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Identity theft
Your data can never be fully safe. But ID theft can be stopped once and for all. Here's how.
June 20, 2005: 3:16 PM EDT
By Michael Sivy Pat Regnier and Carolyn Bigda, MONEY Magazine
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CNN's Allan Chernoff reports on a security breach at a third-party payment processor that is impacting millions of credit card users. (June 20)
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NEW YORK (MONEY Magazine) - On a sunny may morning on Capitol Hill, power suits were hard at work spinning members of Congress. There to testify were representatives of the financial giant Visa and of data brokers Acxiom and Thomson West.

You may not know those last two outfits, but they know you better than you could ever imagine. Both are part of an industry that gathers personal data about millions of Americans and sells it to lenders, retailers, employers, government agencies or other parties.

The speakers delivered much the same message: Don't worry; we're committed to keeping you and your most sensitive information safe from cyberpredators.

"Visa aggressively protects the cardholder information of its members," lobbyist Oliver Ireland stated in his testimony. And here's Acxiom executive Jennifer Barrett, "We employ a world-class information-security staff to help us fend off criminals."

Maybe so, but the criminals don't seem impressed. On the contrary, Americans' personal data is rapidly becoming about as secret as the contents of Paris Hilton's cell phone.

In just the past six months, major security breaches have been reported across the country. At ChoicePoint, data on 145,000 people may have been compromised. At LexisNexis, 310,000. At Time Warner, publisher of this Web site, perhaps 600,000. At Bank of America, up to 1.2 million. Throw in files at Berkeley, Boston College and Tufts, and just this year more than 2.4 million Americans may have been left wide open to hackers, scamsters and, increasingly, gangsters.

The recent rash of mass data heists signals a new and sinister turn in the nature of identity theft, and Congress and state legislatures are finally beginning to respond in a big way.

Now, you may or may not find the prospect of politicians riding to the rescue reassuring. Members of Congress have railed in recent years against other scourges of the technology age (like, say, e-mail spam) to spectacularly little effect.

Why isn't identity theft as obsolete as cattle rustling?

You may even believe that the risk of identity theft -- like the risk of spam, computer viruses and cell-phone radiation -- is simply the price we pay for convenience in the digital era.

But that's not so. Identity theft could be made as obsolete a crime as cattle rustling or high-seas piracy. For instance, in a few states it's now possible to request a freeze on your credit report, stopping anyone from granting new credit without your approval.

Why isn't this brutally simple and effective solution more widespread? Simply put, it disrupts the free flow of credit information on which consumer lenders and data sellers depend.

To be fair, big banks and other credit-card issuers, retailers and data peddlers aren't the only ones who thrive on the ready accessibility of information. You benefit too: It's never been easier to get a credit card, find a mortgage or buy a car.

The financial industry has stressed that convenience when it argues against reform in state legislatures. It is now targeting Washington to water down further restrictions on how companies handle your personal information.

This is what no one acknowledges about identity theft: that there's a conflict of interest between the consumer and the system. Take the precautions you can (click here for our advice), but realize that your identity can't be fully safe without new laws, like a credit freeze, that give you greater control over your own data.

In other words, whether you'll still need to worry about ID theft in a few years will have less to do with your actions than with how well lawmakers do their jobs -- and how well lobbyists do theirs.

ID Theft: What to worry about


For more on what to do if your employer has compromised your data, click here.

Click here for more on digital security  Top of page

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