I’ve had several inquiries from clients and prospective clients that were victims of identity theft and unauthorized use of their credit cards. These people had unsuccessfully tried to explain the fraudulent activity to skeptical debt collectors, who continued to harass them day and night. In one case, the debt collector had already obtained a default judgment and was attempting to garnish the person’s wages. Here are some steps you should take to protect yourself if your identity has been stolen or if your credit cards have been used without your authorization:
- Close any credit card accounts that have been used, or that you suspect may be used, without your permission. Call your credit card company and report the fraudulent activity immediately. Follow up the conversation with a certified letter so you can prove that they received it. Some companies may have forms they want you to fill out. Do so and keep copies for your records. Request that the credit card company confirm in writing that your accounts have been closed. You should also request that the credit card company waive any fraudulent charges. Again, be sure to confirm this in writing and keep a copy for your records.
- Report the fraudulent activity to the credit bureaus. The three main credit bureaus are Equifax, Experian, and TransUnion. The first company you report the fraud to is required to report to the other two companies, but it probably doesn’t hurt to notify all three yourself. Again, send letters by certified mail and keep copies of the letters and mail receipts. The credit bureaus must place a fraud alert on your credit report, which may make it more difficult for identity thiefs to open additional accounts. After reporting the fraud to the credit bureaus, obtain a free copy of your credit report at AnnualCreditReport.com and confirm that a fraud alert has been placed on your accounts.
- File a police report. When you report the fraudulent activity to the police, make sure they make a written report and get a copy of it for your records. This is critical because its usually the first thing debt collectors ask for when you tell them about the fraudulent activity. Unfortunately, debt collectors are trained to believe that you owe the money unless you prove otherwise. Showing them a police report is a good way to convince debt collectors that you’ve been a victim of fraud.
These steps should limit your liability for fraudulent charges, stop additional fraudulent charges, and give you the ammunition to raise a successful defense if the account ends up in collections. Be sure to keep all of your records because it can be years before an account gets placed with a debt collector. Also, an ounce of prevention is worth a pound of cure, so take some time to review this FTC report on how to prevent identity theft.
Change is Coming to Your Wallet. The Washington Post has a great article highlighting many of the provisions of the recently enacted credit card bill of rights. The new law will take effect in 9 months.
Credit Card Law Will Curb FreeCreditReport.com Ads. This article from the Huffington Post points out one of the lesser known, but important, provisions of the credit card bill of rights. The new law targets misleading ads for “free” credit reports that aren’t actually free. The only place to get a truly free copy of your credit report is at AnnualCreditRreport.com.
Home Prices Continue to Decline in March. Home prices fell 19.1% in the first quarter of 2009 compared to the same time period in 2008. National prices have fallen to 2002 levels and are down 32.2% from their peak in 2006.
Notes From Another Credit Card Crisis. Op-Ed contributor Suki Kim compares America’s current credit card crisis with similar problems in South Korea in the early 2000’s.
Right Steps to Take Before Disputing a Credit Error. How to dispute an error on your credit report under the Fair Credit Reporting Act.
A Final Lesson: Repay Student Debt Quickly. Columnist Michelle Singletary advises new graduates to take a hard look at their budgets and attempt to pay back their student loans as soon as possible.
Plan to Encourage Banks to Allow Short Sales. The Obama administration has proposed incentives for banks to allow homeowners to sell their home at a loss, rather than going through foreclosure.
Weighing the Options with Credit Card Debt. Tips for resolving your credit card debt.
Consumerist Interviews Goolsbee on Credit Card Reform. An interview with Obama credit card advisor Austan Goolsbee on proposed credit card reform legislation.
What does your credit card company know about you?
May 15, 2009 by Todd Murray · Leave a Comment
The New York Times has a fascinating (and somewhat scary) article about the data mining techniques that many credit card companies use to calculate risk. Credit card companies collect vast amounts of data about their customers’ backgrounds and purchases and use it to determine which customers are likely to pay their balances and which are likely to default. The article reveals that the Capital One “card lab” is really just “an experiment” designed to collect data about customers’ values and choices and use it to assess risk.
The author also attended a training session for new collection employees at one major credit card issuer. It seems credit card companies are taking a kindler and gentler approach when it comes to debt collection. Not necessarily because its the right thing to do, but because research has shown that empathizing with (and occasionally manipulating) customers increases the likelihood of payment.
The article is somewhat long, but it is well-worth your time.
The U.S. House recently passed the so-called credit card bill of rights, which will prohibit some deceptive and unfair credit card practices. The U.S. Senate is debating a similar bill this week. The Obama administration has strongly supported both bills, and has requested that Congress have a bill ready for his signature by Memorial Day.
Meanwhile, the Wall Street Journal reports that credit card companies are lobbying against further changes, saying regulations approved by the Federal Reserve in December will transform industry practices. Predictably, industry officials say a quicker implementation or different rules could force lenders to cut off some consumers entirely when they need credit the most.
Finally, the Colbert Report weighed in on this debate over credit card regulations.
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