Bloomberg recently reported that financial institutions and Social Security will begin partnering in an effort to fight identity theft, a problem that reportedly cost lenders $6 billion in 2016.
The story indicated that financial institutions have been lobbying Congress to get access to Social Security’s data to fight identity theft and now financial institutions have been invited to join a real-time electronic system to verify that credit applicants’ names match Social Security numbers.
“The system would help banks eliminate sham identities created when fraudsters apply for credit cards using Social Security numbers that aren’t in use. Known as synthetic identity fraud, it is the fastest-growing financial crime in the U.S., according to a report this month by the Federal Reserve. U.S. lenders lost $6 billion from this type of fraud in 2016, according to consultant Auriemma Group,” the story informs.
More from the story about combating this type of crime:
Synthetic identity fraud is typically a long con. Armed with a made-up identity, fraudsters spend years paying the monthly credit-card bills, watching their credit limits slowly tick higher. When they’re ready, they max out the cards with no intent of paying the debt, a phase known as “busting out.”
“There’s probably a lot of synthetic identities that are currently on the books at banks that they don’t know about yet,” Casey Merolla, a managing director at Accenture Plc, said in an interview. “It’s really difficult for the banks to spot.”
The Social Security Administration has long required handwritten consent from consumers to allow lenders to confirm identities. Under that system, banks pay a one-time $5,000 enrollment charge plus a fee every time they look up someone.
“This is definitely a big step forward,” said Naftali Harris, co-founder of SentiLink, a startup that helps banks detect and block synthetic identities. “We work with the paper forms and have those sent into our office — working with our partners, we process them on their behalf. It’s really challenging for our partners to use and really challenging for consumers to use.”
The Social Security Administration has long said the numbers it issues aren’t intended to serve as the country’s universal personal identifier and were instead created to administer government benefits. But last year, under a law signed by President Donald Trump, Congress required the agency to begin developing the new system for banks. There’s a catch: The agency has to have 50% of startup costs funded before it can begin developing the portal. In a notice posted with the Federal Register last month, Social Security said banks have until July 31 to join the program. Bigger banks may pay as much as $3 million to be part of the initial group.
The verified number “is one more piece of extremely valuable information for when a bank is evaluating an application or a potential new customer,” said Jason Kratovil, executive director at Consumer First Coalition, an industry group focused on privacy and fraud.
