The question you have probably been asking yourself throughout this entire book is…”What is my liability in this situation”? Well unfortunately that answer is fairly complex and is dependant on the type of identity theft that has occurred, as well as the timeliness in which you have responded and taken action to correct the problem. In some cases, victims are able to identify and act on the problem quickly resulting in very minimal financial loss. Other particular situations have not worked out quite so well and have resulted in substantial financial debt and a very poor credit rating, which can take years and years to repair.
Let me tell you about a few specific cases of identity theft in where the victim truly ended up as the injured party in more ways than one.
A gentleman in San Diego, California (we’ll call him John Jones), encountered an identity thief who opened a PayPal account under John’s name and filtered $7,600 from John’s Bank of America account into the forged PayPal account. The incident occurred during July and August of 2002 but because John had been traveling he did not notice the money was actually missing until January of 2003. He contacted his bank and was informed that because he had failed to notify the bank within 60 days of the occurrence there was nothing they could do for him. By that time all of the money, with the exception of $2,100 still remaining in the PayPal account had been spent. PayPal returned the remaining sum to John but he was still out $5,000. John sued both PayPal and Bank of America in small claims court, pleading that PayPal should have notified him immediately upon discovering the fraud. Bank of America counter argued that it is the customer’s responsibility to regularly check bank statements and ensure their accuracy. In the end John walked away with a settlement from each of the firms, however was still out approximately $500 as a result. His yearlong battle to turn things right was extensive, time consuming and frustrating.
An elderly woman in Seattle, Washington (we’ll call her Jane Doe), was the victim of a telemarketing scam in December of last year. Jane provided her checking account information to the caller and later found that her account had been cleaned of $800, leaving her overdrawn by $300. When her December Social Security check was deposited the Bank of America withdrew $300 of it to cover the overdraft. Jane was left with barely enough money for food and rent and was forced to “skip” Christmas that year. By February the Bank of America had returned some of the money to her and was continuing to work with her to repair the situation.
A retired California couple (let’s call them the Smiths), were also the victims of identity theft in April of 2001. The Smiths, when attempting to refinance their home mortgage discovered that there was $75,000 in unsettled debts on an account that they had held with this particular mortgage company over a year ago. This was very strange, as they knew they had settled their debt and closed that account a year earlier. It seems that an identity thief had re-opened the account and switched the original mailing address to one in Houston Texas, which is why the Smiths had never received any bills or statements for that account. After three months of phone calls and paperwork, the Smiths had finally received confirmation from the mortgage company that they were not being held responsible for the debt. However, in December of 2003 the Smiths received a notice from the mortgage company’s Financial Services Network that they were being sued for $75,000 plus attorney’s fees for their negligence in not discovering and reporting the identity theft in a timely manner, and thus causing injury to the mortgage company. The Smiths hired a lawyer who specialized in identity theft cases and who was eventually successful in convincing the company to drop the lawsuit. The remaining bad news in this case is that the lawsuit was dropped “without prejudice”, meaning that the firm could resurrect the case in the future should they choose to do so. The Smiths endured this nightmare for almost a three-year period and still the possibility of future incidents hang over their head.
This last case that I want to share with you is more than horrific but thankfully took place prior to the United States Congress making the act of Identity Theft a federal crime. Although this is certainly not something that this victim is thankful for in anyway, but we can take comfort in knowing that an incident like this would result in a very different ending in today’s times. In this particular situation the criminal who was already a convicted felon accumulated more than $100,000 in credit card debt, applied for and obtained a federal home loan, bought homes, motorcycles and handguns in the victims name. The criminal went so far as to even calling the victim and taunting him with the fact that because identity theft was not a federal crime he could continue his charade for as long as he wanted to and nothing would happen. The criminal eventually filed for bankruptcy in the victim’s name while in the meantime the victim spent over $15,000 and four years in efforts to clear his name and re-establish his credit. In the end the criminal was not reprimanded in any way and never paid back one cent to the victim. His only punishment was serving a brief sentence due to the fact that he made a false statement when he purchased his firearm.
By now you are likely beginning to see very clearly why it is that I keep preaching to you over and over how critically important the issue of awareness and knowledge is when it comes to identity theft. And, after looking at the three case studies I just shared, you can see now more than ever the enormity of the consequences when you do not monitor your credit and financial statements. If you have been paying close attention throughout this book then hopefully many thoughts have been running through your mind of how the situations could have been prevented when we discussed the stories of the individuals who were victims of identity theft. You may have been thinking back to all of the prevention tips that you have been provided with, and which of those would have been helpful in each of these cases had those victims had the knowledge that you now have.
Let’s now spend some time looking at what your liability is as the victim of identity theft depending on the specific situation.
If you have been the victim of credit card identity theft you may take some comfort in the fact that credit card liability is limited to $50. If you actually report the credit card lost prior to it being used then you cannot be held accountable for any unauthorized charges that occur after that time. However, if the identity thief uses your card before you have reported it missing or stolen then the maximum amount you will be charged is $50. The same rule applies even if the credit card is used at an ATM to withdraw cash.
Beware of telemarketers who call to sell you “loss protection” insurance for your credit cards. These callers may trick you into believing that should your card be lost or stolen that you will be solely responsible for any charges made to it if you do not have the “loss protection”.
Unfortunately ATM and debit cards do not offer nearly the amount of protection that credit cards do in cases of loss or theft. It is in cases like these where time is truly of the essence and in the end it is very beneficial for you to keep proper track of your statements and card usage. When and if you do notice a discrepancy it is in your best interest to report it immediately to the issuing office. If you are fortunate in that you report the missing card prior to it being used then your financial institution cannot hold you liable for any unauthorized use. If you report the incident within two business days of the loss your liability is capped at $50. In cases where the report is made anywhere after two business days and before sixty days you will be held liable for up to $500 of what the identity thief stole from you. If a victim were to wait more than sixty days, they could potentially lose every single cent that was stolen prior to reporting the card missing. However, we know for a fact that this last scenario couldn’t possibly happen to you. You’re much too smart and well informed to let this happen especially knowing everything that you know now…right?
In most cases you would not be held liable in the situation of forged checks as the majority of States hold the bank liable. However, this doesn’t mean that you have no responsibility in the situation. If you are negligent in notifying the bank within a reasonable amount of time that a check had been lost or stolen, or if you fail to monitor your account for unauthorized transactions then the liability may well rest with you.
Don’t fool yourself into believing that when or if identity theft hits you that the responsibility lies with someone else. It certainly may not be your fault when it happens but you will be held accountable if you allow it to continue and just assume that someone else will look after the mess. It’s your responsibility to protect your financial fate, security and credit rating. If you don’t do it, no one else will and you will surely be taken advantage of. Take precautions, monitor your accounts and act quickly if identity theft does occur. A prompt and efficient response to the matter is the best way for you to minimize your loss.
How often do you sign up for new services, credit cards, loans or accounts? Now tell me how many times you actually read through the entire liability agreement that accompanies that card or service. That’s what I thought, like most of us you may not take the time to read through those seemingly endless agreements that are filled with so much technical and legal mumbo jumbo that it just makes your head hurt.
And what about those online agreements? Do you generally scroll down to the bottom of them without reading a word, click the “I agree” button and then hit “continue”? Many of us do and unfortunately this is where we run into trouble later on once we have become an identity thief victim. I understand that at the time it may seem tedious and unnecessary to read through those agreements but perhaps in the future you might give it a second thought. Additionally, how familiar are you with your liability responsibilities in regards to your current bank accounts, credit cards, debit cards, telephone and cellular service providers, utility providers and online PayPal, eBay and other similar accounts? Not too sure, are you? This might be the perfect opportunity to go back and look at those agreements once again. You may decide that having some of those particular accounts are not worth the price you may have to pay should you one day find yourself in unfortunate circumstances such as those that our three case studies did. Hopefully though as a result of your research you are able to determine that the financial institutions and various companies that you deal with place you as their customer, on the top of their priority list ensuring that you are well protected against identity theft incidences.
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