It seemed simple enough for Jake’s parents. Eager to teach their 8-year-old son about saving money, they opened a small passbook account at their local bank. With a $25 deposit and a lecture on savings, Jake was on his way — until he started getting credit card applications. Young consumer beware. While savings accounts are a great tool for learning, there is no special protection that prevents a bank from selling a child’s personal data, including social security number, birth date and address. And once that data gets circulated, the child can be a prime victim for identity fraud, according to Linda Foley, director of the Identity Theft Resource Center. "Stealing a child’s identity is a great crime. It’s easy, it’s profitable, and with children, the crime isn’t even discovered for years," Foley says. She routinely hears from college students who have applied for their first credit card — only to learn that their credit had been sabotaged years earlier. "What parent ever checks their child’s credit history?" Foley asks. "Virtually none, and the thieves know it."
Identity theft The Federal Trade Commission calls identity theft the fast growing crime in the country, with more than 700,000 victims last year. The number of children who have their identities stolen is hard to estimate since the crime often doesn’t get reported until the child turns 18 and tries to establish credit. But a 1999 study by Image Data LLL, an identity-theft prevention service, estimated that one in five Americans — or a member of their family — has been an identity-theft victim. Having a child’s name and personal data sold by financial institutions is only one way thieves can get the data they need. Parents routinely give their child’s social security number to pediatricians, schools and insurance companies. Many mothers carry their children’s cards in case of an unexpected trip to the pediatrician’s office. What’s the harm? The FTC estimates that 50 percent of all identity-theft cases stem from stolen wallets. So while a mother’s immediate concern might be her lost credit cards, the thief has an even more valuable tool: her children’s social security numbers. "We have to guard our children’s privacy and be careful who we share their data with," says Beth Givens of the Privacy Rights Clearinghouse. "Do you really know who is getting the data, and how they are going to use it?" One example of the ease with which credit card information can be stolen is the recent apprehension of the alleged identity theft ring in Long Island. Software company employees allegedly used the information of more than 30,000 people to empty out bank accounts to the tune of $27 million. People’s credit histories were sold in Brooklyn and the Bronx for up to $60 each. Givens’ organization heard of a recent scam where notices were posted of a class-action lawsuit against a baby food manufacturer. Parents were tricked into sending their child’s name, birth date and social security number to receive a "promised" $500 reward.
Too much credit Once a thief has the data, setting up fraudulent credit is easy. In one case, the personal information of a 12-year-old was stolen and used to open several accounts, including one to purchase an automobile. Consumer advocates are unanimous in their frustration with the complacency companies show in issuing credit. "The credit granting industry is so careless with who gets credit," says Givens. "They don’t go to any effort to determine the authenticity of an applicant. It’s not profitable to them and they can pass along their losses (from theft) to consumers."
Protecting your child So how can parents protect their children from being victims of credit and identity fraud? First, protect the social security number. Don’t carry the card. If you need to take the number to the pediatrician’s, write it separately without the identifying dashes. Ask if another identification number can be used instead. In those areas such as banking where social security numbers are required, find out the bank’s policies about selling the child’s data. Also, make sure the bank clearly identifies that the account belongs to a minor, says Kathy Pitton, spokesperson for Comerica Bank. Parents can go one step further. The new Financial Service Modernization Act requires financial institutions to tell consumers how they collect and use personal data. The law also gives the right to "opt out" and prevent the consumer’s data from being sold. The Privacy Rights Clearinghouse has a sample letter that can be used to opt out (www.privacyrights.org). Usually, a separate letter has to be sent to the institution for each account holder. "Parents should opt out for children if the child has a savings account at a bank or brokerage house, no matter how small the account," says Givens of the Privacy Rights Clearinghouse. "If they don’t, there is a good chance the child’s personal data will be sold." Finally, parents need to check with the credit-reporting bureaus to see if credit has been established in their child’s name. Trans Union (800-916-8800) will put a notice on your child’s social security number alerting creditors that the number belongs to a minor. "There shouldn’t be any credit history for a child unless the parent established it. So, no news is good news," says Rod Griffin, consumer education manager for Experian, the credit-reporting agency. If there is a fraudulent report, file a complaint with your local police department. Once you have the complaint number, you can begin working with credit agencies and the police to investigate. Experian has a special line for parents who suspect their children are victims of credit fraud (888-397-3742, option number 4, press 1).
Children deserve the best start in life possible, so teaching the benefits of savings is still a good lesson. But in these times, teaching them to protect themselves from fraud is even better.
Children’s Financial Fraud Resources · Identity Theft Resource Center, (858) 693-7935 · Privacy Rights Clearinghouse, (619) 298-3396 · Experian, (972) 390-3528 · Identity Theft Resource Center website (www.idtheftcenter.org) · Federal Trade Commission Identity Theft Clearinghouse, (877) ID THEFT, (www.consumer.gov/idtheft/) · Federal Trade Commission contact: Kathleen Lund at K.Lund@FTC.gov