PREPARED STATEMENT OF
PREVENTION AND VICTIM ASSISTANCE
FINANCIAL INSTITUTIONS AND CONSUMER CREDIT SUBCOMMITTEE
HOUSE FINANCIAL SERVICES COMMITTEE
June 24, 2003
Mr. Chairman, and members of the Subcommittee,
I am Howard Beales, Director of the Bureau of Consumer Protection,
Federal Trade Commission ("FTC" or "Commission").(1)
I appreciate the opportunity to present the Commission's views
on the impact of identity theft on consumers and the importance
of information security in preventing identity theft.
The Federal Trade Commission has a broad
mandate to protect consumers, and controlling identity theft
is an important issue of concern to all consumers. The FTC's
primary role in combating identity theft derives from the
1998 Identity Theft Assumption and Deterrence Act ("the Identity
Theft Act" or "the Act").(2)
The Act directed the Federal Trade Commission to establish
the federal government's central repository for identity theft
complaints and to provide victim assistance and consumer education.
The Commission also works extensively with industry on ways
to improve victim assistance, including providing direct advice
and assistance in cases when information has been compromised.
The Commission can take enforcement action when companies
fail to take adequate security precautions to protect consumers'
THE FEDERAL TRADE
COMMISSION'S ROLE IN COMBATING IDENTITY THEFT
The Identity Theft Act strengthened the
criminal laws governing identity theft(3)
and focused on consumers as victims.(4)
Congress also recognized that coordinated efforts are essential
to best serve the needs of identity theft victims because
these fraud victims often need assistance both from government
agencies at the national and state or local level and from
businesses. As a result, the FTC's role under the Act is primarily
one of facilitating information sharing among public and private
Specifically, Congress directed the Commission to establish
procedures to: (1) log the receipt of complaints by victims
of identity theft; (2) provide identity theft victims with
informational materials; and (3) refer complaints to appropriate
entities, including the major national consumer reporting
agencies and law enforcement agencies.(6)
To fulfill the Act's mandate, the Commission has implemented
a plan that focuses on three principal components: (1) A toll-free
telephone hotline, (2) the Identity Theft Data Clearinghouse
(the "Clearinghouse"), a centralized database used to aid
law enforcement, and (3) outreach and education to consumers,
law enforcement, and private industry.
A. Assisting Identity Theft
The most immediate way in which the FTC
assists victims is by collecting complaints and providing
advice on recovery through a telephone hotline and a dedicated
website. On November 1, 1999, the Commission began collecting
complaints from consumers via a toll-free telephone number,
1-877-ID THEFT (438-4338). Every year since has seen an increase
in complaints. In 2002, hotline counselors added almost 219,000
consumer records to the Clearinghouse, up from more than 117,000
in 2001. Of the 219,000 records, almost 162,000 (74%) were
complaints from identity theft victims, and almost 57,000
(26%) were general inquiries about identity theft. Despite
this dramatic growth in reports of identity theft, the FTC
is cautious in attributing it entirely to a commensurate growth
in the prevalence of identity theft. The FTC believes that
the increase is, at least in part, an indication of successful
outreach in informing the public of its program and the availability
Callers to the hotline receive telephone
counseling from specially trained personnel who provide general
information about identity theft and help guide victims through
the steps needed to resolve the problems resulting from the
misuse of their identities. Victims are
advised to: (1) place a fraud alert on their credit reports
and review their credit reports for additional fraudulent
(2) contact each of the creditors or service providers where
the identity thief has established or accessed an account,
to request that the account be closed and to dispute any associated
charges; and (3) report the identity theft to the police and
get a police report, which is very helpful in demonstrating
to would-be creditors and debt collectors that the consumers
are genuine victims of identity theft.
Counselors also advise victims having particular
problems about their rights under relevant consumer credit
laws including the Fair Credit Reporting Act,(8)
the Fair Credit Billing Act,(9)
the Truth in Lending Act,(10)
and the Fair Debt Collection Practices Act.(11)
If the investigation and resolution of the identity theft
falls under the jurisdiction of another regulatory agency
that has a program in place to assist consumers, callers also
are referred to those agencies.
The FTC's identity theft website, located
provides equivalent service for those who prefer the immediacy
of an online interaction. The site contains a secure complaint
form, which allows victims to enter their identity theft information
for input into the Clearinghouse. Victims also can read and
download all of the resources necessary for reclaiming their
credit record and good name. One resource in particular is
the FTC's tremendously successful consumer education booklet,
Identity Theft: When Bad Things Happen to Your Good Name.
The 26-page booklet, now in its fourth edition, comprehensively
covers a range of topics, including the first steps to take
for victims, how to correct credit-related and other problems
that may result from identity theft, tips for those having
trouble getting a police report taken, and advice on ways
to protect personal information. It also describes federal
and state resources that are available to victims who may
be having particular problems as a result of the identity
theft. The FTC alone has distributed more than 1.2 million
copies of the booklet since its release in February 2000.(12)
Last year, the FTC released a Spanish language version of
the Identity Theft booklet, Robo de Identidad: Algo malo
puede pasarle a su buen nombre.
B. Outreach and Education
The Identity Theft Act also directed the
FTC to provide information to consumers about identity theft.
Recognizing that law enforcement and private industry play
an important part in the ability of consumers both to minimize
their risk and to recover from identity theft, the FTC expanded
its mission of outreach and education to include these sectors.
(1) Consumers: The FTC has taken
the lead in coordinating with other government agencies and
organizations in the development and dissemination of comprehensive
consumer education materials for victims of identity theft
and those concerned with preventing this crime. The FTC's
extensive consumer and business education campaign includes
print materials, media mailings, and radio and television
interviews. The FTC also maintains the identity theft website,
which includes the publications and links to testimony, reports,
press releases, identity theft-related state laws, and other
To increase identity theft awareness for
the average consumer, the FTC recently developed a new primer
on identity theft, ID Theft: What's It All About?
This publication discusses the common methods of identity
thieves, how consumers can best minimize their risk of being
victimized, how to identify the signs of victimization, and
the basic first steps for victims. Taken together with the
detailed victim recovery guide, Identity Theft: When Bad
Things Happen to Your Good Name, the two publications
help to fully educate consumers.
(2) Law Enforcement: Because law
enforcement at the state and local level can provide significant
practical assistance to victims, the FTC places a premium
on outreach to such agencies. In addition to the training
described below (see infra Section II.C.),
the staff joined with North Carolina's Attorney General Roy
Cooper to send letters to every other Attorney General letting
him or her know about the FTC's identity theft program and
how each Attorney General could use the resources of the program
to better assist residents of his or her state. The letter
encourages the Attorney General to link to the consumer information
and complaint form on the FTC's website and to let residents
know about the hotline, stresses the importance of the Clearinghouse
as a central database, and describes all of the educational
materials that the Attorney General can distribute to residents.
North Carolina took the lead in availing itself of the Commission's
resources in putting together for its resident victims a package
of assistance that includes the ID Theft Affidavit (see
Section II.B.(3)(a)) and links to the FTC website, www.consumer.gov/idtheft.
Through this initiative, the FTC hopes to make the most efficient
use of federal resources by allowing states to take advantage
of the work the FTC has already accomplished and at the same
time continuing to expand the centralized database of victim
complaints and increase its use by law enforcement nationwide.
Other outreach initiatives include: (1) Participation in a
"Roll Call" video produced by the Secret Service, which will
be sent to thousands of law enforcement departments across
the country to instruct officers on identity theft, investigative
resources, and assisting victims; and (2) redesigning of the
FTC's website to include a section for law enforcement with
tips on how to help victims as well as resources for investigations.
The FTC will launch the new website this summer.
(a) Victim Assistance:
Identity theft victims spend significant time and effort restoring
their good name and financial records. As a result, the FTC
devotes significant resources to conducting outreach with
the private sector on ways to improve victim assistance procedures.
One such initiative arose from the burdensome requirement
that victims complete a different fraud affidavit for each
different creditor with whom the identity thief had opened
To reduce that burden, the FTC worked with industry and consumer
advocates to create a standard form for victims to use in
resolving identity theft debts. From its release in August
2001 through April 2003, the FTC has distributed more than
293,000 print copies of the ID Theft Affidavit. There have
also been more than 356,000 hits to the Web version. The affidavit
is available in both English and Spanish.
The three major credit reporting agencies
("CRAs") recently launched a new initiative, the "joint fraud
alert." After receiving a request from an identity theft victim
for the placement of a fraud alert on his or her consumer
report and for a copy of that report, each CRA now shares
that request with the other two CRAs, thereby eliminating
the requirement that the victim contact each of the three
major CRAs separately.
(b) Information Security Breaches:
Additionally, the FTC is working with institutions that maintain
personal information to identify ways to help keep that information
safe from identity theft. Last year, the FTC invited representatives
from financial institutions, credit issuers, universities,
and retailers to an informal roundtable discussion of how
to prevent unauthorized access to personal information in
employee and customer records. The FTC will soon publish a
self-assessment guide to make businesses and organizations
of all sizes more aware of how they manage personal information
and to aid them in assessing their security protocols.
As awareness of the FTC's role in identity
theft has grown, businesses and organizations that have suffered
compromises of personal information have begun to contact
the FTC for assistance. For example, in the cases of TriWest(14)
in which tens of thousands of consumers' files were compromised,
the Commission advised how to notify those individuals and
how to protect the data in the future. To provide better assistance
in these types of cases, the FTC developed a kit, Responding
to a Theft of Customer or Employee Information, that
will be posted on the identity theft website in the coming
weeks. The kit provides advice on which law
enforcement agency to contact, depending on the type of compromise,
business contact information for the three major credit reporting
agencies, suggestions for establishing an internal communication
protocol, information about contacting the FTC for assistance,
and a detailed explanation of what information individuals
need to know. The kit also includes a form letter for notifying
the individuals whose information was taken. Organizations
are encouraged to print and include copies of Identity
Theft: When Bad Things Happen to Your Good Name with
the letter to individuals.
The FTC particularly stresses the importance
of notifying individuals as soon as possible when information
has been taken that may put them at risk for identity theft.
They can then begin to take steps to limit the potential damage
to themselves. Individuals who place a fraud alert promptly
have a good chance of preventing, or at least reducing, the
likelihood that the release of their information will turn
into actual misuse. Prompt notification also alerts these
individuals to review their credit reports and to watch for
the signs of identity theft. In the event that they should
become victims, they can quickly take action to clear their
records before any long-term damage is done. Besides providing
Responding to a Theft of Customer or Employee Information,
FTC staff can provide individual assistance and advice, including
review of consumer information materials for the organization
and coordination of searches of the Clearinghouse for complaints
with the law enforcement officer working the case.
C. Identity Theft Data Clearinghouse
The final mandate for the FTC under the
Identity Theft Act was to log the complaints from victims
of identity theft and refer those complaints to appropriate
entities such as law enforcement agencies. Before launching
this complaint system, the Commission took a number of steps
to ensure that it would meet the needs of criminal law enforcement,
including meeting with a host of law enforcement and regulatory
agencies to obtain feedback on what the database should contain.
Access to the Clearinghouse via the FTC's secure Web site
became available in July of 2000. To ensure that the database
operates as a national clearinghouse for complaints, the FTC
has solicited complaints from other sources. For example,
in February 2001, the Social Security Administration Office
of Inspector General (SSA-OIG) began providing the FTC with
complaints from its fraud hotline, significantly enriching
the FTC's database.
The Clearinghouse provides a much fuller
picture of the nature, prevalence, and trends of identity
theft than was previously available.(16)
FTC data analysts aggregate the data to develop statistics
about the nature and frequency of identity theft. For instance,
the Commission publishes charts showing the prevalence of
identity theft by states and by cities. Law enforcement and
policy makers at all levels of government use these reports
to better understand the challenges identity theft presents.
Since the inception of the Clearinghouse,
62 federal agencies and 574 state and local agencies have
signed up for access to the database. Within those agencies,
over 4,200 individual investigators have the ability to access
the system from their desktop computers twenty-four hours
a day, seven days a week. The Commission actively encourages
even greater participation.
One of the goals of the Clearinghouse and
the FTC's identity theft program is to provide support for
identity theft prosecutions nationwide.(17)
Last year, in an effort to further expand the use of the Clearinghouse
among law enforcement, the FTC, in cooperation with the Department
of Justice, the International Association of Chiefs of Police
and the United States Secret Service, initiated a full day
identity theft training seminar for state and local law enforcement
officers. Sessions were held in Washington, D.C., Des Moines,
Chicago, San Francisco, Las Vegas, Dallas, and Phoenix. The
Phoenix program was held May 22. More than 730 officers have
attended these seminars, representing more than 170
different agencies. Additional training seminars will occur
later this year in Seattle, New York, and Houston -- cities
the FTC has identified as having high rates of identity theft.
Also, the FTC is a member of an identity theft task force
in Kansas City and is helping coordinate a training seminar
there later this summer.
The FTC staff also helps develop case leads.
Now in its second year, the Commission runs an identity theft
case referral program in coordination with the United States
Secret Service. The Secret Service has assigned a special
agent on a full-time basis to the Commission to assist with
identity theft issues and has provided the services of its
Criminal Research Specialists.(18)
Together, the FTC and Secret Service staff develop preliminary
investigative reports by examining significant patterns of
identity theft activity in the database and refining the data
through the use of additional investigative resources. Thereupon,
the staff refer the investigative reports to appropriate Financial
Crimes Task Forces and other law enforcers located throughout
the country for further investigation and potential prosecution.
Identity theft places substantial costs
on individuals and businesses. The Commission, through its
education and enforcement capabilities, is committed to reducing
these breaches as much as possible. The Commission will continue
its efforts to assist criminal law enforcement with their
investigations. Prosecuting perpetrators sends the message
that identity theft is not cost-free. Finally, the Commission
knows that as with any crime, identity theft can never be
completely eradicated. Thus, the Commission's program to assist
victims and work with the private sector on ways to facilitate
the process for regaining victims' good names will always
remain a priority.
1. The views expressed
in this statement represent the views of the Commission. My
oral presentation and responses to questions are my own and
do not necessarily represent the views of the Commission or
2. Pub. L. No. 105-318,
112 Stat. 3007 (1998) (codified at 18 U.S.C. § 1028).
3. 18 U.S.C. § 1028(a)(7).
The statute broadly defines "means of identification" to include
"any name or number that may be used, alone or in conjunction
with any other information, to identify a specific individual,"
including, among other things, name, address, social security
number, driver's license number, biometric data, access devices
(i.e., credit cards), electronic identification number
or routing code, and telecommunication identifying information.
4. Because individual
consumers' financial liability is often limited, prior to
the passage of the Act, financial institutions, rather than
individuals, tended to be viewed as the primary victims of
identity theft. Setting up an assistance process for consumer
victims is consistent with one of the Act's stated goals:
to recognize the individual victims of identity theft.
See S. Rep. No. 105-274, at 4 (1998).
5. Most identity theft
cases are best addressed through criminal prosecution. The
FTC itself has no direct criminal law enforcement authority.
Under its civil law enforcement authority provided by Section
5 of the FTC Act, the Commission may, in appropriate cases,
bring actions to stop practices that involve or facilitate
identity theft. See, e.g., FTC v. Assail, Inc., W03
CA 007 (W.D. Tex. Feb. 4, 2003) (order granting preliminary
injunction) (defendants alleged to have debited consumers'
bank accounts without authorization for "upsells" related
to bogus credit card package) and FTC v. Corporate Marketing
Solutions, Inc., CIV - 02 1256 PHX RCB (D. Ariz Feb. 3, 2003)
(final order) (defendants "pretexted" personal information
from consumers and engaged in unauthorized billing of consumers'
credit cards). In addition, the FTC brought six complaints
against marketers for purporting to sell international driver's
permits that could be used to facilitate identity theft. Press
Release, Federal Trade Commission, FTC Targets Sellers Who
Deceptively Marketed International Driver's Permits over the
Internet and via Spam (Jan. 16, 2003) (at http://www.ftc.gov/opa/2003/01/idpfinal.htm).
6. Pub. L. No. 105-318,
§ 5, 112 Stat. 3010 (1998).
7. At a consumer's request,
the three major credit reporting agencies will place a fraud
alert on the consumer's credit file that indicates to credit
issuers that the consumer is to be contacted before new credit
is issued in that consumer's name. See Section II.B.(3)(a)
infra for a discussion of the credit reporting agencies
new "joint fraud alert" initiative.
8. 15 U.S.C. § 1681 et
9. Id. § 1666.
The Fair Credit Billing Act generally applies to "open end"
credit accounts, such as credit cards, revolving charge accounts,
and overdraft checking accounts. It does not cover installment
contracts, such as loans or extensions of credit that are
repaid on a fixed schedule.
10. Id. § 1601
11. Id. § 1692
12. Other government
agencies, including the Social Security Administration, the
SEC, and the FDIC also have printed and distributed copies
of Identity Theft: When Bad Things Happen to Your Good
13. See ID
Theft: When Bad Things Happen to Your Good Name: Hearing Before
the Subcomm. on Technology, Terrorism and Government Information
of the Senate Judiciary Comm. 106th Cong.
(2000) (statement of Mrs. Maureen Mitchell, Identity Theft
14. Adam Clymer, Officials
Say Troops Risk Identity Theft After Burglary, N.Y. Times,
Jan. 12, 2003, § 1 (Late Edition), at 12.
15. Kathy M. Kristof
and John J. Goldman, 3 Charged in Identity Theft Case,
LA Times, Nov. 6, 2002, Main News, Part 1 (Home Edition),
16. Charts that summarize
2002 data from the Clearinghouse can be found at www.consumer.gov/idtheft
17. The Commission testified
last year in support of S. 2541, the Identity Theft Penalty
Enhancement Act of 2002, which would increase penalties and
streamline proof requirements for prosecution of many of the
most harmful forms of identity theft. See Testimony
of Bureau Director J. Howard Beales, Senate Judiciary Committee,
Subcommittee on Terrorism, Technology and Government Information
(July 11, 2002). S. 2541 has been reintroduced in the 108th
Congress as S. 153.
18. The referral program
complements the regular use of the database by all law enforcers
from their desk top computers.