Step Two: Know Your Rights and Be ProActive
Back in April–has it been that long?–I posted about how to protect yourself from identity theft in the wake of rampant data breaches. As I discussed in the post, a credit freeze is the absolute best way to lock down your credit file, so that only you are in control of how, when, and where new lines of credit are opened. This is extremely important, and the first line of defense against ID theft. However, criminals are nothing if not creative, and they don’t necessarily need to open a new credit card in your name to steal from you. Some just go directly after your existing bank accounts, credit cards, debit cards, and home equity/personal loans. Here are some steps to follow to clean up after them, if you do get hit:
Credit and Debit Cards — If your credit card is lost or stolen, report it immediately. As you probably know, credit cards allow you to contest charges that you did not make. By law, your maximum liability in the event your credit card is stolen (even if just the card info is stolen, the physical card can still be in your wallet) is $50. The credit card company is on the hook for the rest. However, most companies will not charge you anything, as it’s in their best interest to cover it and thereby generate goodwill with their customers. Debit cards, on the other hand, fall under a different law. IF you report a stolen debit card within 2 days, your liability is limited again to $50. However, if you delay, your exposure could be as much as $500, or in rare cases even more.
Bank Fraud – If someone hacks into your account online, steals your ATM pin, or makes a fraudulent withdrawal from a branch location somehow, the bank will generally make you whole if the fraud can be demonstrated. Most banks feel it is in their best interest to be seen as a safe place to put your money, and therefore will eventually make you whole. However, you don’t want to depend on their “good graces.” According to Bankrate.com, the legal framework in this case is the following:
“ATM or debit cards and electronic transfers from your bank account fall under the Electronic Fund Transfer Act…[I]f purchases or withdrawals are made, consumers have a small window of two business days to report the unauthorized charges or transfers and get a $50 liability limit. After that, there is a $500 liability limit for up to 60 days after the statement reflecting the fraud is mailed. After 60 days, consumers are exposed to unlimited liability.”
That’s why is very important to keep tabs on what is going on in your accounts. In these days of online billpay and electronic transfers, very few people go to the trouble of “balancing their checkbook” anymore. They put all their bills on autopilot and then go about their lives. Even though this makes your life simpler, and that’s a good thing, you should still go over your transactions at least once a month.
Home Equity and Personal Loans — This was a growing area back before the housing crisis in 2008, when no-doc home loans were common and the lending process was much more lax. However, with the housing market finally making a comeback, it is back on the rise again. Criminals with access to the right information can take out new home equity lines of credit and thereby access hundreds of thousands of dollars. Or, using an already open home equity line, they can simply forge checks or make electronic transfers to outside accounts. And since the homeowner may have not used the credit line recently, he or she may not think to check the statements closely. In one example from the FBI website, a criminal obtained someone’s personal information, and used it to setup on-demand electronic transfers. In September of 2013, he proceeded to steal over one half of a million dollars. Had he ultimately succeeded, the victim could eventually have faced foreclosure proceedings, since the monthly payments on that amount would have been substantial. Again, the bank or mortgage company will usually make you whole in the event of demonstrable fraud, but you need to keep a close eye out and report any suspicious activity immediately.
In my next post, I’ll focus on the things you can do to protect yourself online, to prevent the ID theft from happening in the first place.