The far-reaching effects of identity theft have been felt by millions of people throughout the world. It is estimated that 10 million are affected each year in the U.S. alone. Globally, there are nearly 20 people affected by some aspect of identity theft every minute. But a new trend is developing with identity theft crime. This new type of scam is targeting children as the victims.
Bill Draper of the Associated Press reported the story, updated on 8/3/2010. In it, he stated that authorities have identified a new identity theft scam. This particular scam involves the use of computers programmed to locate Social Security numbers that are not currently in use. A significant portion of these numbers are assigned to children. Children typically do not use their Social Security numbers, except for identification.
The scammers target a child’s Social Security number for the purposes of establishing phony credit accounts. These accounts are then used to run up large debts. At this time, hundreds of online businesses are using computers for this purpose. Once a dormant number is found, it’s sold under another name to be used for fraudulent purposes.
There is nothing new about identity theft and how it can be used to establish a phony credit account. But the use of children’s Social Security numbers in this manner can pose a new serious threat. A nation-wide credit system repercussion may ensue.
The example that is given involves a child who turns 18. That child then applies for a first time credit card or a first car loan. They then learn that there is a large debt already posted against their credit rating. An assistant Kansas City U.S., Linda Marshall stated that significant occurrences of this fraud can lead to another financial collapse. She likened these repercussions to the “next wave” of nation-wide financial catastrophes.
Adding to the dilemma, there is no current method for determining the extent of this fraud. This is due to the transitory nature of the businesses conducting this type of fraud. These companies are careful not to stay around long enough to be spotted. The other problem is that most people never think to check a child’s credit rating or credit history.
It’s been noted that there is a major flaw in the system that allow this type of scam. A thief can obtain a child’s Social Security number due to publically available information. A public database can be read by an online company. The data is then sold to the highest bidder. Prices may range from a few hundred to a several thousand dollars.
Those that sell the information are able to circumvent the law by not actually referring to “Social Security numbers”. This is similar to paying for “escort services” instead of “prostitution”. The information sellers instead refer to the data as “CPNs” for “credit privacy numbers” or “credit profile numbers”.
A child’s credit is non-existent so new lines of credit may be opened by linking to another’s credit file. The lines of credit are then built up very fast. The term given to this fraudulent process is “piggybacking”. If the process is done correctly, a very high credit score is the result. With a high credit score, high credit limits become available. There are no risks for the scammer, since a loan default will carry no consequences. The entire fraud process can proceed for years.
This type of scam should not be confused with the older scam of stealing Social Security numbers from deceased people. Today, that doesn’t work because of newer measures taken by the Social Security Administration (SSA). These days, the SSA can simply run a Social Security number against the “death index” database. Since the financial crisis of 2008, loans are more difficult to secure. This is why scammers have turned to stealing children’s Social Security numbers to secure these fraudulent loans.