Monday, May 28, 2007

Fraud Alert Gives False Sense of Security

Recently in a local community a laptop belonging to a county agency was stolen from a community center that had the names and personal information of 7,000 people who had applied for a state health insurance program dating back from 2003 to the present. It does not sound astonishing, but the community has about 45,000 people in it.

The county did do the right thing by disclosing it immediately; they fell extremely short when offering advice.

They told everyone who may be impacted by this to place a fraud alert on their credit report. They also mentioned providing credit monitoring.

Did they really understand what a fraud alert meant? Do they recognize that credit monitoring is an after the fact service?

A fraud alert is a notice you place on your credit report that technically REQUESTS additional verification by the lender with you personally when new credit is applied for.

Go into a store and request a store credit card, the lender who transacts credit for the store will check your credit report for viable credit. If there is a fraud alert on your account they have the OPTION of contacting you to verify that you have actually applied for credit at this store. Note the word OPTION, not mandatory nor legally required. If the lender cannot reach you at the phone numbers they have on file, they can go ahead and issue credit at their discretion.

So if everything works correctly for a thief they could obtain credit in your name despite a fraud alert. Remember it is at the lenders option and they want to issue credit, that is what they do. It only adds an optional extra step, but doe not guarantee a thief will not be able to open up an account in your name.

The name used for this notification is misleading. Local county officials thought it sounded like worthy all encompassing advice to offer to 7,000 victims.