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Updated 11/8/2006 9:30 AM ET
A growing number of banks and retailers are moving beyond Social
Security numbers to verify your identity. They're relying on such
personal details as your car color, your father-in-law's name and
the city you lived in five years ago.
If it's really you, what color is your car?
No, you never gave them this information; rather, they pulled
it from public and private databases. These private details are
increasingly being used to approve you for credit at a store, give
you access to your account online or to verify that you — rather
than an impostor — are making a purchase. It's the latest effort
by financial institutions to fight a growing threat of identity
theft from online "phishing" and other scams. Chase,
HSBC, Vanguard, American Express and Barclaycard US use this customer-verification
technique. Mellon Financial is testing it. In the past two years,
the technology has been adopted by six of the top 10 U.S. banks
and thrifts, says Verid, a provider of the technology. "Names,
addresses and Social Security numbers are no longer the unique identifiers
they used to be," says Kevin Watson, Verid's CEO. "You
can phish someone's password and Social Security number, but you
can't phish someone's memories."
Privacy advocates worry, though, that the technology could
violate consumer privacy. "This is pretty scary,"
says Paul Stephens of the Privacy Rights Clearinghouse. "They're
taking information from public records, but the individual can't
control how this is used." If you use your credit card more
times in one day than usual, your bank may call and ask about the
make or model of your last car before approving a transaction. You
might also be quizzed on whether John is the name of your father,
brother or brother-in-law. Frank Lapiano, a sales rep in New York,
got a taste of this technology when he and his fiancée bought a
wedding ring at a department store in September. To verify his identity,
his credit card issuer, Chase, asked about the last four digits
of his Social Security number, his mother's maiden name and charges
he'd made in the past 48 hours. Then the bank dug deeper: It asked
multiple-choice questions about which age range reflected his father's
age and also about the city his mother lived in. Lapiano, 32, says
he found it "odd" that the bank quizzed him about details
he'd never given to it. Also, the five-minute verification process
took too long and was "definitely annoying," he complains.
Mike Cunningham of Chase says that while the bank doesn't want
to "inconvenience customers, we want to make sure we're protecting
them against unauthorized purchases." Thomas Lautenschlager
of San Francisco has fielded questions about his relatives when
applying for credit cards. The queries to confirm his ID made him
feel more secure, but he says if banks ever start asking "about
who you're with on a certain day, that would kind of freak you out."
Identities are often stolen to commit financial fraud. Estimated
damage in 2006: 8.9 million
Number of U.S. identity-fraud victims: 4% Victims as a percentage
of U.S. population
$56.6 billion Total fraud losses per year
$6,383 Average fraud amount per victim
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