1. Texas House of Representatives Committee on Criminal Jurisprudence Testimony of Randall S. James Banking Commissioner Texas Department of Banking August 23, 2002 Interim Charge #4 Identity Theft

2. Prepared by: Texas Department of Banking - August 2002 House Committee on Criminal JurisprudencePage 2 IDENTITY (ID) THEFT FACTS  ID theft is a U.S. and Texas problem – Number of victims for 2001 1 U.S. – 86,168 Texas – 6,496  Texas ranks 3 rd in the total number and 11 th in the per capita number (31.2 per 100,000) of victims in the U.S.  The Texas Department of Banking received 14 complaints about ID theft since September 2001.  ID theft complaints are normally filed directly with: Local law enforcement; Attorney General’s Office; Federal Trade Commission; and/or The FBI. 1 Complaint statistics as reported by the Federal Trade Commission for calendar year 2001

3. Prepared by: Texas Department of Banking - August 2002 House Committee on Criminal JurisprudencePage 3 How Victims’ Information is Misused Total Complaints Filed in 2001 U.S. 1 86,168 Texas 1 6,496 Credit Card Fraud42%41% Unauthorized Phone or Utility Service20%15% Bank Fraud13%16% Employment9%16% Fraudulent Loans7% Government Documents or Benefits6%7% Other19%24% As Reported by FTC Identity Theft Data Clearing House (Total percentages exceed 100% because of multiple misuses) 1 Complaint statistics as reported by the Federal Trade Commission for calendar year 2001

4. Prepared by: Texas Department of Banking - August 2002 House Committee on Criminal JurisprudencePage 4 How Victims’ Information is Misused As Reported by the Texas Department of Banking from Filed Consumer Complaints Reporting Period – September 2001 through July 2002 (Number and Percentage reflect multiple misuses) NumberPercentage Bank Fraud964% Credit Card Fraud536% Fraudulent Loans17% Other17%

5. Prepared by: Texas Department of Banking - August 2002 House Committee on Criminal JurisprudencePage 5 Texas Cases As Received by the Texas Department of Banking  Metropolitan Consumer – Lost $15,000 Alleged crime – Theft of social security and account numbers Institutions involved – Brokerage company and Internet bank Method of alleged crime – Theft of U.S. mail and unauthorized transactions with brokerage company and Internet bank Discovery period – Three months  Metropolitan Consumer – Original loss $15,000. Alleged crime – Postal theft, check forgery, forged drivers license Institutions involved – Commercial bank and merchants Method alleged crime – Theft of check order in U.S. mail Discovery period – Two months  Northeast Texas Rural Consumer – Lost $3,000 Alleged crime – Check forgery Institutions involved – Internet check vendor, commercial bank, and merchants Method of alleged crime – Unauthorized purchase of checks over the Internet Discovery period – Three to four months

6. Prepared by: Texas Department of Banking - August 2002 House Committee on Criminal JurisprudencePage 6  Any person is a potential ID theft victim.  Enforcement actions against ID theft crimes need to be strengthened, easier to prosecute, and receive priority.  Victims of ID theft need timely and more efficient methods to cleanse their financial records.  Education and awareness programs may be an effective tool to deter ID theft crimes. ID Theft Observations

7. Prepared by: Texas Department of Banking - August 2002 House Committee on Criminal JurisprudencePage 7 Recommendations To Combat ID Theft Create state website for informing consumers of preventative measures, agencies to contact in the event of ID theft or fraud, and links to national websites and agencies. Develop and/or enhance state sponsored consumer education awareness programs about ID theft and fraud. Investigate expedient ways for victims to clear falsely tarnished credit, employment, or criminal justice reports and records. Note:The Department of the Treasury and seven federal financial regulators are in the process of issuing rules to implement section 326 of the USA PATRIOT ACT, which will require reasonable procedures for verifying the identity of any person seeking to open an account.