Fake people with real credit cards

Much has been made in the news about bots in this late presidential election. You know, fake social media profiles that were set up to promote a business or political ideology and make it seem more popular. Major social media platforms have recently attempted to purge many of these. So this begs the question, if someone can create a fake social media profile could someone simply create a fake person and get a credit card in that person’s name?

Yes, they can. In May 2017 the government raided the home of a South Carolina man suspected of doing just that. He was suspected of obtaining 558 credit card accounts and using those cards to make at least $340,000 in purchases. He had a ledger of names, social security numbers, addresses and birth dates. This is the latest technique used by criminals and may already account for 20% of all credit card fraud in the United States costing banks $6 billion. It was not viewed as a major threat until recently mostly because it takes a long time to make this a profitable venture for a criminal and time is often the enemy of the criminal.

The criminals purchase stolen social security numbers or make an attempt to guess numbers that are not in use. It is paired with someone else’s address and other information. Most of the time the initial application is rejected since the social security number lacks a credit history but the inquiry generates an entry with the credit bureaus. The thief will try again and again and again until someone bites. When they do the thief might even pay the bills for the first few months or years thereby raising their credit limit. With better credit more cards are applied for and probably approved and other users are added to the accounts using other fake identities. Then when the time is right they go on a spending spree and essentially cash out with potentially tens of thousands of dollars worth of goods and services. One thief is believed to have walked away with $200 million doing this.

Now one would think that there is a fatal flaw in this since the card statements are being sent to an address so the credit card issuer (or police) would know where to come looking for the thief. Not so fast. Many thieves use a PO Box. The price of this scam gets even higher owing to the amount of time that the collections department will spend trying to get a hold of the thief being completely ignorant of the fact that they were scammed.

It also seems that getting a social security number that can be used is not necessarily hard. Since every American has one and that ranges from the oldest person alive to a newborn baby there are tens of millions of them that are active but with no credit history. There aren’t too many five year olds with credit cards after all. Up until 2011 the person’s birth year was built into the number but at that point random numbers began to be used and banks and credit card issuers are able to look up a social security number to verify it. They pay a one time fee to enroll and a small fee for each lookup but not every issuer is enrolled and this technique was used to make sure parents with bad credit were not using their child’s number. It may be useful for something else now.

When this scam happens the banks have to eat the losses. For the average person who’s number was stolen they may have some difficulty applying for credit but they are not on the hook for any payments when their information is stolen. Most banks simply write-off the losses but some are being more proactive and are logging the phone number or IP address of an applicant and use fraud detection software to look for anything suspicious. That was how the man in South Carolina was caught. It also didn’t help that he all but bragged about it on Facebook as well.