Watching Out for Identity Theft in Your Credit Bureau Disputes Process
Identity theft is a growing issue facing consumers in the United States. Just a few years ago, in 2015, the Bureau of Justice Statistics published an article estimating that 7% of all US adults were victims of identity theft in 2014. More recently, in 2016, a Bankrate.com survey suggested that 41 million US adults have had their identities stolen, which equates to approximately 16% of the US adult population. So why does all this matter when designing your credit bureau disputes process?
Let’s explore a situation for a moment, from a consumer’s perspective:
You are in the process of applying for a mortgage and are notified by your lender that you cannot be approved, due to a drop in your credit score caused by newly opened credit cards on your credit report. However, you didn’t apply for any credit cards. Reacting to the situation at hand, you reach out to the credit card issuer to dispute the inquiry/account on your credit bureau.
At this point, you don’t yet know that a fraudster has run up 10 other inquiries in your name. Time is of the essence to address the ID theft and what happens next is highly dependent on the credit bureau disputes process in place at the credit card company you have contacted.
The situation described above is all too common today. When handled well, the financial services firm issuing the credit card has an opportunity to address the issue while helping the consumer understand what is occurring through to resolving the issue. This requires the issuer having robust investigation practices in place for Identity Theft within their credit bureau disputes operation. When not handled well, this can lead to fraud losses and a frustrated consumer.
While it is important to conduct a reasonable investigation, the alignment between the disputes and fraud investigation business areas should be seamless. Each area should collaborate closely to ensure their investigation processes are aligned to conduct a comprehensive validation of the dispute. Improved internal communication can provide the consumer with a timely and accurate resolution as well as a positive customer experience.
Best Practices for Credit Bureau and Fraud Disputes Investigations
Reasonable credit bureau dispute investigations, governed by the Fair Credit Reporting Act (FCRA), should evaluate disputes beyond just matching account number to name, address and social security number, as fraudsters often have this information at their fingertips. Investigations should consider common indicators of identity theft, such as:
- Account activity following account opening – such as an address change.
- Recent bureau activity indicating potential identity theft, such as a high volume of recent inquiries that is out of pattern.
- Repeat disputes (indicating the first investigation may have missed the ID fraud) – which may occur when the consumer fails to provide sufficient information during the first dispute.
- If the customer has multiple products, assess the customer based on their entire relationship as opposed to the specific product.
- Dispute investigators should be cautious, aware, and well trained that fraudsters may have sufficient information to pass verification processes.
Including these indicators as part of disputes investigation procedures, and training disputes agents to be familiar with identity theft, can help lenders quickly recognize identity theft scenarios. Further, disputes agents should have the ability to place outbound calls (being cautious by only dialing verified numbers) to “develop” a dispute further if indicators are present on the account. When applicable, disputes agents may try notifying the customer using online banking tools that can include alerts via SMS and/or email.
This is where an issuer has an opportunity to build loyalty with the consumer by positioning themselves as an advocate to help the victim through the identity theft process. While the issuer’s power is limited to removing the fraudulent tradeline they reported to the bureaus, they can provide tools and guidance to the victim as they:
- Add a Fraud Flag / Fraud Victim Statement to their credit report, via the Credit Reporting Agencies.
- Remove additional fraudulent inquires that may not have otherwise been known to the consumer.
- Protect themselves against further information breaches by updating user names, passwords, security questions, and potentially changing their Social Security Number.
Conclusion: Take a broader view to Credit Bureau Disputes Investigations
Unfortunately for many consumers, the disputes process can be challenging – the CFPB’s recent February 2017 Complaint Report indicated that consumers often reported barriers to submission of disputes such as authentication questions they cannot pass. Some consumers reported notifying both the data furnisher and credit reporting agencies of the potential identity theft with appropriate documentation and then having the accounts verified as accurate. While the CFPB’s Complaint Reporting should be taken with a grain of salt – as it does not provide the financial services firm an opportunity to “verify” information – it does provide directional information related to what is of concern to consumers and regulators.
For consumers, being a victim of identity theft is filled with uncertainty and fear. Organizations that ensure their disputes investigations go above and beyond to identify—and help the consumer resolve— cases of identity theft can reduce complaints, avoid regulatory scrutiny and even build loyalty with existing customers or those could become customers in the future.