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ID Theft: Know Your Liability Limits
A brief overview of your potential liability when victimized by credit card or banking fraud.
If You've Already Been Victimized
If your wallet disappears, there are limits to how much you will have to pay for the charges made by a
thief (see the article Know Your (Liability) Limits). In some cases you may owe nothing. But you can help
limit your liability and reduce potential losses for merchants and banks (which often get passed on to
consumers in the form of higher costs for goods and services) by doing the following.
First, immediately call your credit and charge card companies on their toll-free numbers and explain the
situation. You may not have to pay for fraudulent charges if you notify the card issuer quickly (usually
within two business days of discovering the loss or theft).
Instruct your card companies to close your accounts.
Why close them instead of just asking for fraudulent
charges to be removed? For one thing, it'll be difficult
for the card issuer to identify and prevent all fraudulent
purchases. Also, it's good to have your credit reports
show that an account was "closed at customer's
request" instead of "lost or stolen." The latter could
indicate that you somehow were at fault. And follow up
your phone conversations with letters to the card
companies - to ensure an adequate "paper trail." It
may help to keep a detailed log of phone calls and
letters to avoid confusion and to prove that you made
the required notifications.
After you've closed your credit card accounts, open new ones with new account numbers and PINs.
Replace your old ATM card with a new one, and change your existing PIN to one that cannot be easily
guessed by a thief. Your birth date and portions of your Social Security number, telephone number or
street address usually are poor choices for PINs.
Canceling your credit card may not be enough to stop crooks from applying for new accounts. That's why
you also should contact the three big credit bureaus and have them "flag" your file as one belonging to a
possible fraud victim. This warning will caution credit grantors to check with you before approving new loans or cards in your name. Experts say you should take the time
to call all three credit bureaus, and perhaps even follow up in writing.
Immediately notify local police where the wallet was lost or stolen. Hugh Eagleton of the FDIC's Division
of Compliance and Consumer Affairs recommends that you fill out a police report and ask about signing a
written affidavit verifying that unauthorized transactions in your name are fraudulent. "These documents
will help you when dealing with your bank or credit card company or removing clouds from your credit
record," he says. "They give you more credibility when you say that you had no part in any fraud."
Also worth calling: the Social Security Administration (for replacement of Social Security and Medicaid
cards), the Department of Motor Vehicles (to get a new driver's license), and your telephone and utility
companies (to prevent a con artist from using a utility bill as proof of residence when applying for new
credit cards).
Final Thoughts
There's no doubt about it: Our recommendations are time-consuming. But victims of lost wallets and
identity theft can tell you that the extra efforts we've described would be far preferable to the many hours
you would spend trying to erase a criminal's fingerprints from your credit record.
Remember: Your name and good credit history are among your most valuable assets. Protect them.
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Copyright © Federal Trade Commission. Reprinted with permission.
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