Identity Theft

In 2021, an estimated 15 million Americans were victims of identity fraud. Of these, 3.3 million had to pay at least some of the cost of the fraud. Several federal laws protect against identity theft and fraud. One law also requires organizations in certain critical infrastructure sectors to report substantial breaches to the Department of Homeland Security. In addition, each state has its own data breach law. Federal legal safeguards include providing consumer protections related to credit files compiled by the three major credit bureaus. For example, federal law provides consumers with the right to: 

• review their credit file from each major credit reporting agency once a year for free, 
• correct inaccuracies in their credit files, and 
• place a fraud alert or a security freeze on each credit file. 

The federal government does not require companies to notify consumers of data breaches involving consumers’ personal information. But all states and territories do require it for security breaches involving certain categories of information. 

The Fair and Accurate Credit Transactions (FACT) Act of 2003 allows consumers to review their credit files from each of the three bureaus, correct inaccuracies in the files, and place a fraud alert when identity theft is suspected. In addition, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 allows all Americans to place a security freeze on their credit reports for free. It also requires the Federal Trade Commission to post a website with links to credit reporting agencies to request a freeze. 

Both these federal laws preempt state laws. The FACT Act preempts state law in a number of areas, including the sharing of information among affiliated companies. The Economic Growth, Regulatory Relief, and Consumer Protection Act preempts state security freeze laws, including those that would limit who can gain access to an individual’s credit record while under a credit freeze. 

As hackers have gotten more sophisticated, it has become more important to have robust systems for detecting fraud. One promising development is the use of artificial intelligence. This technology allows computers to review patterns in an individual’s spending habits and then flag deviations from expected behavior.