Trading identity theft for fraud

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Trading identity theft for fraud

HR 2971, the Social Security Privacy and Identity Theft Prevention Act of 2004, just passed the ways and means committee. Identity theft is a serious problem, and nobody could object to legislation that cuts back on identity theft any more than they could object to the Protection of Soft and Cuddly Bunnies Act.

Unfortunately, when looking at any policy or measure five questions need to be asked.

1. What problem is the policy or measure trying to solve?

2. How can it fail in practice?

3. Given the failure modes, how well does it solve the problem?

4. What are the costs, both financial and social, associated with it, and flowing from its unintended consequences?

5. Given the effectiveness and costs, is the policy or measure worth it?

In the case of HR 2971, our concern is with the cost of unintended consequences. Imagine that you are not the victim of identity theft, but an abandoned wife who needs to collect child support from a deadbeat dad. Or that your life savings have been stolen by a fraudster. Or that your wealthy spouse wants a divorce, and insists that they are broke and have no property to split with you.

If you fall into any of these categories, HR 2971 virtually guarantees that you will never see the money owed you. The reason for this is that neither the police nor the state nor the federal government will drop what they are doing to locate the assets that have been concealed from you. Instead, your attorney will hire a private investigator.

Private investigators, not the government do the lions share of locating concealed assets in civil cases. LUBRINCO, for example, is involved in the search for roughly $600 million dollars a year (mostly in high-value frauds, which tend to involve over $100 million in any give case). But one of the tools we use is the social security number. Of 2000 John Q. Publics, which one has the same social security number as Mrs. Public’s ex? What is the social security number of the fraudster, and what accounts and properties can we find associated with someone who has that social security number? Without access to the information in credit header and other locator information, which will be denied to licensed private investigators under sections 107 and 108 of HR 2971, investigations will become either impossible or cost-prohibitive.

For the very rich, the law will have little effect. They will either have the clout to get law enforcement to take action, or will be able to afford to spend large amounts to get the information they need.

For those of us in the middle class or below, or for those stripped of resources by a fraudster, concealed assets that might have been located will now never be seen, because their location will become un-affordable for us. For some, the penalties will far outweigh the risks of identity theft, and HR 2971 might best be renamed the Deadbeat-Dad and Fraudster Protection Act of 2004….

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