Identity Theft Blog by Truston

Credit card companies form security council

This isn’t exciting news. I thought it worth noting for those in the industry. CNET News.com reports…

American Express, Discover Financial Services, JCB, MasterCard Worldwide and Visa International announced Thursday the creation of an organization to develop and maintain security standards for credit and debit card payments. It's the first time the five brands have agreed on a single, common framework.

The newly formed Payment Card International (PCI) Security Standards Council will manage the PCI Data Security Standard, first established in January 2005 with the intention of making its implementation more efficient for all parties involved in a payment card transaction. That includes merchants, payment processors, point-of-sale vendors, financial institutions and more than a billion card holders worldwide.

No-limit credit cards can damage your credit score

Beware of no-limit credit cards. Despite the prestige and flexibility these cards offer, it’s possible the cards could result in a lower credit score. It seems odd, but someone who has the track record and wealth to qualify for such cards, and manages their credit well, could still get burned. It’s because part of your credit score is determined by the gap between the credit limit on your cards and how much you pay off (the credit utilization). The no-limit credit card company has to report something as the limit to the credit bureaus. If it reports some arbitrary “limit” to the credit bureaus which is low, and you are a big spender, they could be screwing you over. Because the gap between your limit and your balance could be very small.

What should the credit card companies use as the “credit limit” necessary to determine this gap? Probably the most customer friendly thing to do is report your highest-ever balance as your limit. But they don’t all do that as this article below describes. Also, the article I believe has a small error. It says that “Credit utilization accounts for 30 percent of your credit score.” Not entirely true. 30% of your credit score is determined by your indebtedness, of which credit utilization is ONE factor. Other factors which effect that 30% include money owed on all accounts, quantity of credit accounts, and how much your mortgage/installment loans are paid off.

Read more from Bankrate.com via MSN Money.

"Consumers who are thinking of opening one of these no-limit credit cards may want to think how deeply their scores will be affected," says Craig Watts, spokesman for Fair Isaac, the corporation that developed the well-known FICO score.

Government awards blanket purchase agreements to two credit bureaus

Your tax dollars are primed and ready. The credit reporting agencies now are drooling, waiting for the next huge data breach anywhere within the government. When it happens—ka-ching. FCW has more.

Three firms received blanket purchase agreements Aug. 14 to give agencies credit-monitoring services following several thefts or losses of federal employees’ laptop computers containing personal information.

The General Services Administration awarded the BPAs to Equifax, Experian Consumer Direct and Bearak Reports, a small, woman-owned firm, according to the agency.

Experian IPO coming in October

Experian is going public on or about October 11. Manchester (UK) Evening News has a detailed story and background. According to this report, Experian might have a market cap of US$9 billion.

IRS is unleashing collection agencies on taxpayers

Prepare for an ungodly beast to be unleashed on U.S. taxpayers. Unfortunately this is a fait accompli. The IRS is going to use collection agencies to collect back taxes. Look, getting tax revenues that are left on the table is great. But how can this be a good thing?

Reasons to be concerned:

1. Less taxes could be collected, not more. Collections make a huge commission. Now if they collect a LOT more unpaid taxes. Maybe it will pay off. Huge risk.
2. Sensitive data released. Data on thousands of taxpayers will have to be released to these agencies.
3. Loads of scams. Companies posing as legitimate collection agencies will take advantage of public knowledge that some collection agencies now do collect taxes. This is going to be a huge scam.

GuardMyCreditFile reports on one hell of a story.

Of all the bad ideas to come out of Washington within the past twelve months, this one has got to be in contention for the "dumbest" award. Beginning September 7th, the IRS will begin using private collection agencies to go after people who owe back taxes. The new policy will be a windfall for collection agencies but is likely to cost tax payers more than $80 billion in lost revenues over the course of the next ten years. At the same time, the policy is likely to lead to significant privacy breaches, scams and consumer abuses.

Under the plan which has been approved by Congress, collection agencies will make a commission of anywhere from $0.22 to $0.24 on every dollar that is collected. It is expected that agencies will make $330 million annually from the deal. According to the IRS, using private collection agencies will be significantly more expensive that using IRS employees would be. In fact, IRS employees only cost tax payers $0.03 to $0.04 for every dollar collected.

Tags: collection+agencies,IRS,taxes

Consumers fight back and win in two cases vs. credit bureaus

GuardMyCreditFile has a post on two recent court rulings that went in favor of consumers.

Until now, the CRAs have fought back using the excuse that it is not their responsibility to insure that the data reported by creditors is accurate. But the US 5th Court of Appeals has now officially disagreed with the CRAs, and a jury in a separate case ordered Equifax to pay $351,000 to an identity theft victim.

How Experian thumbs its nose at the FTC every day

In 2005, Experian (doing business as consumerinfo.com) was fined $1 million by the Federal Trade Commission for deceptive and fraudulent marketing of credit reports (see the FTC report here). Basically they marketed “FREE” credit reports and then charged people for the services. In clear violation of Federal law.

Experian fought it but was forced to pay a fine and put a disclaimer on their web site. So how did they implement this disclosure? Go to http://www.experian.com/ and see. They put the disclaimer in tiny font, orange text on orange background! Practically invisible. Especially since 1/12 men and 1/200 women are color-blind to some degree.

Anyone wondering why I named my company Truston?

Update: here’s a screen shot of the disclosure from the Experian home page:

How to get four free credit reports in one year (legally)

If you are a victim of identity theft you have a right to four (4) free credit reports in the year after you report the fraud. Federal law* gives you those rights. The consumer credit reporting agencies (CRA) don’t really want you to know that. I know people who work at the credit bureaus that aren’t even aware of these rights. Here’s how you get the four free credit reports.

1. Every victim gets a free credit report when reporting fraud. Call the CRA, report that you are a victim, place your initial 90–day fraud alert, and ask for your credit report (this is done using an automated voice response system or online).
2. Get a police report, fill out an FTC fraud affidavit, and send an appropriately worded letter to the CRAs. In the letter, request an extended 7–year fraud alert on your credit file. Once you do that, according to U.S. law, you have a right to two (2) free copies of your credit file disclosure (credit report) in the following 12 months (from each of the 3 CRA).
3. As part of the same Federal law, you have a right to one free credit report every 12 months, regardless of whether you are a victim or not. This is the “free annual credit report” you’ve no doubt heard about. And it is totally separate from the free reports you get as a victim.

So that’s four free reports in one year from each of the three CRA (so actually 12 total reports). That is far better than credit monitoring—and it is totally free. In other words, if you are a victim, paying for a credit monitoring service is expensive overkill.

Now all those laws and procedures are kind of a pain to understand and deal with. It requires sending letters with correct information and remembering all the specific time frames. All this confusion used to play right into the hands of the credit reporting agencies, by serving as a virtual obstacle to you taking advantage of your rights.

Well, don’t worry about it anymore. Because my company, Truston, is going to help you with all that. And all it will require is your email address to get started. Sign up here to get notified when we launch our service.

* The Federal law I refer to is Public Law 108–159, Fair and Accurate Credit Transactions Act of 2003. Which amended the Fair Credit Reporting Act. How do I know all this? I read these laws in my spare time. My misery is your pleasure .

Dinged when signing for a debit card purchase

WSJ.com has an article about signing for your debit card purchases. Banks are trying to get consumers to use signature-backed transactions versus using your PIN—they can make more money that way. Banks (the card issuers) get a higher fee on these purchases. PIN-backed transactions should actually be less risky for merchants and the issuers, so the fee should be lower all around (often it isn’t, which is scandalous). The article points out that some banks are now providing consumers incentives (both negative and positive) in the form of point-of-sale fees (penalties) if you use your PIN and extra perks if you don’t. What should you do? Well, it depends, but I’m going to rain on the entire parade and tell you to avoid using your debit card altogether (if that’s feasible).

I wrote a blog post on debit cards versus credit cards here. I was shocked to read in the WSJ article that debit cards are one-third of all card transactions. These are generally a bad idea from a security and risk standpoint for consumers. My blog post points out the pros and cons. I do realize that people are too far in debt and misuse their credit cards. So some folks use debit cards to avoid this problem. That’s fair, I suppose. However, if you are someone that pays all your bills every month, I recommend avoiding debit cards for purchases. Your protections are far less robust with debit cards than credit cards.

Update: I don’t think my original post sufficiently displayed the outrage we should all feel if it is true that banks are penalizing their customers for using a PIN with a debit card transaction. It’s a far less risky transaction—for you, the bank (card issuer) and the merchant. A fraudster would have to have stolen your card and the PIN. Debit cards are proven to be far safer at the point of sale. So it is outrageous for your bank to charge you a fee for using a safer transaction. It’s a totally upside down way of looking at it. We’re trying to reduce fraud aren’t we?

New blog on bankruptcy and credit

The US PIRG blog points out a new blog authored by seven scholars and professors that will focus on bankruptcy and credit called Credit Slips. Nice title. In their own words, it’s a blog about “what does happen and what should happen when consumers and businesses borrow money.” I’m subscribed.