Child identity theft (you read that right) shows how cracked the system is
(MONEY Magazine) – Did you hear the one about the five-year-old girl working as a cook in a Utah steak house? How about the second-grader in Florida who racked up $13,000 in credit-card debt? Or the suburban Seattle infant who was delinquent on paying his own medical bills?
Silly as these setups sound, they have the same punch line: Kids are the fastest-growing group of identity theft victims, and these examples, while extreme, are real. The perpetrators range from low-life uncles to druggie computer hackers to people selling fake IDs to immigrants.
Not very funny, eh?
You might wonder how someone who doesn't yet have teeth can get credit. Used to be, you didn't get a Social Security number until you started earning a paycheck. But today 90% of newborns are signed up before they leave the hospital, for tax-reporting reasons. What's more, the lack of a credit record makes kids a bigger target. "Identity thieves don't have to worry about bad credit histories," says Richard Hamp, assistant attorney general for Utah.
The ID theft numbers (like the victims) are still small: Children and young teenagers account for an estimated 4% of all cases, hardly enough to inspire faces on milk cartons. But that's up from 2% in 2002, according to the Federal Trade Commission. And seeing as there are nearly 10 million cases of identity theft each year, 4% would represent some 400,000 children. Moreover, the Identity Theft Resource Center in San Diego reports that cases involving children account for nearly a quarter of the calls it receives. Years from now, the victims could apply for their first MasterCard, only to discover that they have terrible credit.
The most disturbing thing, however, isn't the number of people affected but what the rise in kiddie ID theft says about the priorities of big business. In the chase for higher profits, the financial services industry is ignoring security needs. "They think it's cheaper to absorb the losses than to try to reduce the fraud," says Linda Foley, executive director of the Identity Theft Resource Center.
The best safety advice is the obvious: Don't give out a child's Social Security number, and be sure kids know not to respond to e-mail asking for data. Some experts recommend ordering a credit report once a year (there shouldn't be one if the child has never had a credit line).
But the ultimate responsibility for prevention rests with the companies that cavalierly approve credit. They don't care enough to stop your family from being targeted--and that's the real crime.