    Sometimes, the most effective vehicle in getting out the 
message is when the message comes directly from an 
authoritative source, the criminals themselves. Last year, 
Postal Inspectors in Pittsburgh caught a man who stole the 
identities of several celebrities, including the actor Will 
Smith. The thief, Carlos Lomax, was prosecuted by the U.S. 
Attorney's Office in the Western District of Pennsylvania and 
convicted. Lomax agreed to let us tape an interview of him 
describing what he did and how he did it.
    Educating the public and working to reduce opportunities 
where the Postal Service and the mail can be used for illegal 
purposes are crucial elements in our fight against identity 
crimes. As always, we will do our part to remove criminals from 
society. We appreciate the subcommittee's recognition of this 
important issue, and with your permission, sir, we would like 
to play a brief portion of that tape.
    [The prepared statement of Kevin J. Burke follows:]
 Prepared Statement of Kevin J. Burke, Deputy Chief Inspector, Eastern 
       Field Operations, United States Postal Inspection Service
    Good morning, Mr. Chairman, members of the subcommittee. On behalf 
of the United States Postal Inspection Service, thank you for holding 
this hearing and giving me the opportunity to discuss the subject of 
identity crimes and the significant role Postal Inspectors play in 
combating it.
    I'm Kevin Burke, Deputy Chief Inspector, Eastern Field Operations, 
for the Postal Inspection Service.
    The responsibility for safeguarding 200 billion pieces of mail a 
year and ensuring America's trust in the postal system falls on the 
shoulders of U. S. Postal Inspectors.
    As federal law enforcement officers, we enforce over 200 federal 
statutes; primary among those are the theft or possession of stolen 
mail statute and the oldest, and still the most effective consumer 
protection law, the mail fraud statute. Last year, Postal Inspectors 
made over 11,000 arrests. Three thousand of those arrests were for 
identity theft. Identity theft arrests have increased each year for the 
past three years.
    I'm sure all of you have received pre-approved credit applications 
in the mail. In the past, those mailings were prime targets for an 
identity thief because they simply required the thief to sign the 
application and return it to the company. But times have changed, due 
to our efforts in raising awareness of the problem. For example, credit 
card companies have adopted recommendations we've made and have begun 
automatically discarding suspicious-looking applications for credit, 
especially when there are differences between where the ``customer'' 
claims they reside and what address their customer file indicates. In 
addition, credit card companies have changed another of their 
practices--credit offers sent through the mail now contain much less 
information.
    Another favorite vehicle for thieves used to be the fraudulent 
change-of-address scheme, directing the Post Office to forward a 
victim's mail to an address the thief controlled. Not any more. A 
proactive effort by the Postal Service to prevent a false change-of-
address is the Move Validation Letter. Now, whenever a change-of-
address is filed, the Postal Service sends a letter to both the old and 
new addresses. The letter instructs the recipient to call an ``800'' 
number if they had not recently requested a change. This simple measure 
has virtually eliminated the placing of a false change of address with 
the Postal Service as an avenue for committing identity theft.
    According to a report released by the FTC this past September, mail 
theft as a source for identity theft happened in only 4% of the cases 
surveyed. As we have made it more difficult for mail theft to be a 
component of identity theft, criminals have turned to other means, 
oftentimes recruiting the assistance of insiders, employees who have 
access to the personal information of clients or other employees.
    Personal information contained in corporate and government records 
and computer databases is a fertile area for dishonest employees 
working in conjunction with identity thieves.
    Three years ago, a Philadelphia resident reported to police that, 
after her father's death, she continued receiving credit card bills 
showing charges made in her father's name. The statements even 
reflected a request for a new account. US Postal Inspectors and 
detectives from the Philadelphia Police Department determined that her 
father's identity had been stolen when his body was processed through 
the Medical Examiner's Office. Sixteen suspects were ultimately 
identified, ten of them employees working within the Medical Examiner's 
Office. The employees used the credit cards to make purchases for 
themselves or passed the credit cards and other personal information 
they found to outsiders. The scheme went on for three years before they 
got caught. All sixteen defendants were caught and convicted. Postal 
Inspectors were called in to participate in the investigation as bills 
for illegally purchased items were sent through the mail as was 
financial information for newly--and fraudulently--opened accounts.
    Just last month, in a separate investigation, Postal Inspectors in 
Philadelphia and other task force members arrested the ringleader of an 
identity theft gang. A search of his Chester residence found a 
commercial-grade credit card embossing machine that the suspect had 
purchased over the Internet. The suspect used a fictitious name and had 
his purchase delivered by private carrier to an abandoned Philadelphia 
area address, all without arousing suspicion. When searching his house, 
we also recovered over 2,500 blank credit cards, numerous counterfeited 
credit cards, valid credit cards that had been stolen from the mail, 
and counterfeit PA, VA, FL and DC drivers' licenses.
    Postal Inspectors together with the FBI are also investigating the 
identity theft of about 30 Montgomery and Delaware County residents who 
donated blood to the American Red Cross in November or December of last 
year. Donors are required to supply their names, social security 
numbers and other identifying information before giving blood. As this 
is still an active investigation, I am not at liberty to offer any 
details other than the Red Cross has been very forthcoming in 
cooperating with authorities and the case is ongoing.
    In addition to modifying industry practices and making financial 
mailings less attractive to a thief, our partnerships with regulatory, 
financial industry and other law enforcement groups have resulted in a 
number of initiatives.
    In 2002, Patrick J. Meehan, U.S. Attorney for the Eastern District 
of PA, formed a regional working group to facilitate the sharing of 
intelligence and investigative resources in combating identity theft in 
and around the Philadelphia area. As a member of the Group, the Postal 
Inspection Service has taken the lead in developing a web-based 
database that tracks customer and financial industry reports of mail 
theft and identity theft. The database allows all Group members to 
track loss information and perform advanced searches on victims' names. 
The database also performs what is known as ``link analysis,'' by 
automatically matching common addresses used by thieves.
    One of the most insidious aspects of identity theft is the length 
of time the scheme can be carried out before it is even detected. It 
may be months before a victim realizes they've been targeted. It's not 
until a consumer gets turned down for credit, a car loan or a mortgage 
on a dream house because of a bad credit rating do they realize what 
has taken place. Damaged credit ratings may take years to restore. 
Victims run the gamut of society--they're wealthy, they're poor; 
they're old, they're young. No one is immune. Anyone is a potential 
victim.
    Aggressive law enforcement efforts are a key component of our 
mission. But arrests are not the only solution. We have found that 
creating awareness and prevention programs for consumers can go a long 
way to lessen the impact of this crime on the public.
    Over the past 10 years, the Postal Inspection Service has published 
and distributed a series of brochures, posters and newsletters to raise 
public awareness. Our publication ``Identity Theft--Safeguard Your 
Personal Information,'' has been distributed to over two million 
consumers and businesses. ``Detecting and Preventing Account Takeover 
Fraud,'' another of our publications, advises credit card companies on 
steps they can take to detect and prevent takeover schemes.
    Just this past September, the Postal Inspection Service, along with 
our partners the FTC and the Postal Service launched a nationwide 
awareness campaign on identity theft. We used a two-pronged approach: 
providing prevention and awareness information to consumers, and 
informing businesses on the need to safeguard their files and databases 
containing customers' information. Actor Jerry Orbach, of television's 
Law and Order fame, who himself was a victim of identity theft, was the 
campaign's spokesman.
    The Mullen agency of Pittsburgh provided support for this year's 
campaign on a pro bono basis. But what really makes this campaign 
unique is the funding source. We've all heard the saying, ``crime 
doesn't pay.'' In the case of this awareness campaign, it does pay. 
This campaign was funded through a unique application of fines and 
forfeitures paid by criminals in a past fraud case.
    Sometimes the most effective vehicle for ``getting out the 
message'' is when the message comes directly from an authoritative 
source, the criminals themselves. Last year, Postal Inspectors in 
Pittsburgh caught a man who stole the identities of several 
celebrities, including the actor Will Smith. The thief, Carlos Lomax, 
was prosecuted by the U.S. Attorney's Office in the Western District of 
Pennsylvania and convicted. Lomax agreed to let us tape an interview of 
him describing what he did and how he did it. I would like to play a 
portion of that tape for you now.
    Educating the public and working to reduce opportunities where the 
Postal Service and the mail can be used for illegal purposes are 
crucial elements in our fight against identity crimes. As always, we 
will do our part to remove criminals from society. We appreciate the 
subcommittee's recognition of the importance of this issue.

    Mr. Greenwood. Please do.
    [Video shown.]
    Mr. Greenwood. Thank you. Mr. Abel, you are recognized for 
your statement.

                    TESTIMONY OF JOHN M. ABEL

    Mr. Abel. Good afternoon, Chairman Greenwood and 
Congressman Gerlach. On behalf of the Pennsylvania Attorney 
General, Mike Fisher, I am honored to be here this afternoon to 
testify on this important topic. My name is John Abel, and I am 
a Senior Deputy Attorney General in the Philadelphia Regional 
Office of General Fisher's Bureau of Consumer Protection.
    Identity theft, as we heard, is a serious crime, and 
growing problem across the country with Pennsylvania's 
experience being no exception. Victim of this crime face 
devastating economic repercussions, and oftentimes spend 
countless hours undoing the harm in order to get their finances 
back in order. This can be a very stressful experience for the 
ordinary consumer, who in many instances does not realize until 
much later that their identity has been hijacked by an unknown 
perpetrator. By this time, hundreds if not thousands of dollars 
in unauthorized charges have been made in their name from any 
number of sources.
    I am here today to speak on behalf of the Bureau of 
Consumer Protection that is housed within the Public Protection 
Division. By way of background, the Bureau has several regional 
offices which handle more than 40,000 written complaints 
annually from consumers throughout the state. Nearly each of 
these consumer complaints is assigned to an individual agent, 
and in most instances, the agent will seek to mediate the case 
with the business, with the hopes of achieving a satisfactory 
resolution.
    Should the Bureau detect a pattern or practice of consumer 
fraud, based on the complaint history or from any other source, 
the Bureau may then commence a formal investigation and take 
legal action if necessary. With regard to the issue of identity 
theft, I will focus, for my few moments, on the efforts of the 
Bureau in educating consumers to avoid these thieves, and 
assisting consumers with restoring their credit.
    Although our office is vested with criminal authority to 
pursue perpetrators of identity theft, as a civil law 
litigator, I will not be able to speak specifically to the 
details of any criminal investigations or prosecutions. 
However, I would be happy to provide, later, any further 
information the subcommittee might desire.
    As for the scope of the problem, according to the Social 
Security Administration, more than 750,000 incidents of 
identity theft occurred nationwide last year. One study found 
that on the average, it takes victims 175 hours and over $800 
in out of pocket costs to clear their name.
    Allow me to share with the committee some recent numbers 
which pertain specifically to Pennsylvanians. Statistics on 
identity theft are maintained by the Federal Trade Commission, 
which established an Identity Theft Hotline and Data 
Clearinghouse back in 1999. These records show that in 2002, 
Pennsylvania had reports of victims in 5,080 cases. The 
overwhelming majority, 46 percent, specifically experienced 
credit card fraud. Next, the most common instance involved 
unauthorized use of phone or utility services. Almost 1 in 4 of 
these crimes occurred in Philadelphia. However, every region of 
the State has experienced this brand of crime.
    Data shows the typical victim of identity theft is between 
30 and 40 years of age and does not notice the crime until 
roughly a year after they have become a victim. Particularly 
disturbing is the victimization of our seniors, who with their 
good credit, retirement nest eggs and trusting nature are often 
targeted by scam artists. Only the State of Florida has a 
higher percentage of citizens over the age of 65 than 
Pennsylvania, and Attorney General Fisher's efforts to protect 
the Commonwealth's citizens include a special commitment to the 
protection of our seniors.
    As for efforts to combat the problem, the old saying that 
an ounce of prevention is worth a pound of cure is particularly 
true in this case. Attorney General Fisher has taken action to 
educate Pennsylvanians on how to avoid these tactics. Through 
various forms of outreach and public speaking, representatives 
from the Bureau help to spread the word on the rather simple 
and easy steps that consumers can take to avoid becoming a 
victim. We appear before religious and other community 
organizations, senior groups, numerous civic associations. We 
staff information booths at shopping malls and county fairs all 
throughout the state.
    Just this last year, the Bureau joined the National 
Consumer Protection Week by participating in education fairs 
and activities throughout the state. The theme was ``Consumer 
Confidential: The Privacy Story.''
    Consistent with what I had said about the seriousness of 
these crimes against seniors, the Attorney General's Office has 
also launched a program known as the Senior Crime Prevention 
University to educate older Pennsylvanians and their families 
on crime prevention. This program is presented in conjunction 
with other law enforcement agencies, who provide training to 
help stop the multitude of crimes, including identity theft 
against the senior citizens of Pennsylvania.
    The Bureau has specially published a brochure with 
particular tips on how to protect one's personal identification 
information. For example, minimize identification information 
in cards you carry. Don't carry your Social Security card with 
you. Purchase a shredder. We have seen identity thieves that 
commonly sift through garbage seeking discarded mail. Be 
mindful of billing cycles. If it seems like one of your bills 
didn't arrive, follow up with the business. Don't give out 
personal information over the phone, through the mail, or over 
the Internet, unless you have initiated the contact or know 
with whom you are dealing. And last, order a copy of your 
credit report at least on an annual basis.
    If, despite taking these precautions, a person's 
information does end up in the wrong hands, our Office then 
recommends taking the following steps immediately. Call the 
fraud departments of the credit bureaus and request that a 
fraud alert be put on your file. You should also ask for a copy 
of your credit report and then follow up with those bureaus by 
asking that they remove any fraudulent or incorrect 
information. Contact banks, credit card companies and all other 
creditors who issued credit in your name and/or permitted 
access to your existing account and close all affected 
accounts. Finally, then contact your local police department 
and file a criminal report on the incident.
    As I mentioned before, each consumer complaint that the 
Bureau receives is assigned to an individual agent. In the case 
of identity theft, this agent is available to direct the 
consumer to the appropriate agencies. Additionally, these 
agents are available to work with and provide information to 
other parties in an effort to address some of the problems 
created by this theft.
    The Bureau has also taken action within the context of 
legal actions to protect consumer privacy and avoid identity 
theft. For instance, when an online retailer of children's 
education materials announced that it was going to cease 
operations and sell off its assets, Pennsylvania, along with a 
majority of other states, filed an Objection in the Bankruptcy 
Court to prevent that company from selling its customer list. 
Ultimately, through the efforts of Pennsylvania, the FTC and 42 
other states, this company agreed to destroy the customer list.
    In another, more recent case, the Bureau took action 
against Bucks County based national seller of computers, and 
made certain that the settlement there prohibited the sale or 
disclosure of other consumer information.
    Once again, thank you for the opportunity to comment today 
on the Bureau of Consumer Protection's efforts to assist 
consumers in preventing the growing problem of identity theft, 
and we want to commend Congress for its recent enactment of the 
Fair and Accurate Credit Transactions Act, which should further 
assist consumers in combating this problem.
    For instance, one of the two provisions that quickly come 
to mind is the one providing for a free annual credit report 
that will allow consumers to do this annual checkup that we 
talked--that we heard about this morning that is so important.
    Another provision is the one that speaks to the truncation 
of credit card and debit card account information. These and 
the other provisions should assist in combating this problem.
    I will be happy to take any questions.
    [The prepared statement of John M. Abel follows:]
  Prepared Statement of John M. Abel, Senior Deputy Attorney General, 
 Pennsylvania Office of Attorney General, Bureau of Consumer Protection
                            i. introduction
    Good morning Chairman Greenwood and distinguished members of the 
House Subcommittee on Oversight and Investigations. On behalf of the 
Pennsylvania Attorney General Mike Fisher, I am honored to be here this 
morning to testify on the important topic of identity theft. My name is 
John Abel and I am a Senior Deputy Attorney General in the Philadelphia 
Regional Office of General Fisher's Bureau of Consumer Protection.
    Identity theft is a serious crime and growing problem across the 
country with Pennsylvania's experience being no exception. Victims of 
this crime face devastating economic repercussions and oftentimes spend 
countless hours undoing the harm in order to get their finances back in 
order. This can be a very stressful experience for the ordinary 
consumer who in many instances does not realize until much later that 
their identity has been hijacked by an unknown perpetrator. By this 
time, hundreds, if not thousands, of dollars in unauthorized charges 
have been made in their name from any number of sources.
    I am here today to speak on behalf of the Bureau of Consumer 
Protection of the Attorney General's Office that is housed within the 
Public Protection Division. Along with the Bureau of Consumer 
Protection, a number of other offices are located within Public 
Protection including the Health Care Section, AntiTrust Section, 
Charitable Trusts and Organization Section and the Civil Rights 
Enforcement Section.
                             ii. background
    Before I begin to talk about this problem, let me start by giving 
you a brief background of the Bureau of Consumer Protection. By law, 
the Attorney General's Bureau of Consumer Protection is authorized to 
perform the following duties:

 Investigate commercial and trade practices in the distribution, 
        financing and furnishing of goods and services for the use of 
        consumers;
 Conduct studies, investigations and research into matters affecting 
        consumer interests and make such information available to the 
        public;
 Advise the Pennsylvania Legislature on matters affecting consumer 
        interests, including the development of policies and the 
        proposal of programs to protect consumers;
 Investigate fraud and deception in the sale, servicing and furnishing 
        of goods and products, and strive to eliminate such illegal 
        actions;
 Promote consumer education and publicize matters relating to consumer 
        fraud, deception and misrepresentation.
    The Bureau of Consumer Protection has seven regional offices which 
handle more than 40,000 written complaints annually from consumers 
throughout the Commonwealth. Over the past couple of years, the number 
of complaints has risen dramatically by more than 30 percent. This 
increase is due to a number of factors, one of which includes a growing 
wave of bankruptcies of a number of large retail establishments. Each 
of these consumer complaints is assigned to an individual agent and in 
most instances, that agent will seek to mediate the case with the 
business with hopes of achieving a satisfactory resolution. Should the 
Bureau detect a patten or practice of consumer fraud, based on 
complaint history or other sources, the Bureau may then commence a 
formal investigation.
    Under the law, the Bureau is authorized to file a formal legal 
action where it has reason to believe that a business has engaged in 
such a pattern of illegal practices and it is in the public interest to 
do so. On average, the Bureau files 150 actions per year. Legal actions 
take the form of a lawsuit filed in the Commonwealth Court or local 
Court of Common Pleas. These actions also include a settlement 
agreement permitted by law which is known as an Assurance of Voluntary 
Compliance. Through these actions, the Bureau can seek injunctive 
relief, such as prohibiting a company from doing business in the 
Commonwealth, as well as consumer restitution. The Bureau is authorized 
to seek a penalty of $1,000 per violation and $3,000 per violation 
where the consumer is of age 60 or older.
    With regard to the issues of identity theft, I will focus on the 
efforts of the Bureau of Consumer Protection in educating consumers to 
avoid these thieves and in assisting consumers with restoring their 
credit. Although our Office is vested with criminal authority to pursue 
perpetrators of identity theft, as a civil law litigator with the 
office, I will not be able to speak specifically to the details of any 
criminal investigations or prosecutions. However, I would be happy to 
provide later any further information that the subcommittee might 
desire.
                         iii. scope of problem
    According to the Social Security Administration, more than 750,000 
incidents of identity theft occurred nationwide last year. One study 
found that on the average, it takes victims 175 hours and over $800 in 
outofpocket to clear their name. The Federal Trade Commission reports 
that in 2002 they received 161,819 identity theft complaints. This 
national figure is almost double that which was reported in 2001, when 
the FTC tracked 86,198 complaints of identity theft. We have every 
reason to believe that the trend is increasing this year.
    Allow me to share with the Committee some recent numbers which 
pertain specifically to Pennsylvanians. Statistics on identity theft 
are maintained by the Federal Trade Commission which established an 
Identify Theft Hotline and Data Clearinghouse in 1999. These records 
show that in 2002, Pennsylvania had reports of victims in 5,080 cases. 
The overwhelming majority, 46 percent, specifically experienced credit 
card fraud. Next to credit card fraud, the most common instance 
involved unauthorized use of phone or utility services. Almost 1 in 4 
of these crimes occurred in Philadelphia. However, every region in the 
Commonwealth has experienced this brand of crime.
    With statistics such as these, which have been steadily increasing, 
identity theft is a problem that certainly warrants the continued 
attention of the Subcommittee.
    Data shows that the typical victim of identity theft is between 30 
and 40 years old and does not notice the crime until roughly a year 
after they have become a victim. At this age, people generally have an 
established credit history and a steady income. Similarly, with 
children, work, and other commitments, there are a lot of priorities 
and responsibilities to tackle. It is often easy to take your financial 
privacy and security for granted. Particularly disturbing is the 
increasing victimization of our seniors who, with their good credit, 
retirement nest eggs and trusting nature, are often targeted by scam 
artists. Only the state of Florida has a higher percentage of citizens 
over the age of 65 than Pennsylvania, and Attorney General Fisher's 
efforts to protect the Commonwealth's citizens includes a special 
commitment to protection of our seniors.
    These criminals use a variety of methods to access your 
information. They steal purses and wallets for personal information; 
they complete changeofaddress cards to have personal information 
forwarded out of the victim's hands. Other practices include ``dumpster 
diving,'' where criminals steal discarded statements and preapproved 
credit offers from the victim's trash. ``Shoulder surfing'' refers to 
the practice of stealing PIN numbers and account numbers over the 
person's shoulder while they are using an ATM. Of course, the Internet 
is fertile ground for these thieves. A fraudulent email can be sent 
promising some benefit in exchange for personal information. A 
surprising number of people quickly sent out the information without 
taking any steps to determine the validity of the offer.
                     iv. efforts to combat problem
    The old saying that ``an ounce of prevention is worth a pound of 
cure'' is particularly true in the case of identity theft. Attorney 
General Fisher has taken action to educate Pennsylvanians on how to 
avoid these tactics. Through various forms of outreach and public 
speaking, representatives from the Bureau of Consumer Protection help 
to spread the word on the rather simple and easy steps that consumers 
can take to avoid becoming a victim. We appear before church and other 
community organizations, senior groups, as well as numerous civic 
associations. We staff information booths at shopping malls and county 
fairs throughout the state.
    Just this last year, the Bureau joined in National Consumer 
Protection Week by participating in consumer education fairs and 
activities throughout the Commonwealth. The theme was ``Consumer 
Confidential: The Privacy Story.'' As part of this event, the Bureau 
rolled out a new brochure titled ``Consumer Privacy: Protecting Your 
Personal Information.''
    Consistent with what I had mentioned about the seriousness of these 
crimes against seniors, the Attorney General's Office has also launched 
a program known as the Senior Crime Prevention University to educate 
older Pennsylvanians and their families on crime prevention. The Senior 
Crime Prevention University is presented in conjunction with other law 
enforcement agencies who provide training to help stop the multitude of 
crimes, including identity theft, against the senior citizens of 
Pennsylvania.
    The Bureau has also specially published a brochure which offers 
specific tips to protect personal identifying information. For 
instance:

 Minimize the identification information and cards you carry. Don't 
        carry your social security card with you and carry other cards 
        that list your social security number (such as prescription 
        cards or insurance cards) only when necessary.
 Purchase a shredder. As I said earlier, identity thieves commonly 
        sift through garbage seeking discarded mail such as preapproved 
        credit card offerings and bank statements.
 Be mindful of billing cycles if it seems like one of your bills 
        didn't arrive, follow up with the business. Remember, that in 
        addition to containing your name, address and other 
        information, monthly statements also contain account numbers.
 Don't give out personal information over the phone, through the mail, 
        or over the Internet unless you have initiated the contact, or 
        know with whom you are dealing. To get your information, 
        identity thieves may pose as representatives of banks, Internet 
        services providers, even government agencies.
 Order a copy of your credit report.
    If, despite taking these precautions, a person's information does 
end up in the wrong hands, our Office recommends taking the fallowing 
steps immediately:

 Call the fraud departments of the credit bureaus and request that a 
        ``fraud alert'' be put on your file. This lets creditors know 
        to call you before they open any new accounts in your name. You 
        should also ask for a copy of your credit report and follow up 
        with these credit bureaus by asking that they remove any 
        fraudulent or incorrect information.
 Contact banks, credit card companies and all other creditors who 
        issued credit in your name and/or permitted access to your 
        existing account and close all affected accounts.
 Finally, contact your local police department and file a criminal 
        report on the incident. Such a report can help in clearing up 
        your credit records and, or course, may lead to the arrest of 
        the thief.
    As I mentioned before, each consumer complaint that the Bureau 
receives is assigned to an individual agent. In cases of identity 
theft, this agent is available to direct the consumer to the 
appropriate agencies. Additionally, the agents are available to work 
with, and provide information to, other parties in an effort to address 
some of the problems created by the theft.
    The Bureau has also taken action within the context of legal 
actions to protect consumer privacy and avoid identity theft. For 
instance, when an online retailer of children's education materials 
announced that it would cease operations and sell off its assets, 
Pennsylvania, along with a majority of other states, filed an Objection 
in the Bankruptcy Court to prevent that company from selling its 
customer list as an asset. Ultimately, through the efforts of 
Pennsylvania, the FTC and 42 other states, this company agreed to 
destroy the customer list.
    In another case where the Bureau took action against a Bucks County 
based national seller of computers, the Office made certain that the 
settlement prohibited the sale or other disclosure of customer 
information.
    In another legal action, this Office reached an Assurance of 
Voluntary Compliance with a Bucks County developer and distributor of 
computer games to resolve alleged violations related to the company's 
use of ``spyware'' in its computer games. Customers who purchased the 
product were unaware that the games included a computer file attachment 
which allowed third party advertisers to secretly interact with the 
consumers' computers and trace their steps on the Internet. Asserting 
that this conduct violated consumer privacy rights, the Commonwealth 
secured an agreement from the business barring the inclusion of such 
programs in its products and requiring the company to provide a means 
for customers to remove the software program from previously purchased 
products.
    Once again, thank you for the opportunity to comment today on the 
Bureau of Consumer Protection's efforts to assist consumers in 
preventing the growing problem of identity theft and I want to commend 
Congress for its recent enactment of the Fair and Accurate Credit 
Transactions Act which should further assist consumers in combating 
this problem.
    I would be happy to take any questions.

    Mr. Greenwood. Thank you. Lieutenant Colonel Periandi.

             TESTIMONY OF LT. COL. RALPH M. PERIANDI

    Mr. Periandi. Good morning, Chairman Greenwood. I am 
Lieutenant Colonel Ralph Periandi, Deputy Commissioner of 
Operations for the Pennsylvania State Police. On behalf of 
Colonel Jeffrey B. Miller, Commissioner of the Pennsylvania 
State Police, I would like to thank the House Energy and 
Commerce Subcommittee on Oversight and Investigations for this 
opportunity to speak on the issue of identity theft.
    Identity theft is delineated in Title 18, Pennsylvania 
Crimes Code, Section 4120. This statute indicates a person 
commits the offense of identity theft of another person if he 
possesses or uses, through any means, identifying information 
of another person without consent of that person to further any 
unlawful purpose. The unlawful activity could involve a 
criminal utilizing a victim's information in order to obtain 
access to loans, credit, or debit cards, bank accounts, 
services such as telephone or cable, or personal property 
ranging from groceries to automobiles. Following the tragic 
events of September 11, 2001, law enforcement must also 
consider the use of another person's identifying information by 
criminals or terrorists in an attempt to gain access to 
restricted areas, information--restricted areas or information 
in order to further their criminal enterprise.
    In recent years, the crime of identity theft has grown in 
scope with the advent of the inexpensive personal computer. 
Those criminals possessing familiarity with computers now have 
powerful resources at their disposal. By obtaining personal, 
biographical and financial information which is readily 
available on the Internet, an identity thief can pose as 
anyone. Additionally, by utilizing the wide range of high 
quality computer peripherals, they are able to craft documents 
and identification which allow them to create new identities or 
steal the identity of someone else. Another computer aided 
method of committing identity theft is known as skimming. 
Skimming is the practice of reading and storing the magnetic 
information on a debit or credit card. It is easily 
accomplished by those in the service or retail industry by 
swiping a provided credit or debit card through a second card 
reader at the time of a legitimate transaction. The stored 
information is then used by that individual or sold to others 
for criminal purposes.
    Conversely, the technologically challenged identity thief 
continues to resort to time tested low-tech methods for 
obtaining the personal information of a victim. Stealing mail, 
digging through garbage, generally provides the criminal with 
extensive personal information, to include the victim's full 
name, date of birth, Social Security number, bank account 
information, utilities account information, address and 
telephone number. Armed with this knowledge, the identity thief 
is ready to apply for credit or access funds in the name of the 
victim.
    Currently, the best source for documented statistical 
information concerning the problem of identity theft, and it 
has previously been testified to, is the Federal Trade 
Commission. The FTC has been maintaining data and information 
regarding this crime since enactment of the Identity Theft and 
Assumption Deterrence Act. In furtherance of this Act, the FTC 
developed the Identity Theft Data Clearinghouse and its 
reporting vehicle, the Consumer Sentinel. To quantify the 
problem of identity theft, the following information is 
provided from the Consumer Sentinel.
    Of over 380,000 fraud complaints received nationally in 
2002, the largest category of complaint was identity theft at 
43 percent. Individual victim costs per fraud is estimated at 
$2,000. This, Mr. Chairman, the next area, national reporting 
of identity theft has steadily increased since the year 2000, I 
think you are going to find to be staggering. In 2000, which 
represents the first full year of reporting, slightly over 
31,000 reports were received. 2001, slightly over 86,000 
reports were received. This increase indicates a 177 percent 
change from 2000 to 2001. In 2002, almost 162,000 reports were 
received. Actually, 161,819, which represents an 88 percent 
increase over 2001. So from 2000 to 2001, we have a 177 percent 
increase. From 2001 to 2002, we have an additional 88 percent 
increase.
    In the year 2002, 75 percent of victims were between the 
ages of 18 and 49. Of a little over 13,000 fraud complaints 
received in Pennsylvania during 2002, again, as is reflected 
nationally, the largest category of complaint was identity 
theft. In Pennsylvania, it amounted to 39 percent of all 
complaints. In 2002, Pennsylvania ranked 22nd among the states 
for victims of identity theft per 100,000 population, with 
approximately 5,080 victims.
    Mr. Abel, representing the Pennsylvania Attorney General's 
Office, has previously testified to related statistics to 
these. The top three crimes committed in concert with identity 
theft in Pennsylvania during 2002 were credit card fraud, 46 
percent of those complaints, phone or utilities fraud, 22 
percent of the complaints and bank fraud, 12 percent.
    The top three victim locations for identity theft in 2002 
in Pennsylvania were Philadelphia, with 24 percent of the 
complaints, Pittsburgh, with 5 percent and Allentown, with 1 
percent. Continuing in an effort to quantity this problems 
since the inception of the Pennsylvania statute regarding 
identity theft in 2001, Pennsylvania State Police have received 
714 complaints involving this crime. 302 were received in the 
year 2001, while 412 were received in the year 2002. This 
represents a 27 percent increase in the number of complaints we 
have received in the State Police, and I think it should be 
noted that we are responsible for 80 percent, we are 
responsible for policing 80 percent of the land mass in the 
state, but 30 percent of the population, so a full 70 percent 
of the population is not reflected in the statistics regarding 
the complaints received by our department.
    This data provides a general overview of the raw, cold, 
statistical information regarding the crime of identity theft. 
What it does not provide is insight into the associated 
emotional problems victims of the crime encounter. Many 
individuals do not discover they are the victim of an identity 
theft for months, if not years. Some victims have been duped 
for as long as 5 years. Upon discovery, victims must spend 
significant amounts of time contacting creditors and credit 
reporting agencies in an attempt to repair the damage to their 
credit histories. While this is occurring, they are often 
unable to obtain credit and financial services, 
telecommunication, utility services and even employment.
    Many victims report having wages garnished and tax refunds 
withheld. In those instances when an identity theft--an 
identity thief has received a criminal record in the victim's 
name, victims have reported having licenses revoked, family 
background checks and even being arrested or detained. 
Combating the crime of identity theft in Pennsylvania requires 
law enforcement to achieve three main objectives. First, law 
enforcement personnel must be properly trained and informed 
regarding this crime. Second, they must be appropriately 
staffed with criminal investigators to conduct these sometimes 
in-depth and lengthy investigations. Finally, the public needs 
to be provided with information concerning methods to protect 
themselves from identity theft, as well as information 
regarding the steps to take should they become a victim.
    Each of these objectives will be explored more fully. In 
Pennsylvania, the State Police are tasked with providing police 
services to those areas and citizens who find themselves 
without their own police department. We are a full service 
department, performing functions ranging from traffic 
enforcement to criminal investigations. Our criminal 
investigators are responsible for the investigation of all 
types of crime. As such, our investigators must receive 
training and obtain expertise in all facets of criminal 
investigation. Training specific to identity theft and fraud is 
available to them and Pennsylvania's law enforcement community 
through numerous sources. Some examples are at our own Academy, 
Pennsylvania State Police Academy in Hershey and our regional 
training centers; at the Middle Atlantic Great Lakes Organized 
Crime Law Enforcement Network, or MAGLOCLEN, which is 
headquartered right here in Bucks County; the National White 
Collar Crime Center; International Association of Financial 
Crimes Investigators; the United States Department of Justice. 
The FTC has been previously testified to, and local banking 
institutions.
    Generally, individual instances of identity theft are 
investigated by a criminal investigator assigned to one of our 
troop commands In those instances when a case of identity theft 
is indicative of organized criminal activity, the Pennsylvania 
State Police rely on the Organized Crime Division of our Bureau 
of Criminal Investigation. Members of this specially selected 
group of investigators are strategically located in task forces 
throughout Pennsylvania. They work with their troop 
counterparts as well as local and Federal investigators on 
cases involving large monetary losses, which are usually 
associated with organized groups of criminals.
    These groups may be associated with traditional organized 
crime, displaced ethnic groups, or simply enterprising local 
criminals. Identity theft is increasingly becoming an 
international crime, with roots in Canada, Eastern Europe, Asia 
and Africa. This has made prosecution difficult, and in some 
cases, impossible, even with the involvement of Federal law 
enforcement.
    In an attempt to deter or mitigate the crime of identity 
theft, the Pennsylvania State Police provide the following 
information to law enforcement agencies and the general public, 
and I do this, Mr. Chairman, at the risk of repeating previous 
recommendations, because I think we all believe it is very 
important that we get this information to the public.
    Let us answer a few questions for our citizens. First, how 
do I protect myself? These and other protective measures will 
not absolutely guarantee you will never become a victim of 
identity theft, but employing one or more of these can 
drastically reduce your risk.
    Give your Social Security number only when it is absolutely 
necessary and do not carry your Social Security card with you. 
Leave it at home or in a secure place. Annually, review your 
Social Security personal earnings and benefits statement, which 
is mailed to all participants. A copy can also be requested 
from the Social Security Administration. Memorize your ATM 
password and shield the keypad when entering your password at 
any ATM machines. Previously, Mr. Chairman, I believe you asked 
a question relative to passwords and PIN numbers particularly. 
And we have had instances where criminals from a remote 
location will videotape the keypad and then, by certainly 
expanding or utilizing that videotape to basically just look at 
the particular PIN information, and they have already captured 
possibly your password information or your account number 
information.
    Do not place bill payments in your mailbox for pickup. We 
saw that in one of the videos. Mail your bills directly from 
the Post Office. Shredding of documents, which we have already 
talked about. Annually obtaining your credit report from the 
three major credit reporting agencies. Carefully review them 
for accuracy and immediately correct all mistakes. Have your 
name removed from lists sold to companies offering pre-approved 
credit cards. That has already been testified to and questioned 
and discussed, by contacting three credit card reporting 
agencies.
    Do not give your credit card number over the telephone 
unless you have initiated the call. Ensure that neither you nor 
the called party is using a mobile or cellular telephone. This 
is another issue that we deal with where people speak freely on 
mobile phones and cellular telephones without regard for the 
fact that that can often be intercepted. When you purchase 
items with a credit card, take your receipts with you. Do not 
toss them away. Do not put your credit card number on the 
Internet unless it is an encrypted or secured site.
    How about the question what if I become a victim of 
identity theft? Identity theft can occur even if you have been 
careful about protecting your personal information because of 
the ever-increasing skill employed by professional thieves. The 
exact steps that you should take after becoming a victim of 
identity theft will vary depending upon your circumstances, but 
in most instances, the following steps should be taken.
    Mr. Greenwood. I am going to ask you to just kind of go 
through these steps real----
    Mr. Periandi. Skip through those?
    Mr. Greenwood. Real quickly, and--because----
    Mr. Periandi. Okay. Contact the security department of the 
respective financial institution. Contact each of the Nation's 
credit reporting agencies. File a complaint with your local 
police department or law enforcement agency where the identity 
theft took place, and I know previously Mrs. Kane talked about 
the problem relative to jurisdiction and venue. That has been 
cleared up with an amendment in 2002 in Pennsylvania, so that 
prosecution can be taken at either the residence or the work 
location of the victim.
    Report fraudulent use of your Social Security number to the 
Social Security Administration. Notify the United States Postal 
Service, which has been testified to, and notify immediately 
your agency, if an ATM card has been lost or stolen or any of 
that information has been compromised.
    Same thing with checks. If you are a victim of identity 
theft, never agree to pay any portion of the debt just to get a 
collection agency off the case. The Fair Debt Collection Act 
prohibits collectors from contacting you if within 30 days 
after you receive their written notice, you send them a letter 
refuting the debt, et cetera, with supporting documentation 
relative to criminal violation.
    Unfortunately, it is impossible to protect yourself 
entirely from identity theft, but following the safeguards 
detailed herein can greatly reduce your risk.
    Additionally, the Pennsylvania State Police provides 
numerous other services to Pennsylvania citizenry and law 
enforcement community in dealing with the problem of identity 
theft. The Bureau of Forensic Services offers examination of 
questioned documents, handwriting comparisons, patent and 
latent fingerprint identification comparison. The Polygraph 
Unit in many instances is required to determine the veracity of 
involved suspects. Community Services Unit performs speeches 
and provides information to community groups concerning how to 
reduce the probability of becoming a victim of this type of 
theft. The Bureau of Criminal Investigation, through the 
Department's Pennsylvania Criminal Intelligence Center, or 
PaCIC, provides briefs, which contain information concerning 
prevention and response methods for crimes such as identity 
theft. In addition, ongoing analysis of data helps PaCIC to 
identity trends in an effort to alert law enforcement statewide 
to potential organized efforts to commit identity theft.
    Finally, with the advent and ease of access to computer 
technology, the State Police Area Computer Crime Task Forces 
have become an invaluable resource to Pennsylvania law 
enforcement, particularly in those instances when a computer 
has been utilized in some way to steal an individual's identity 
or commit a crime utilizing another's identity.
    As you can see, Mr. Chairman, the Pennsylvania State Police 
brings a wide variety of investigative resources to combat the 
evolving problem of identity theft in the Commonwealth. Through 
experience, we have learned to utilize and share these 
resources with local, State and Federal investigators. Only by 
sharing resources and staying ahead of the criminal mind will 
we be effective in this crime fighting effort.
    Finally, recent legislative changes to Pennsylvania's 
identity theft statute have made investigation and prosecution 
for this crime a more efficient and effective process. I 
mentioned the fact that the venue has been changed and 
penalties have been enhanced. The clarification of venue is 
particularly important, as many of the crimes associated with 
identity theft occur in other jurisdictions, states and 
countries.
    In closing, I would like to thank Chairman Greenwood and 
the Members of the committee for the opportunity to address you 
today on this issue. As a member of the Pennsylvania State 
Police, each officer carries on a tradition of excellence begun 
in the year 1905. As part of this tradition, it is the mission 
of each member of our department to effectively investigate 
crime and criminal activity, provide investigative assistance 
and support to all law enforcement within the Commonwealth, and 
promote public awareness concerning personal responsibility 
regarding crime reduction. This includes the crime of identity 
theft.
    I welcome the opportunity to respond to any questions or 
comments you may have.
    [The prepared statement of Ralph M. Periandi follows:]
 Prepared Statement of Lt. Col. Ralph M. Periandi, Deputy Commissioner 
                of Operations, Pennsylvania State Police
    Good morning Mr. Chairman and members of the Committee. I am Lt. 
Col. Ralph M. Periandi, Deputy Commissioner of Operations for the 
Pennsylvania State Police. On behalf of Colonel Jeffrey B. Miller, 
Commissioner of the Pennsylvania State Police, I would like to thank 
the House Energy and Commerce Committee for this opportunity today to 
speak on the issue of Identity Theft.
    Identity Theft is delineated in Title 18, the Pennsylvania Crimes 
Code, Section 4120. This statute indicates a person commits the offense 
of identity theft of another person if he possesses or uses, through 
any means, identifying information of another person without consent of 
that other person to further any unlawful purpose. The unlawful 
activity could involve a criminal utilizing a victim's personal 
information in order to obtain access to loans, credit or debit cards, 
bank accounts, services such as telephone or cable, or personal 
property ranging from groceries to automobiles. Following the tragic 
events of September 11, 2001, law enforcement must also consider the 
use of another persons identifying information by criminals or 
terrorists in an attempt to gain access to restricted areas/information 
in order to further their criminal enterprise.
    In recent years, the crime of Identity Theft has grown in scope 
with the advent of the inexpensive personal computer. Those criminals 
possessing familiarity with computers now have powerful resources at 
their disposal. By obtaining personal biographical and financial 
information, which is readily available on the Internet, an identity 
thief can pose as anyone. Additionally, by utilizing the wide range of 
high quality computer peripherals available, they are able to craft 
documents and identification, which allow them to create new identities 
or steal the identity of someone else. Another computer aided method of 
committing Identity Theft is known as ``skimming''. ``Skimming'' is the 
practice of reading and storing the magnetic information on a debit or 
credit card. It is easily accomplished by those in the service or 
retail industry by ``swiping'' a provided credit or debit card through 
a second card reader at the time of a legitimate transaction. The 
stored information is then used by that individual or sold to others 
for criminal purposes.
    Conversely, the technologically challenged identity thief continues 
to resort to time tested low-tech methods for obtaining the personal 
information of a victim. Stealing mail and digging through garbage 
generally provides the criminal with extensive personal information to 
include the victim's full name, date of birth, social security number, 
bank account information, utilities account information, address, and 
telephone number. Armed with this knowledge, the identity thief is 
ready to apply for credit or access funds in the name of the victim.
    Currently, the best source for documented statistical information 
concerning the problem of Identity Theft is the Federal Trade 
Commission (FTC). The FTC has been maintaining data and information 
regarding this crime since enactment of the Identity Theft and 
Assumption Deterrence Act in 1998. (Pub. L. No. 105-318, 112 Stat. 
3007) In furtherance of this Act, the FTC developed the Identity Theft 
Data Clearinghouse and its reporting vehicle, the Consumer Sentinel. To 
quantify the problem of identity theft, the following information is 
provided from the Consumer Sentinel:

 Of 380,103 fraud complaints received nationally in 2002, the largest 
        category of complaint was Identity theft at 43%.
 The Financial costs to victims of all fraud reported in the nation 
        during the year 2002 is estimated at nearly \1/2\ billion 
        dollars. 43% of this figure would indicate Identity Theft 
        nationwide cost victims approximately $200 Million.
 Individual victim cost per fraud is estimated at $2,000.
 National reporting of Identity Theft has steadily increased since the 
        year 2000. In 2000, which represents the first full year of 
        reporting, 31,117 reports were received. During 2001, 86,198 
        reports were received. This increase indicates a 177% change 
        over the previous year. Finally, in 2002, 161,819 reports were 
        received, which represents an 88% increase over the year 2001.
  In the year 2002, 75% of victims were between the ages of 18-49.
 Of 13,119 fraud complaints received in Pennsylvania during 2002, the 
        largest category of complaint was Identity theft at 39% of all 
        complaints.
 In 2002, Pennsylvania ranked 22nd among states for victims of 
        Identity Theft per 100,000 population, with 5,080 victims.
 The top three crimes committed in concert with an Identity Theft in 
        Pennsylvania during 2002 were Credit Card Fraud with 2,359 
        victims (46%), Phone or Utilities Fraud with 1,103 victims 
        (22%), and Bank Fraud with 623 victims (12%).
 The top three victim locations for Identity Theft in 2002 were 
        Philadelphia with 1,202 victims (24%), Pittsburgh with 226 
        victims (5%), and Allentown with 70 victims (1%).
    Continuing, in an effort to quantify this problem since the 
inception of the Pennsylvania statute regarding Identity Theft in 2001, 
the Pennsylvania State Police have received 714 complaints involving 
this crime. 302 were received in the year 2001, while 412 were received 
in 2002. This represents a 27% increase.
    This data provides a general overview of the raw, cold statistical 
information regarding the crime of Identity Theft. What it does not 
provide is insight into the associated emotional problems victims of 
this crime encounter. Many individuals do not discover they are the 
victim of Identity Theft for months, if not years. Some victims have 
been duped for as long as five years. Upon discovery, victims must 
spend significant amounts of time contacting creditors and credit 
reporting agencies in an attempt to repair the damage to their credit 
histories. While this is occurring, they are often unable to obtain 
credit and financial services, telecommunication and utility services, 
and even employment. Many victims report having wages garnished and tax 
refunds withheld. In those instances when an identity thief has 
received a criminal record in the victim's name, victims have reported 
having licenses revoked, failing background checks, and even being 
arrested or detained.
    Combating the crime of Identity Theft in Pennsylvania requires law 
enforcement to achieve three main objectives. First, law enforcement 
personnel must be properly trained and informed regarding this crime. 
Second, they must be appropriately staffed with criminal investigators 
to conduct these sometimes in-depth and lengthy investigations. 
Finally, the public needs to be provided with information concerning 
methods to protect themselves from Identity Theft, as well as 
information regarding the steps to take should they become a victim. 
Each of these objectives will be explored more fully.
    In Pennsylvania, the State Police are tasked with providing police 
services to those areas and citizens, who find themselves without their 
own police department. We are a full service department, performing 
functions ranging from traffic enforcement to criminal investigations. 
Our criminal investigators are responsible for the investigation of all 
types of crime. As such, our investigators must receive training and 
obtain expertise in all facets of criminal investigations. Training 
specific to Identity Theft and fraud is available to them and 
Pennsylvania's law enforcement community through numerous sources. Some 
examples are: the Pennsylvania State Police Academy; the Middle 
Atlantic-Great Lakes Organized Crime Law Enforcement Network 
(MAGLOCLEN); the National White Collar Crime Center (NW3C); the 
International Association of Financial Crimes Investigators; the U.S. 
Department of Justice; and local banking institutions.
    Generally, individual instances of Identity Theft are investigated 
by a Criminal Investigator assigned to one of our Troop commands. In 
those instances when a case of Identity Theft is indicative of 
organized criminal activity, the Pennsylvania State Police rely upon 
the Organized Crime Division of the Bureau of Criminal Investigation. 
Members of this specially selected group of investigators are 
strategically located in task forces throughout Pennsylvania. They work 
with their Troop counterparts, as well as local and federal 
investigators on cases involving large monetary losses, which are 
usually associated with organized groups of criminals. These groups may 
be associated with traditional organized crime, displaced ethnic 
groups, or simply enterprising local criminals. Identity Theft is 
increasingly becoming an international crime with roots in Canada, 
Eastern Europe, Asia and Africa. This has made prosecution difficult 
and in some cases impossible even with the involvement of federal law 
enforcement agencies.
    In an attempt to deter or mitigate the crime of Identity Theft, the 
Pennsylvania State Police provide the following information to law 
enforcement agencies and the general public:
How Do I Protect Myself?
    These and other protective measures will not absolutely guarantee 
you will never become a victim of Identity Theft, but employing one or 
more of these can drastically reduce your risk:

 Give your social security number only when it is absolutely 
        necessary, and do not carry your social security card with you. 
        Leave it at home or in a secure place.
 Annually review your social security personal earnings and benefit 
        statement which is mailed to all participants. A copy can also 
        be requested from the Social Security Administration 
        (1.800.772.1213).
 Memorize your ATM password and shield the keypad when entering your 
        password at ATM machines.
 Do not place bill payments in your mailbox for pickup. Mail your 
        bills directly from the post office.
 Shred all documents containing personal information especially bills, 
        credit card receipts, pre-approved credit card offers, and bank 
        statements, before you throw them away.
 Annually obtain a copy of your credit report from the three major 
        credit reporting agencies (Trans Union, 1.800.680.7289) 
        (Equifax, 1.888.766.0008) (Experian, 1.888.397.3742). A basic 
        report costs $9.00 from any of the three agencies. Certain 
        states have passed legislation giving residents free or reduced 
        prices on credit reports. Carefully review them for accuracy 
        and immediately correct all mistakes identified on your credit 
        reports in writing.
 Have your name removed from lists sold to companies offering 
        preapproved credit cards by contacting the three credit 
        reporting agencies and taking advantage of their ``optout'' 
        service. One number, 1.888.567.8688, reaches all three 
        agencies.
 Do not give your credit card number over the telephone unless you 
        have initiated the call. Ensure that neither you nor the called 
        party is using a mobile or cellular telephone.
 When you purchase items with a credit card, take your receipts with 
        you, do not toss them away.
 Do not put your credit card number on the Internet unless it is an 
        encrypted or secured site.
What If I Become A Victim of Identity Theft?
    Identity Theft can occur even if you have been careful about 
protecting your personal information because of the ever-increasing 
skill employed by professional thieves. The exact steps that you should 
take after becoming a victim of Identity Theft will vary depending upon 
your circumstances, but in most instances, the following steps should 
be taken:

 Contact the security department of the respective financial 
        institution, both verbally and in writing, for each account 
        that has been opened or tampered with and close these accounts. 
        The federal Fair Credit Billing Act limits your liability for 
        unauthorized charges to $50.00, but it's your responsibility to 
        make the appropriate notification, in writing, within 60 days 
        after the fraudulent activity has been discovered. Once the 
        financial institution acknowledges the fraud, ask them to send 
        all three credit reporting agencies a letter confirming 
        fraudulent activity.
 In the past, one necessary step included contact with each of the 
        nation's three major credit reporting agencies (TransUnion, 
        Equifax, and Experian). In an effort to streamline the process, 
        the credit reporting agencies have agreed to begin sharing 
        fraud related information. As of April 15, 2003, Identity Theft 
        victims need only make one toll-free call to any of the three 
        nationwide credit reporting agencies. The information they 
        provide will be automatically shared with the remaining 
        agencies for inclusion in their records. Within 24 hours of 
        being notified, each credit reporting agency will post a 
        security alert on the victim's credit file, which will be 
        viewed by all lenders or other users accessing future reports. 
        The alert will notify lenders of the reported fraud, thereby 
        assisting them to avoid opening a fraudulent account in the 
        victim's name. The credit reporting agencies will also remove 
        the victim's name from the lists of pre-approved credit or 
        insurance offers for a period of two years. Additionally, the 
        agencies have agreed to provide each victim with a copy of his 
        or her credit file, and to simplify the information 
        verification process to include deletion of fraudulent 
        information.
 File a complaint with your local police department or the law 
        enforcement agency where the Identity Theft took place. Also, 
        file a complaint with the Federal Trade Commission (FTC) 
        Identity Theft Hotline by telephone at 1.877.IDTHEFT. Although 
        the FTC has no criminal law enforcement authority, they can 
        pursue civil remedies and assist victims in resolving the 
        problems associated with the crime.
 Report the fraudulent use of your social security number to the 
        United States Social Security Administration at 1.800.269.0271. 
        Under certain circumstances, a new social security number may 
        be issued.
 Notify your nearest United States Postal Inspection Service if you 
        suspect the theft of your mail.
 If your ATM card has been lost or if your password has been 
        compromised, immediately notify your bank. The Electronic Fund 
        Transfer Act limits your losses to $50.00 if you make this 
        report within two business days. If you wait more than 60 days 
        to make the report, you could lose all the money that was taken 
        from your account.
 If checks were stolen or fraudulent bank accounts were established, 
        report this to your bank and to the major check verification 
        companies (Telecheck, 1.800.710.9898) (Certegy Inc., 
        1.800.437.5120) (International Check Services, 1.800.631.9656). 
        Request they notify retailers who use their service that you 
        were the victim of Identity Theft.
 If you're a victim of Identity Theft, never agree to pay any portion 
        of the debt just to get collection agencies off the case. The 
        Fair Debt Collection Act prohibits collectors from contacting 
        you if within 30 days after you receive their written notice, 
        you send them a letter refuting the debt. Along with your 
        letter, send supporting documentation (police report, letters 
        from credit reporting agencies, etc.) to substantiate your 
        position.
    Unfortunately, it is impossible to protect yourself entirely from 
Identity Theft, but following the safeguards detailed herein can 
certainly reduce your risk. Publications by the Federal Trade 
Commission (FTC) can provide further information on how to prevent 
Identity Theft. These publications can be obtained by contacting the 
FTC by telephone at 1-877-IDTHEFT or by visiting their web sites at 
http://www.ftc.gov or at http://www.consumer.gov. Phone counselors at 
the FTC can assist callers on how to take advantage of their consumer 
rights and on what actions need to be taken to restore their credit.
    Additionally, The Pennsylvania State Police provides numerous other 
services to Pennsylvania's citizenry and law enforcement community in 
dealing with the problem of Identity Theft. The Bureau of Forensic 
Services offers examination of questioned documents, handwriting 
comparisons, and patent and latent fingerprint identification and 
comparison. The Polygraph Unit in many instances is required to 
determine the veracity of involved suspects. The Community Services 
Unit performs speeches and provides information to community groups 
concerning how to reduce the probability of becoming a victim of this 
type of crime. The Bureau of Criminal Investigation through the 
Department's ``Pennsylvania Criminal Intelligence Center'' (PaCIC), 
provides Briefs, which contain information concerning prevention and 
response methods for crimes such as Identity Theft. In addition, 
ongoing analysis of data helps PaCIC to identify trends in an effort to 
alert law enforcement statewide to potential organized efforts to 
commit Identity Theft. Finally, with the advent and ease of access to 
computer technology, the State Police Area Computer Crime Task Forces 
have become an invaluable resource to Pennsylvania law enforcement, 
particularly in those instances when a computer has been utilized in 
some way to steal an individual's identity or commit a crime utilizing 
another's identity.
    As you can see, the Pennsylvania State Police brings a wide variety 
of investigative resources to combat the evolving problem of Identity 
Theft in the Commonwealth. Through experience, we have learned to 
utilize and share these resources with local, state and federal 
investigators. Only by sharing resources and staying ahead of the 
criminal mind will we be effective in this crime fighting effort.
    Finally, recent legislative changes to Pennsylvania's Identity 
Theft statute have made investigation and prosecution for this crime a 
more efficient and effective process. Penalties have been stiffened and 
venue now includes the residence or employment address of the person 
whose identifying information has been lost or stolen or has been used 
without the person's consent. The clarification of venue is 
particularly important as many of the crimes associated with Identity 
Theft occur in other jurisdictions, states, or countries.
    In closing, I would like to thank the Chairman and members of the 
Committee for the opportunity to address you today on this issue. As a 
member of the Pennsylvania State Police, each officer carries on a 
tradition of excellence begun in the year 1905. As part of this 
tradition, it is the mission of each member to effectively investigate 
crime and criminal activity, provide investigative assistance and 
support to ALL law enforcement agencies within the Commonwealth, and 
promote public awareness concerning personal responsibility regarding 
crime reduction. This includes the crime of Identity Theft. I welcome 
the opportunity to respond to any questions or comments you may have.

    Mr. Greenwood. Thank you, sir. I appreciate it. Let me go 
back to the tape we saw with Mr. Lomax, if that is, in fact, 
his real name. Walked through how easy it was for him to steal 
actor Will Smith's identity. He basically looked in a magazine 
that probably had an article that said who his mother and his 
mother's maiden name, what his mother's maiden name was, 
address and enough identifying information gleaned from a 
source like that to then go, and what he said he did, as I 
recall, was to go and get, first off, a duplicate birth 
certificate, and then take that and get a duplicate Social 
Security card, and then take that and get a duplicate driver's 
license. The question I have for any or all of you. If Mr. 
Lomax gets out of jail tomorrow, and wants to start all over 
again, picking another victim, would he be able to do it just 
as easily today as he did initially? Anything changed that 
makes his job more difficult?
    Mr. Burke. Well, sir, I would like to believe no. One of 
the----
    Mr. Greenwood. Pull the microphone close to you.
    Mr. Burke. One of the--he mentioned mother's maiden name. I 
will give you an example. The Inspection Service, in concert 
with the banking industry, meets, they have an initiative, it 
is the Financial Crimes Mail Security Initiative, and we meet 
twice a year, and at those meetings, we discuss best practices. 
The young lady from the bank in Newtown mentioned the--as an 
example, the 1-800 number, and then of course, Mr. Lomax, I 
believe that is his real name, mentioned the mother's maiden 
name. Well, the 1-800 sticker that you now get on your credit 
cards was a result of an Inspection Service initiative, and in 
particularly, a now retired Inspector working out of Florida, 
and as odd as this may seem, in developing this 1-800 number 
and asking for pertinent information that only the individual 
would know, someone suggested at one of these meetings that 
they use the mother's maiden name. Well, lo and behold, it 
became an industry standard. Now, the good news is that they 
are varying that. They are asking other pertinent information. 
So that is an example of how it is becoming more difficult.
    And as was mentioned several times here today, the 
interaction with State and local, Federal law enforcement now, 
and the publicity due in large part because of committees and 
meetings and public referendums like this is doing a great deal 
of good to prepare people for it.
    In the past, local law enforcement may take a complaint on 
a credit card and quite honestly, it was difficult for them to 
give it the time and effort it needed, because it crossed 
jurisdictional lines. Now, with the FTC downloading the data 
and everything and everyone having access to that, we have 
minimized that, too, so I think through educating the public 
and the aggressive interaction across the board from law 
enforcement at every law, there are more and more stopgaps that 
are being put in that will make it more and more difficult.
    Mr. Greenwood. You may share the microphone with Ms. 
Broder.
    Ms. Broder. I guess I can't say with real confidence that 
it would be that much more difficult to accomplish what Mr. 
Lomax did if he gets out of jail tomorrow. But one of the new 
provisions of the FACT Act requires the FTC, along with the 
bank regulatory agencies to develop guidelines for red flags, 
that is the pattern, what are the indicia of fraud, and when we 
see these types of patterns emerging, what should be done? He 
talked about 17 to 18 accounts opened in a short period of 
time. Mrs. Kane referred to a 33 page credit report for someone 
who had a very normal pattern before. So the question is what 
can the financial agencies do to pinpoint that where now they 
are not, where they are not aware of the fraud, they are not 
paying attention to those as closely as they might.
    Mr. Periandi. Mr. Chairman.
    Mr. Greenwood. What about the--go ahead, yes, please, 
Colonel.
    Mr. Periandi. If I could add. Unfortunately, your question 
is right on point. But it goes to something that we have found 
even in the area of terrorism, and that is, it goes to the 
identifying documents, the base documents. When someone has a 
birth certificate, Social Security card and driver's license 
that appears to be legitimate, and is in fact legitimate, 
because it has been obtained from legitimate agencies, it makes 
it very, very difficult for law enforcement. I won't comment 
for the private sector, but it makes it very, very difficult 
for law enforcement to work through that and identity this 
individual as being a criminal, because all the documents, the 
supporting documentation that you would look at is accurate.
    They have a reliable and accurate birth certificate. They 
have a reliable and accurate driver's license, particularly 
which is a photo identification, so I can only assume that when 
they present this at a retail establishment, or even within the 
banking industry, that that information is going to be 
accepted, and that--so it gets, I think you make a very good 
point. We need to look at how easy it is for criminals to 
obtain that identifying documentation that really gives them 
access to the rest of the system. Once they have that 
documentation, they have access to the rest of the system.
    Mr. Greenwood. And of course, the tricky part in this is 
that any of us can lose our driver's license or Social Security 
card, or for that matter, our birth certificate, and want to 
get copies of it, and so we don't want the government to make 
it impossible or extraordinarily difficult. Sometimes, we might 
need those documents in a hurry, like for travel or something 
like that, and so it is a tough balance. Let me talk--ask about 
the consequences on the other side of this quotient. We have--I 
think the Postal Inspection Service talked about 3,000 arrests 
in a year. One of the things that seems to make a difference in 
criminal conduct is when someone says--when people are talking, 
potential criminals, criminal are talking amongst themselves, 
they say I went to jail, or I did hard time, or you know, I got 
off easy.
    When we make all these arrests, are we in fact coming down 
hard enough on the perpetrators in terms of are they--do we 
have the--are we--sometimes, I see that in law enforcement--is 
given limited resources and time and money. It is only the 
biggest cases that are actually taken in to prosecution and the 
smaller cases are disposed of in some other way, probationary 
response. There is not even always restitution, so it is a--who 
would like to comment on how effective we are being in various 
law enforcement agencies in actually making sure that people 
pay consequences for these crimes?
    Mr. Burke. Congressman, I think that--I think we are 
starting to see a change in the trends, but as is often the 
case in local prosecutor, State and Federal prosecution, they 
have quite a lot on their table, and oftentimes, they will put 
dollar restrictions or dollar limitations that a case would 
have to be over, say, $50,000 for it to be accepted for 
prosecution, and that varies, and of course, each case stands 
in and of itself. From an investigator's standpoint, certainly 
you are not going to get to me to say that every perpetrator 
that commits identity theft, or any crime for that matter, gets 
a fair and just sentence, because certainly as investigators, 
we would like to see them get as much as possible.
    Oftentimes, some of the groups, as was mentioned by the 
State Police, are organized ethnic groups, and then you are 
dealing with Federal entities like the INS and all, and you can 
identify these people, and quite honestly, sometimes, they are 
deported and back several years later. You run into them again. 
So, I think we can go a long way to come up with uniform 
sentencing guidelines. Certainly, there is, in the Federal 
Government sentencing guidelines, but they are not always 
applied equally, because of the size of the case and other 
considerations.
    Mr. Greenwood. Anyone else wish to comment on that?
    Mr. Periandi. I would say I tend to agree, if we take Mrs. 
Kane's example, an individual who perpetuates an identity theft 
generally is perpetuating it on numerous individuals, so it 
makes sense to prosecute that individual where they are 
located. In her case, it was in Schenectady, New York. However, 
I think we recognize that if that individual would have been 
extradited to Bucks County and tried here, where the victim 
resides, and where the victim would be identified, or the 
judges and the court system would identify with the victim, the 
probability for a stronger, harsher sentence and to actually 
server that stronger, harsher sentence is increased. So, we 
really need to work between the states to ensure that when that 
case is prosecuted in Schenectady, New York, that somehow, we 
drive home the same kind of identity with the victim and the 
emotions associated with what would happen if that individual 
were tried here in Bucks County, and I think it does come to 
some type of standard sentencing, but you know, I don't know 
how you do that in 50 individual states without impacting 
states' rights issues from the Federal level.
    Mr. Greenwood. Ms. Kane talked about the fact that the 
people prosecuting the case really didn't stay much in touch 
with her, that the banks had experienced the actual financial 
losses, so they hired an investigator, and then they gave that 
information to law enforcement, but that she was pretty much 
out of the loop and didn't have the opportunity to ever to 
confront the woman who had defrauded her, or to observe the 
trial, testify at the trial. What is the state-of-the-art 
today? Are we seeing your agencies, those of you particularly 
in the criminal side of this thing, actually staying and 
recognizing that the victim is not just the finance institution 
but the person whose identity has been stolen and keeping in 
touch with that person, or keeping them in the loop?
    Mr. Periandi. We try to, Mr. Chairman, but that really is a 
function of the prosecutor's office, and what we have found, 
particularly if the prosecutor is in touch with the victim, at 
least specifically during the sentencing stage, that that is 
very helpful to have the victim present and able to testify 
prior to sentencing, or just say a few words to the Court prior 
to sentencing. But we certainly will reach out to victims when 
the case proceeds to that particular point, as long as we are 
notified, again, by the prosecutor's office, but that really 
becomes their function at that point.
    Mr. Greenwood. Ms. Broder, let me ask you, much has been 
mentioned of the FACT Act today. Does the FTC feel that the 
U.S. Congress has completed its work on identity theft, or is 
there more to do?
    Ms. Broder. Well, in light of the 18 rulemaking, studies 
and reports, we think they have done enough for the time being. 
This is--it has been a dramatic change through the FACT Act, 
and substantial changes will take place in the financial 
industries as well, and I think this, speaking for myself here, 
is the right step, and then we see what effect these changes 
have on the incidence of identity theft and the recovery of 
victims, and if this is not adequate, I think it is time to go 
back to the drawing board, but for the time being, it seems 
like a very comprehensive approach to the problem, sir.
    Mr. Greenwood. Congress has given you a lot of work to do. 
Has Congress given you enough resources to do it?
    Ms. Broder. I think we are well prepared to take on these 
tasks, Mr. Chairman. Part of our program is to leverage our 
resources so that we make our resources available to others. 
That is the whole idea behind the training of local law 
enforcement. Let them convey our message as well. We do that 
also through the credit reporting agencies and the financial 
institutions. We make all of our publications available on a 
CD-ROM, English and Spanish, the books, the affidavit, so that 
other agencies, banks, can print them as well, put their names 
on the front cover. We don't care, as long as they get the 
message out. So for the time being, I think we are okay. Thank 
you very much.
    Mr. Greenwood. The--when we heard about the Red Cross and 
the folks using the information on blood supplies, I though 
that was about as low as it could go, until we learned about 
the Medical Examiner's employees gleaning information from dead 
bodies. How did the perpetrators achieve that crime, accomplish 
that crime?
    Mr. Burke. Well, they--the pedigree of the information they 
got, actually, from my understanding, is the credit card from 
the deceased, and then once they had that----
    Mr. Greenwood. So they actually go through the wallets of--
--
    Mr. Burke. They go through the personal belongings of the 
deceased, and of course, once you have that basic data, then 
you can build your fraudulent activity from there.
    Mr. Greenwood. That is as low as you can go.
    Mr. Burke. I would say it is, sir.
    Mr. Greenwood. You also talked in your testimony, Mr. 
Burke, about individuals purchasing commercial grade credit 
card embossing machines over the Internet. Is anyone looking 
at--there are so many purchases you can make over the Internet 
now, of a very illegal nature, and at least--ways to access all 
kinds of tools for committing crimes, and this is the latest 
one that I have heard of. Is anyone taking action to try to 
limit the access, the availability of this equipment?
    Mr. Burke. Not--certainly not the Inspection Service. What 
I have here, Congressman, is a copy of--one of our Inspectors 
downloaded this. This is the same website, and there is an 
embosser there, so I can give it to your----
    Mr. Greenwood. Okay. Well, the staff will pick that up 
after the hearing. And I think that is something that should be 
pursued. It would be interesting to know whether the actual 
manufacturers are marketing their products this way, and why 
they would do that. Maybe they have a perfectly legitimate 
reason, but it seems that that is the kind of equipment that is 
very dangerous, obviously, in the hands of the wrong 
individuals, and we need to be careful with that. Let me just 
see if I have another kind of question that needs to be asked. 
Well, I think we have gone long enough, and I do thank all of 
the witnesses in this last panel as well as all of the 
witnesses throughout this hearing the last several hours. It is 
a big help. Our intent here is twofold, one is to use the media 
that is here to help inform the public in this region of the 
precautions that they need to take and what they should do if 
they are victims, and the others to see what kinds of tasks 
that may lay before Congress and if it is not giving more 
authority to the FTC, it may be pursuing issues like the 
availability of this kind of equipment on the Internet. So with 
that, I would also like to thank Ms. Washington, to my right, 
who as the counsel for this committee, and my staff and the 
District and Washington for helping this--organize this 
hearing, and it is now adjourned.
    [Whereupon, at 1:14 p.m., the subcommittee was adjourned.]

                                  
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