Huge Data Breach At South Carolina Department of Revenue

As I learned today, the powers that be at the South Carolina Department of Revenue did not believe they needed all the security features to protect the information included with the tax returns sent when tax payers electronically filed  their returns.  As a result, the information of 3 million people and over 200,000 businesses was stolen by a data thief in Eastern Europe.

What's even worse than being exposed to identity theft by an Eastern European identity theft ring?  Having the state that did not care enough to protect your data "compensate" you for the risk it put you in by signing you up for a year's worth of credit monitoring from Experian.  Why is that so bad (other than the fact that credit monitoring does not help protect consumers much, if any)?  Because Experian requires anyone using their monitoring service to agree to binding arbitration.  So for the 3 million South Carolinians and 200,000 plus South Carolina businesses to receive the offered "protection" from the risk of identity theft caused by South Carolina's negligence, the consumers and businesses have to give up their right to a jury trial against Experian, which basically means they lose again if their identity is actually stolen.  

South Carolina, you should be ashamed of yourself for doing this to your own people.  My advice to those affected in South Carolina.  Don't use the monitoring service.  Instead, use annualcreditreport.com and stagger  your annual three free credit reports (one from each of the big three credit bureaus) to one every four months and thereby monitor your credit for free without giving up any of your rights.  Oh, and if your identity is stolen, hire the Kittell Law Firm to sue the credit bureaus and creditors who refuse to remove the fraud accounts that will show up on your credit reports.  

Identity theft insurance? Is it really worth it?

Is Identity Theft Insurance worth the money?  Not really.

In fact, is it even insurance?  Insurance is supposed to pay for things to be replaced or repaired in the event something bad happens.  Home insurance pays for repairs to your house after its damaged by a fire or a storm.  Flood insurance will pay to replace something damaged in a flood.  Car insurance will pay to repair your car after a wreck.  Life insurance replaces the income of a deceased family member.

Identity theft "insurance," on the other hand, does little to repair the damage caused by identity theft.  Sure, it will reimburse a victim for some out of pocket costs, such as certified mail costs and notary charges.  At a cost of $15.00 to $20.00 a month, identity theft insurance seems like its a good deal.  But its not.  It covers little.  

Identity theft insurance does nothing to fix the main thing damaged by identity theft - the victim's good name.  Identity theft insurance does nothing to correct the errors on the victim's credit reports caused by the appearance of the numerous fraud accounts opened in the victim's name.  It does not eliminate from the victim's criminal record any charges for crimes committed in the victim's name.  It does not reimburse the victim for the mental anguish and stress caused by dealing with uncaring credit bureaus, fraud credit grantors and relentless collection agencies.  Nor does identity theft insurance reimburse victims for the embarrassment they suffer when denied credit due to the unpaid fraud accounts appearing on their credit reports.

Instead of wasting money on identity theft insurance, consumers should save that money and instead be proactive about protecting their Social Security Number and disputing the fraudulent accounts if and when their identities are stolen.  Then, if the credit bureaus and the fraud credit grantors fail to fix the errors caused by the identity theft, the consumer should hire an experienced Fair Credit Reporting Act attorney (like me!) and sue the credit bureaus and credit grantors using the Fair Credit Reporting Act.  Not only does filing such a lawsuit not cost the consumer his or her hard earned money (like identity theft insurance does), if the consumer prevails at trial or settles with the credit bureau, the consumer receives compensation for all he or she has gone through.  

Do yourself a favor.  Don't pay for identity theft insurance and, if you feel like you must, simply add it as a rider to your existing homeowner's insurance.  That's a much cheaper option (usually $20 or $30 a year, rather than a month) and provides the same level of coverage.  And, if you end up being a victim of identity theft, don't just look to your identity theft insurance for reimbursement.  Hire an experienced consumer attorney who can get your credit report corrected and get you fair compensation for your damages.

Experian purchases Australian company Pacific Micromarketing

Expanding its Australian presence, consumer reporting agency Experian Information Solutions, Inc. purchased Pacific Micromarketing for $6.17 million dollars. Pacific Micromarketing was the analytics arm of Australian publisher PMP. Pacific Micromarketing surveys, records, classifies, segments and analyzes customer databases for commercial clients. The 15 year old company operated in Australia and New Zealand. All of its employees will transfer to Experian offices as part of the sale. PMP will continue to exist as its own company.

What the Smurf?! Dr. Smurf guilty of identity theft!

A Lithuanian hacker who used the screen name "Dr. Smurf" has been convicted of identity theft and sentenced to five years in prison.  Tadas Petrauskus, 23, of Brick, New Jersey, sold passwords to an unidentified western Pennsylvania person that could have potentially given the buyer access to the financial accounts of approximately 10,000 people.  

Petrauskus was caught at John F. Kennedy International Airport after flying in from Belgium in the possession of a laptop containing many credit card numbers in its memory.  Dr. Smurf was sentenced by U.S. District Judge Nora Barry Fischer.  Hopefully his five year sentence will seem like a Smurfing long time!

Tax Refunds for Identity Theft Victims Likely to be Delayed

Are you an identity theft victim?  Well, you are likely to be more victimized this tax season.

Last year, identity theft victims were told to expect to wait 180 days (or approximately 6 months) for their tax returns to be processed.  According to Taxpayer Advocate Service, an IRS watchdog group, the delay this year could be similar or even longer than last year's wait.

The IRS waits to give tax refunds until it completes a load of internal paperwork, even if the IRS has already determined that the identity theft victim is entitled to a refund.

When the Taxpayer Advocate Service reported to Congress recently, it recommended faster refund access and setting up a single point of contact for victims.  However, the IRS contends that its current system is effective and that it has improved procedures for stopping identity theft.  Let's hope so, because tax return identity theft has been rampant the last few years.

10,000 Active Identity Theft Rings in the U.S.?!

According to an article written by Bob Sullivan for nbcnews.com, there are 10,000 identity theft rings active in the United States, primarily in the Southeast, including a hot spot right down the road from me in Greenville, Mississippi.  Very interesting read.  I have reposted Mr. Sullivan's article below and here is a link to his article - http://redtape.nbcnews.com/_news/2012/11/14/15144350-10000-id-fraud-gangs-active-in-us-especially-the-southeast-study-finds?lite

"There are 10,000 active identity theft crime rings across the United States, with the greatest concentration in a "ring of fraud" that stretches across the Southeast from Virginia to Mississippi, according to a new report by fraud-fighting firm ID Analytics.

A majority of these rings are what the firm calls "Friends & Family" groups, not professional criminal organizations, the report concludes. The rings are most highly concentrated in Washington D.C.; Detroit; Tampa, Fla.; Greenville, Miss., Macon, Georgia; and Montgomery, Ala., the report found.

ID Analytics compiled the results by examining its massive database of credit applications and other identity “risk events,” which now includes 1.7 billion entries.  The firm cross references credit applications from major banks, auto dealers, wireless firms and other credit grantors looking for evidence of systematic identity fraud. Previously, ID Analytics has used its data to help identify tens of thousands of registered sex offenders who are living digital double lives, and millions of U.S. residents who are"sharing" their Social Security number with someone else.

The crime ring project is a first, says head researcher Stephen Coggeshall.

"This is first time we raised it up a level and looked at how these people are connected," he said. "I am surprised at how many rings there are."

A "crime ring" was defined by ID Analytics as two or more individuals working in concert, repeatedly submitting fraudulent applications in an attempt to commit fraud. Collusion was determined by noting when multiple members of the rings used similar personal identifying information, such as Social Security numbers, in fraud attempts.

Not every fraudulent credit application is successful; many are detected and denied by lenders' fraud-fighting tools.  Still, the attempts indicate an active fraudster at work.

Examples of fraud rings published in the report read like short mystery novels.

One four-person group in the Indianapolis-area --  made up of two members in their 70s and two 48-year-old women -- has submitted 345 fraudulent credit card applications.  The individuals’ names were not provided by ID Analytics because they have not been charged with any crime.

Another six-member ring is run by a 52-year-old woman and her sister and operates out of an apartment complex in Washington, D.C., the report said.  

"Together this team has used 10 SSNs and multiple first names, last names and  birthdates to commit fraud," the report says. "In addition to identity manipulation, this group is also applying for accounts using stolen identities (identity theft). They have completed more than 69 credit card applications and defrauded four victims, including two deceased persons."

Near McCallum, Texas, two families appear to have teamed up and specialized, with one member targeting wireless providers and two others focusing on retail and bank credit cards, the report said.  Together they have submitted 142 fraudulent applications.

"It appears that the children in the group are stealing their own parents’ identities," it added.

While traditional organized crime and drug crime rings also form ID fraud rings, Coggeshall said the most surprising result of his research was the prevalence of what he called "Friends and Family" fraud rings.  More than half of the rings include multiple family members.

"This is a strong indication that more than half are not what we’d think of as professional groups," he said. "(It’s) a family or an innocuous neighbor committing fraud.”  

"The family dynamics is a big surprise," he said. "Rather than seeing a lot of what I would say are unrelated people collaborating, we see a lot of families doing this, sharing information. Siblings and parents toggling SSNs systematically, sharing dates of birth and committing identity theft."

Coggeshall said he excluded those family groups who might be sharing identities to simply avoid bad credit histories -- a brother and sister living together, and the brother allowing the sister to use his Social Security number to obtain cell service, for example.

"Every one of the (10,000) is committing fraud with the intent to not pay," he said, and doing it at least 10 times or more.

Another surprise in the report: Numerous studies have shown that the rate of identity theft is higher in urban areas, but the number of crime rings is much higher in rural areas, Coggeshall said.

"The map is a surprise, the systematic collusion in the South," he said.

One potential explanation:  Identity theft and methamphetamine crime rings often go hand in hand, with meth addicts trading stolen mail and credit card applications for drugs.  Meth addiction rates are also higher in rural areas. 

But that doesn't completely explain the ID fraud rings to Coggeshall.

"These rural areas must make it easier for people to collude, for some reason," he said.

ID Analytics, which was acquired last year by identity theft monitoring service LifeLock Inc., has indicated a willingness to share the crime ring data with law enforcement, but Coggeshall said he was unaware of any arrests that have resulted from the research.

That level of information sharing is in its early stages, he said.

"It's not our business to (encourage law enforcement to act). I would say law enforcement is very busy and has to pick priorities. ... We do this for our commercial clients. We are having conversations with law enforcement agencies, but they are not too far along. I would say law enforcement is cautiously interested."

New FCRA Lawsuit Against Equifax

The Kittell Law Firm filed a new Fair Credit Reporting Act lawsuit today against Equifax for mixing the credit file of our client with that of his father.  As a result, three of the father's tax liens were reported by Equifax on our client's credit report.  What's even worse than that?  Equifax failed to remove the father's tax liens from the son's credit report, even after the son provided documentation that the tax liens belonged to the father.  Equifax continued reporting the father's tax liens on the son's credit report, causing the son to be denied credit on at least three occasions. 

Its bad enough to mix up two people with different names, different Social Security numbers, different addresses and different dates of birth.  What's worse is that Equifax still could not get it right even after being told to fix the obvious error.  Good thing the Fair Credit Reporting Act exists to provide consumers with the opportunity to obtain justice for the aggravation and other damages caused by the credit bureaus' callous disrespect for the accuracy of the credit reports they generate.