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is not easy to do, but it must be done. And I think we can do that. It is going to be a challenge for this Committee.

Mr. Chairman, thank you immensely for holding these hearings.
Chairman SHELBY. Thank you.
Senator Allard.

STATEMENT OF SENATOR WAYNE ALLARD Senator ALLARD. Mr. Chairman, I, like many of my colleagues on this Committee, want to thank you for your diligence on this particular issue, both for holding today's hearing as well as your support for improvement of the Fair Credit Reporting Act. While national statistics tend to focus on crimes such as homicides and burglaries and robberies, the crime of stealing one's identity is a serious and widespread crime that too often goes overlooked. Identity theft takes advantage of hard-working citizens in a situation they simply cannot prevent. Many of these hard-working citizens, Mr. Chairman, will not even realize that they have been a victim of identity theft until they go to apply for a car loan or a loan for their home. Then suddenly they discover that for some reason or another, they do not qualify.

This is almost a subject for another hearing, but part of the problem is that on credit scores, for example, a lot of consumers do not even realize that there is a system out there that has an impact on their credit ratings. This system is based on how frequently a credit card is used; how many credit cards one has; how many inquiries there are on your name. All of these actions have an impact on one's credit. So why should we worry about it? Well, it has an impact on the interest rate that you might pay on a loan, so there is a hidden cost associated with this system.

If you talk to victims, there are also issues as far as legal jurisdiction, and which law enforcement agency is responsible for enforcing certain laws pertaining to identity theft. This may need to be covered in another committee, but it is something this Committee should think about.

The other important question that comes up: Are our penalties tough enough? When you look at what happens to a victim of something like this, I think the question that we need to ask is: Are the penalties tough enough for the perpetrators?

And so, Mr. President—Mr. Chairman, I hope that you continue to hold hearings on this important issue.

Chairman SHELBY. I support President Bush.
Senator ALLARD. Yes, sorry about that, Mr. Chairman.
[Laughter.]

Senator ALLARD. I think we need to look at a number of different cases to fully understand this problem. The bottom line is that of the more than one million inquiries that the Federal Trade Commission received in 2001, 86,680 of them were identity fraud complaints. This presents a grave situation for unsuspecting Americans and a challenge for all financial institutions and businesses in the United States.

While there is an apparent need to protect sensitive personal information from getting into the wrong hands, there is also a need for a certain degree of transparency in order for the U.S. financial and business systems to function.

I would like to thank the witnesses for agreeing to testify today on this important issue, and I look forward to all of your testimony.

Chairman SHELBY. Thank you, Senator Allard.
Senator Schumer.

STATEMENT OF SENATOR CHARLES E. SCHUMER Senator SCHUMER. Thank you, Mr. Chairman, and thank you for holding this hearing.

Again, this is a really important issue. I have been concerned and involved in it for over a year, and there is nothing worse than when your identity is stolen through no fault of your own and then it takes you years and years to restore your credit rating. It is an impossible situation. And it used to be a small situation. You know, this was not done en masse before the days of computers. Somebody might reach into a garbage can and find somebody's credit card number and do it. But we have had instances in New York where whole databases were stolen by employees selling for 30 bucks an identity or something like that and making huge amounts of money. Our U.S. Attorney, Mr. Comey, had a major indictment of this.

So, I certainly agree with what some of my colleagues have said, I think Mike Crapo, that our credit system and this new digital age have brought huge benefits. It also brings some liabilities, and it is our job to focus on those liabilities, and I think FCRA is an appropriate place to do it.

As I mentioned, Mr. Chairman, this issue is of specific concern to New York. The city where I live, my hometown, has the unfortunate distinction of being the identity theft capital of the United States. We suffer more identity theft than any other place. My State, New York, has the second highest amount. And this is mushrooming

Last year, the FTC nationally received twice as many complaints about identity theft as in 2001. Many people predict that by 2006 there are going to be half a million to 700,000 Americans victimized. And this is not just a casual thing. It changes your life. You cannot get credit. Some people hound you. It is a huge mess.

So, I think we have to move, and we have to move quickly. When you destroy a person's credit rating, you not only jeopardize an honest person's ability to get a credit card, receive approval for a loan, obviously, but also to get a job, or to buy a house. Those are ones that go to the core of who each of us are and what matters to us in our lives.

We should do a number of things, and like some others here, I have a proposal that I have been floating and circulating. Before I do that, I do want to mention a couple of other people who have had-Senator Cantwell has a bill that I have cosponsored that makes it easier to restore your rating once it has been stolen. And in the Judiciary Committee, we are working together with Senator Feinstein in terms of toughening up the penalties. But there are five or six things I would recommend to this Committee to look at.

One is to make sure that the credit databases are much more secure. You do that in a few ways. You make sure that the people who have access to those credit databases are bona fide people; make sure they do not have a criminal record; make sure they have

had no other bad histories in the past. All too many companies do not do that now. Two, let people go into those even the employees go into those credit databases on a need-to-know basis. Most of the companies we found, including the big case in New York which affected people throughout the country, any employee could just punch in and get the whole database, whether they needed it for their job or not. And so the credit companies should do this on a need-to-know basis. Let the employees go in there on a need-toknow basis. So those two things are important.

At the core of the proposal I have made is credit account notification. Credit reporting agencies should notify a consumer when a new credit account is opened in his or her name because we know what happens. They take your name, they take your birth date, they take your Social Security number, and they just put in a different address. If the minute, you know, Chuck Schumer, 05—I should not use my Social Security number—Chuck Schumer, Social Security number, 123–45–6789, birth date, January 1, 2001—make myself a little younger. But the minute that happens, and someone opens up a credit card at a new address, they should immediately send a notification to my old address where I really live, and I would say, hey, I did not move to Evanston, Illinois. And you could stop a whole lot of identity theft with that simple notification provision. I think we should do that.

And two other things, Mr. Chairman. I am sorry. I appreciate the indulgence. We should truncate credit card receipts. Some companies do this. In other words, the receipt, the part you discard, does not show the whole number on there so people cannot go into the garbage can, pick it up, and duplicate your credit card number. That is easy to do, and some companies have it and some do not.

Finally, as I mentioned earlier-Senator Cantwell has worked on this—make it easier if once it is proven bona fide that you are a victim of identity theft, make it easier to get your financial life back because that is a real hard thing to do.

So, I would like to work with you, Mr. Chairman, and others on this Committee and try to get these changes and maybe put them in the Fair Credit Reporting Act. I really thank you for having a hearing on a very much needed topic.

Chairman SHELBY. Thank you, Senator Schumer.

It is obvious, I think, here today that there is great interest on the Republican and Democratic side to do something about this issue, do something for the consumer, and I believe we can do it working together.

Senator Bunning.

STATEMENT OF SENATOR JIM BUNNING Senator BUNNING. Thank you, Mr. Chairman, and I want to thank all our witnesses who are about to testify. It is a very important hearing and a very important issue.

The technology boom has made most Americans live easier. With the Internet, we can get information that a few years ago it would have taken hours to research in just a matter of seconds. Workers are more efficient. It provides multiple entertainment options, and people can shop from home.

Unfortunately, the technology boom has also provided many opportunities for another class of Americans: criminals. We have all heard the horror stories of identity theft, all of us. We will hear much more about it today. It is a problem, and we have to deal with it. Many have had their lives destroyed, and it has taken years for them to recover. We must make it harder for the criminal to steal. We must make the punishment fit the crime. And we must help victims recover quicker.

I think we can accomplish all of these goals. Fighting identity theft is not a partisan issue, and in the tradition of this Committee, I am sure we will tackle it in a bipartisan manner.

I am also pleased to note that the Administration has been working extensively on this problem. I look forward to working with them and all of the Members of this Committee so that we can get a good bill that we can all support and that will help solve this growing problem.

I am very impressed with the diversity of opinion we have before us today. Once again, we have the FTC and others who are about to testify. We have the Secret Service to tell us how to recognize how identity theft works and how they investigate it. We have witnesses from the finance and retail industries to let us know what they are trying to do to prevent identity fraud. And we have consumer groups here to let us know how the average consumer is affected and what victims can do.

This is a very important subject, and I applaud the Chairman for holding this hearing. Once again, thank you, Mr. Chairman, and all of our witnesses for testifying.

Chairman SHELBY. Thank you, Senator Bunning.
Senator Sarbanes.

STATEMENT OF SENATOR PAUL S. SARBANES Senator SARBANES. Mr. Chairman, I want to commend you for holding this hearing. I think identity theft is a very serious national problem. It is an issue of great concern, obviously, on both sides of the aisle. Here in the Senate, a number of Senators actually have already in one way or another indicated their interest in seeking legislative improvements in this area. Senator Bennett actually held a hearing 5 or 6 years ago on the subject of financial instrument fraud. I know that Senators Bunning, Crapo, Kyl, Cantwell, Daschle, Corzine, Leahy, Feinstein and many, many others have offered and supported legislation. I could go on and on. So there is obviously very keen interest in it.

It is obvious why. Identity theft has become an increasingly growing problem in recent years. Business Week recently stated

in an article entitled "To Catch an Identity Thief," "Identity theft is one of the fastest-growing crimes in the United States” The Federal Trade Commission reported that in 2002, they received over 380,000 consumer fraud complaints, of which about 162,000, or 43 percent, were about identity theft. Identity theft complaints far exceeded complaints about other types of consumer fraud at the FTC. The number of complaints about identity theft-and many of these are not reported incidentally, so this is only to some extent the tip of the iceberg—was 88 percent more in 2002 than in 2001.

Obviously, Americans have strong concerns about protecting their confidential information. This is an area, Mr. Chairman, in which you have shown a great deal of concern and leadership. Honest citizens who are victims of identity theft incur a high cost in money, time, anxiety, and efforts to correct and restore their spoiled credit histories and their good credit name.

I look forward to hearing the testimony of the witnesses today about ongoing enforcement efforts and what additional measures can be taken to bring identity theft under control.

I am very frank to tell you that I do think that, in the context of working on the Fair Credit Reporting Act, this is an opportunity to encompass within that initiative serious and effective measures to come to grips with this problem of identity theft. It is reaching epidemic proportions out there. It is devastating honest, hardworking, law-abiding people who become the victims of these, in many instances, very ingenious schemes, and in some instances brutally simple schemes. And, I think, as we address the FCRA issue, this is the right opportunity to address this identity theft question as well.

Chairman SHELBY. Thank you, Senator Sarbanes.
Senator Bennett.

STATEMENT OF SENATOR ROBERT F. BENNETT Senator BENNETT. Thank you, Mr. Chairman, and as Senator Sarbanes has noted so graciously, we did hold a hearing on this subject back in the days when Senator D'Amato was the Chairman of the Committee and I had a Subcommittee focusing on financial services and high technology. I discovered that, at least at that time, it was not high technology that was the principal source of identity theft. People would steal mail, and upon stealing mail they would hope they would get lucky and get some piece of information that could then be useful to them. And, of course, the real bonanza would be if they could find a credit card in the mail.

So, I will be very interested to hear what has happened in the time since then, and I agree with Senator Sarbanes that it is very appropriate that these hearings be held in the context of reviewing the Fair Credit Reporting Act. The Fair Credit Reporting Act has been attacked by some as being a challenge to the privacy of individuals, and ironically, the system that has been created under the Fair Credit Reporting Act in the past also provides the greatest bulwark against identity theft, because if you have sound information in a number of different places, you have the building blocks with which you can rebuild your credit background and history. And without that information, without the flow that comes between the various credit reporting agencies, you have a much more difficult time reclaiming your true identity.

There was once a movie called “The Net” where the heroine of the movie had her entire identity stolen, and there was no place she could go to prove who she was because, given the magic of Hollywood, they were even able to ascribe her fingerprints to somebody else. Being Hollywood, of course, they figured it out before the last reel, and she emerged triumphant. But if there were someplace where she could go to say this is the sound information about me that has been accumulated that I can tap into, it would have killed

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