Why aren't lenders held partially responsible for identify theft?

July 30, 2008 2:38 PM

Why aren't lenders held partially responsible for identify theft?

A SSN is such an arbitrary (and easily stolen) method of establishing identity, it seems criminal that more care isn't required, or a higher standard of proof. Does this rise to the level of criminal negligence, considering they seem to be too easily opening the door to this crime?

Clearly, the responsibility ultimately lies with the person stealing the identity. But lenders have established a system that makes it pretty easy to play around with my credit, if someone was so inclined. Have they ever been sued?

posted by Benevolent Space Robot to work & money (14 comments total)

Because unlike European countries, the US has no data protection laws to speak of. Your "credit" doesn't belong to you at all, it's an entry in a database somewhere. If this data in incorrect, then the people to sue are the providers of said data. Maybe there's a case for a libel suit.
posted by atrazine at 3:20 PM on July 30, 2008

Is there an alternative way of doing it that they are choosing not to use?
posted by smackfu at 3:28 PM on July 30, 2008

Lenders are held partially responsible for identity theft. They have to eat all the money they lent the crook.
posted by kindall at 3:50 PM on July 30, 2008 [1 favorite]

Is there an alternative way of doing it that they are choosing not to use?

Part of me wonders why they have a prima facie right to establish credit in my name in the first place with such low entrance requirements, such that I would need to come up with a better method for them; but perhaps having more stringent standards for establishing identity with someone who just happens to show up with a SSN? I'm not necessarily sure what that would be. The fact that we're assumed to be opted in to this process, putting unwitting people at risk without permission, that feels a bit troubling. The whole thing feels constructed to provide easier access to credit to the benefit of banks, than to protect the consumer.
posted by Benevolent Space Robot at 3:55 PM on July 30, 2008

Lenders are held partially responsible for identity theft. They have to eat all the money they lent the crook.

They aren't held responsible for damages done to an individual, though, who has to spend months of man hours to repair credit. I'm sure they factor in the lost money to the cost of doing business.
posted by Benevolent Space Robot at 3:57 PM on July 30, 2008

The whole thing feels constructed to provide easier access to credit to the benefit of banks, than to protect the consumer

How does that benefit banks? Do ID thieves typically pay back the loans they obtain fraudulently? Are the banks insured for these kinds of losses?
posted by Flipping_Hades_Terwilliger at 4:05 PM on July 30, 2008

Thanks for the feedback, by the way!
posted by Benevolent Space Robot at 4:06 PM on July 30, 2008

How does that benefit banks? Do ID thieves typically pay back the loans they obtain fraudulently? Are the banks insured for these kinds of losses?

I assumed that they make up for losses in volume of loans, which explains why it's been insanely easy to get home loans and credit cards over the last decade or so, even for people who have bad credit and low income. Of course, that's probably coming back to bite everyone in the ass, but the up front thinking for most lenders has been that easier credit access for the average consumer means more business and more money for banks. Those who are delinquent, or fraudulent, get absorbed by the volume.

Of course, I don't really know that much about all of this, so perhaps there's something I'm not seeing correctly.
posted by Benevolent Space Robot at 4:10 PM on July 30, 2008

Lenders are held partially responsible for identity theft. They have to eat all the money they lent the crook.

I will say though, that does answer my question as posed. Thanks!
posted by Benevolent Space Robot at 4:22 PM on July 30, 2008

I assumed that they make up for losses in volume

Someone used my checking account number to auto pay their cell phone bill. About $700 worth. When I finally noticed it my bank refunded the money. The culprit's phone account number was right there in the billing statement. They did nothing about that, saying they only investigate fraud over $1000. And the police drag off shoplifters who steal a sandwich from the deli.
posted by StickyCarpet at 5:40 PM on July 30, 2008

I had around $600 taken from my checking account to pay a CATV bill (via check numbers stolen from my mailbox). It was obvious the bank didn't plan to do anything about it except refund the money, though I can't imagine it's too hard to trace the cable bill. This must be the most risk-free area of crime ever.
posted by telstar at 6:20 PM on July 30, 2008

As someone who works in the financial services industry (though not an expert) I would offer that it is the US obsession with convenience, plus the "cost of doing business" that has been mentioned.

Personally I would *gladly* go along with decreased convenience for the purchase of unusual items at unusual locations, or big ticket items, or cash transactions, or have maximum per day outlays imposed to avoid the nightmare of ID theft that you describe (actually, ID theft is a constant, confidential data is treated far too lightly as is clear from news stories, so the above ideas are to minimize the likelihood the ID theft would be as lucrative to the criminal or go unnoticed by the consumer as long).

Basically, I place most of the blame on the politicians. When I was younger, a long time ago, if there was a problem that many citizens were encountering, politicians would at least try to do something meaningful about it. It might be grandstanding, it might be only partially effective, but these days it seems like all politicians do is worry about Intellectual Property or selling off broadcast frequencies. They totally avoid complicated issues like consumer credit, health insurance or a totally out of control federal deficit. If it became a federal law the finance companies and banks could no longer just treat it as a cost of doing business.
posted by forthright at 7:18 PM on July 30, 2008

Someone used my checking account number to auto pay their cell phone bill. About $700 worth. When I finally noticed it my bank refunded the money. The culprit's phone account number was right there in the billing statement. They did nothing about that, saying they only investigate fraud over $1000. And the police drag off shoplifters who steal a sandwich from the deli.

Not a good comparison. (1) The cost of the sandwich represents a larger portion of the deli's revenue than the phone bill represents for the bank. (2) It doesn't cost a deli to investigate a shoplifter they see with their own eyes, but it does cost a bank to investigate fraud, even with a phone number on the bill. (3) And the deli calls the police. If the bank did the same, the police would have dragged off the cheat, too.

I assumed that they make up for losses in volume of loans, which explains why it's been insanely easy to get home loans and credit cards over the last decade or so, even for people who have bad credit and low income.

That spins it too negatively. Here's a better way to think about it: A bank assumes (and, frankly, knows) that X percentage or X dollar amount will be lost in a given year - someone robs a bank, someone does the phone bill fraud above, someone who was lent money goes bankrupt and can't pay the loan back, etc. Every bank has a different level of comfort and a different assumption for what will be lost. They recognize that acceptable levels of loss are simply a part of doing business as a bank.
posted by NotMyselfRightNow at 4:53 AM on July 31, 2008

Personally I would *gladly* go along with decreased convenience for the purchase of unusual items at unusual locations, or big ticket items, or cash transactions, or have maximum per day outlays imposed to avoid the nightmare of ID theft that you describe

I don't think that's a common attitude. Higher barriers tend to make people walk away and find another merchant who has lower barriers.
posted by smackfu at 5:58 AM on July 31, 2008