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Thursday, November 01, 2007

A new twist to identity theft - synthetic identities

The Wall Street Journal article talks about a new twist in identity theft - imaginary people, concoted by scammers, who look real on paper. These people with synthetic identity are increasingly being used to get loans and credit cards from financial institutions. The article discusses the tricks used by one scammer, Mr. Rose, who defrauded over $700,000 from banks by creating such imaginary people.

"Working with a partner, Mr. Rose tricked the guardians of the credit system - lenders and the three big credit bureaus - into treating his fake identities as if they were real, creditworthy consumers. He obtained several hundred credit cards in the names of Mr. Gregory and as many as 500 other fake personas over two years, filching around $750,000 over a two-year period.

Unlike traditional identity thieves, who purloin people's information to get loans or make purchases, fraudsters like Mr. Rose mix legitimate and phony data to create synthetic identities. This kind of fraud doesn't usually directly affect consumers. The big losers are banks, which get stuck with loan defaults and unpaid credit-card bills that identity thieves leave behind."

While the banks have been secretive about their losses from synthetic identity fraud, the article suggests that this problem is growing and "is showing up all over the place."

Such scams take advantage of the holes in the practices of the three big credit-reporting companies, which maintain a file for every inquiry lenders make, even if it contains mismatching or erroneous data. Scammer take advantage of such no-hit files by applying for credit cards using a mix of real and phony data.

"The FTC has estimated that the no-hit phenomenon has created "tens of millions" more files in the credit bureaus' databases than there are actual consumers.

For complete article, see:

The Wall Street Journal: The Borrower Who Never Was

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posted by Ruby @ 8:05 AM

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