Mr. Chairman, I commend you for holding this hearing, and for your thoughtful approach to addressing the myriad of issues impacting the reauthorization of the Fair Credit Reporting Act by holding this series of hearings.
Addressing the issue of Identity Theft will play a central role in efforts to reauthorize the FCRA. I think this problem has been acknowledged by just about everyone, and institution, with a stake in making sure that FCRA gets done. In fact, it's the single largest source of consumer-related problem the FTC receives complaints about.
The numbers bear this out. According to the FTC, reported instances of identity theft rose 88% in 2002, to 380,000 from 220,000 in 2001. And estimates suggests that the real number of identity theft victims last year is closer to 1 million victims, as many don't bother to report their situation to the FTC. And the cost of identity theft is staggering and growing. The out-of-pocket costs for victims of ID theft skyrocketed from $160 million in 2001 to $343 million last year.
Simply put, our consumers are losing the battle against identity thieves. And when they lose, our economy loses as well.
While Congress has taken some important steps to address the issue of Identity Theft, most notably by making it federal crime in 1998 (with the passage of the "Identity Theft and Assumption Deterrence Act), and some in the financial services industry have implemented voluntary initiatives - like truncating credit card numbers - to reduce ID theft, there is much more that can be done.
Next week, I plan on introducing legislation to address the problem of identity theft. The bill, "The Identity Theft Notification and Credit Restoration Act," is based on three key principles - disclosure, prevention and credit restoration.
First, the bill would require financial institutions to promptly disclose to affected customers, credit reporting agencies, and law enforcement when the information systems, either computerized or paper records, have been breached in a manner that compromises the security, confidentiality, or integrity of the "personal financial information" of that institution's customers.
Second, the bill requires credit reporting agencies, upon notification of the breach, to place "fraud alerts" in the credit files of affected individuals. This red flag will alert issuers of credit to undertake enhanced preauthorization procedures prior to issuing credit in the name of an individual who has "fraud alert" on their credit file, an important step that should prevent the fraudulent issuing of credit in an identity theft victim's name.
Finally, the bill provides victims of identity theft with access to four credit reports the year following the theft of their identity, to ensure that inaccurate and credit damaging information resulting from the identity theft does not end up on their credit file.
The bill also improves the ability of all consumers to monitor the content, and accuracy, of the information contained in their individual credit file by providing them with access to one free credit report per year.
Mr. Chairman, many, including some of our witnesses have articulated that one of the best ways we can fight identity theft is by empowering consumers with more information, and greater awareness, of the risks of this growing problem. This bill does just that.
I look forward to working with you and other members of the Committee on it as we move this process forward, thank you.