Dealing with Identity Theft

By Stephen J. Dunn

If you receive a collection notice concerning an account that is unfamiliar to you, you should not ignore it.  Someone may have stolen your identity and used it to fraudulently obtain credit in your name.  This happened to me in 1998.

The scheme generally works as follows.   Someone, likely part of a ring, gets ahold of your name and Social Security number.  Accounts are then opened in your name and Social Security number, but with a bogus address.  The accounts are opened in a different region of the country from the one in which you live.  The accounts are opened at high-end retailers, such as jewelers or purveyors of electronics, and quickly maxed out.  In the ensuing months, the retailers send statements to the bogus address, without response.  The retailers double-check your address, and find your true address.  Then their statements start arriving at your home.

Upon receiving a collection notice for an account that is unfamiliar to you, you should immediately contact the retailer and inquire about it.  If indeed the charges are not your’s, you should demand that the retailer disassociate you from the account, that it stop attempting to collect the account from you, and that it make no negative reference concerning you.  You should also go to annualcreditreport.com and  request a free copy of your credit report from each of the three national credit reporting agencies—Experian, Trans Union, and Equifax.

Upon receiving your credit reports, carefully examine them.  Report any inaccurate information to the credit reporting agency using its dispute procedure.  Upon receiving a dispute, the credit reporting agency must investigate it and notify you of the result within 45 days.  An investigation consists of contacting the source of the disputed information—a merchant—and inquiring whether the information is true.

If the source of defamatory information about you (false information that reflects badly upon you) confirms that the information is true, your remedy lies against the source.  You should have an attorney write to the source of the information and explain that the information is false, that it is defamatory, and that it is causing you to suffer damages.  Your attorney should demand that the source immediately—

(1)          Contact each credit reporting agency and inform it of the false, defamatory nature of the information, and that the information must be forthwith deleted from your credit file.

(2)          Contact each person to whom the credit reporting agency has sent a copy of your credit report containing the false, defamatory information and inform said person of the falsity of the information.

Your attorney should threaten to sue any source of defamatory information about you who refuses to expunge the information from your credit files.  Such a lawsuit can sound in defamation and negligence, among other theories, and it can seek actual as well as punitive damages, and attorney fees and other costs of the action.  The suit can be brought in Federal or State court.

You should also request that each credit reporting agency place a fraud alert in your credit file.  This will tell the world that you have been the victim of identity theft, and that no one should extend credit in your name without first contacting you and confirming that the person using your name in indeed you.

You should not take the word of a source of a defamatory credit report concerning you that it has contacted the credit reporting agencies expunged the defamatory information from your credit files.  You should pull another set of your credit reports from the credit reporting agencies and verify it yourself.

If the source of defamatory credit information about you refuses your demand to contact the credit reporting agencies and expunge the defamatory information from your credit files, you should sue the source.  If there is more than one source, you may be able to sue all of them in a single action.  If the credit reporting agencies have “investigated” your dispute, then under the Federal Fair Credit Reporting Act you have no cause of action against them—their legislative lobby is apparently too strong to allow such a cause of action.

Lawsuits against a merchant for having reported defamatory credit information about a consumer are usually settled for a monetary sum.  The defendant merchant(s) should also be required to contact each person who has received the defamatory credit information concerning you and inform them of the falsity of the information.

If your case is not settled but goes to trial, and the jury finds for you on liability, then the jury may award you such actual damages as it finds you have proved, as well as attorney fees and other costs of the action.  If the jury finds the defendant’s(s’) to have been willful or malicious, it may also award punitive damages.

How did my case turn out?  When I began receiving statements at my house for accounts I had not opened, I requested copies of my credit reports from the credit reporting agencies.  The credit reports evinced that retail credit accounts opened by fraudulent use of my identity had been used to purchase $25,000 of furniture and electronics.  I wrote to the retailers informing them that the accounts were opened by fraudulent use of my identity, and demanding that they expunge the false, defamatory information about me from my credit files.  Most of them complied with my demand, but some of them did not.  I sued the retailers who had refused to retract their false, defamatory credit reports about me.  I sued them in one action in State court; alternatively, I could have sued them in Federal court.  Once the retailers had retained counsel (and paid some legal bills), they made a settlement overture.  I felt that $20,000 was a reasonable settlement amount.  As the defendants capitulated quickly, without a lot of fighting, I accepted $18,000 from them collectively to settle the case.

I also obtained a copy of the defendant merchants’ files for the fraudulent accounts.  The accounts were opened using my name and Social Security number, but a bogus address in the Dallas, Texas area (I live in Michigan). One of the applications had a photo of the applicant.  The individual was dark-complexioned, apparently Hispanic (I am fair-complexioned and Irish).  I had the impression at the time that the ring had gotten my name and Social Security number from a credit application I had submitted to a national retailer.

I also had fraud alerts placed in my credit files.  I have not had a problem with identity theft since.

Merchants are well-advised to put in place procedures to verify the identity of credit applicants.  Such procedures should include contacting the credit reporting agencies and verifying the address given by an applicant.  And when a consumer contacts a merchant asserting that he or she did not make charges the merchant has ascribed to him or her, the merchant must promptly investigate and, if it is unable to prove that the consumer did in fact make the charges, contact credit reporting agencies and delete the charges from the consumer’s credit files.

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