http://economist.com/printedition/displayStory.cfm?Story_ID=3D3730381
Identity theft
From The Economist print edition
Collecting, and stealing, personal information is big business
PLATO asked What is man? and St Augustine asked Who am I? A new breed
of criminals has a novel answer: I am you! Although impostors have
existed for ages, the growing frequency and cost of identity theft is
worrisome. Around 10m Americans are victims annually, and it is the
leading consumer-fraud complaint over the past five years. The cost to
businesses was almost $50 billion, and to consumers $5 billion, in
2002, the most recent year that America's Federal Trade Commission
collected figures.
After two recent, big privacy disasters, people and politicians are
calling for action. In February, ChoicePoint, a large data-collection
agency, began sending out letters warning 145,000 Americans that it
had wrongly provided fraudsters with their personal details, including
Social Security numbers.
Around 750 people have already spotted fraudulent activity. And on
February 25th, Bank of America revealed that it lost data tapes that
contain personal information on over 1m government employees,
including some Senators. Although accident and not illegality is
suspected, all must take precautions against identity theft.
Faced with such incidents, state and national lawmakers are calling
for new regulations, including over companies that collect and sell
personal information. As an industry, the firms such as ChoicePoint,
Acxiom, LexisNexis and Westlaw are largely unregulated. They have also
grown enormous. For example, ChoicePoint was founded in 1997 and has
acquired nearly 60 firms to amass databases with 19 billion records on
people. It is used by insurance firms, landlords and even police
agencies.
California is the only state with a law requiring companies to notify
individuals when their personal information has been compromised which
made ChoicePoint reveal the fraud (albeit five months after it was
noticed, and after its top two bosses exercised stock
options). Legislation to make the requirement a federal law is under
consideration. Moreover, lawmakers say they will propose that rules
governing credit bureaus and medical companies are extended to
data-collection firms. And alongside legislation, there is always
litigation. Already, ChoicePoint has been sued for failing to
safeguard individuals' data.
Yet the legal remedies would still be far looser than in Europe, where
identity theft is also a menace, though less frequent and costly. The
European Data Protection Directive, implemented in 1998, gives people
the right to access their information, change inaccuracies, and deny
permission for it to be shared. Moreover, it places the cost of
mistakes on the companies that collect the data, not on
individuals. When the law was put in force, American policymakers
groaned that it was bad for business. But now they seem to be
reconsidering it.
Copyright 2005 The Economist Newspaper and The Economist Group.
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