Identity Theft News and Links

Identity Theft Insurance – Miserly Upon Misery

This report examines the nascent identity theft insurance market and related consumer service of “credit monitoring”. The report concludes that the present product offerings of both identity theft insurance and credit monitoring are flawed in that a major component of each is already provided free to consumers who are aware of it. Identity theft insurance coverage of credit or debit card losses is superfluous in most cases given the existence of zero liability policies of major credit card issuers and because debit card losses in most cases are reimbursed under a voluntary bank debit card code. Credit monitoring has as its core feature the delivery of a credit report from a major credit reporting agency, however, consumers in all provinces have a right to access these reports upon request at least once a year at no cost. The report calls for provincial insurance regulators to ensure that companies offering identity theft insurance are required to disclose that there are these free services that overlap with the intended coverage or service. Identity theft coverage as it now stands is also of questionable value, given that its major potential claims items, that is, payment for time off work to resolve identity theft issues, as well as legal assistance, are capped at low recovery levels. Uncertainty over the extent of “legal assistance” under these agreements abounds, and it is noted that most identity theft victims do not actually need full legal defence services to recover from identity theft. Both credit monitoring and identity theft insurance may have a dampening effect upon efforts by consumers to directly attack the problem of identity theft. Both products shift costs of identity theft to consumers from business. Credit monitoring also has been used as an inadequate form of recompense to consumers after a corporate data breach. Instead, governments should consider the effectiveness of data breach disclosure laws and consumer credit freezes. The report notes that corporations may be the real parties in need of identity theft insurance, in the form of data breach insurance, and that such insurance might encourage corporations to institute best practices for information handling. Concerns also emerge with credit monitoring and identity theft being another service provider that collects and relies upon sensitive consumer information. Therefore these services could be themselves targets of identity theft attempts. Providers of these services must provide an extremely high standard of data security to safeguard the vulnerable consumers who do seek their services. The report closes with a recommendation that identity theft insurance increase coverage of actual fraud losses and the consumers think carefully before purchasing these services in their present state.
 

Credit Counselling: A Way Forward

This report provides an overview and a description of the current structure of credit counseling services in Canada. The first part will provide a snapshot of the industry starting with its origins, the types of credit counselling agencies and services they provide; including funding models, accreditation requirements for professional counselors and the challenges that the industry face in meeting the expectations of consumers. The second part will explore the legal framework, both at the federal and the provincial levels, to which the industry is expected to comply and the final part will include recommendations to improve credit counselling of services from the standpoint of Canadian consumers and their interests.
Consumer credit counselling agencies (CCCAs) provide debt reduction services and financial education to debtors. They assist consumers who are having problems dealing with the management of their personal finances and need help to pay down their debts and improve their credit rating. The feature services are debt management plans or DMPs, widely known as “debt consolidation”, that consist of taking lump-sum payments from debtors facing financial struggles, or who are unable to keep up with their monthly bills, and re-distributing those monies to creditors on a pro-rated basis. Credit counselling agencies will notify the creditor that the consumer has signed in to a DMP, and forward a request to obtain relief, negotiate late fees and possibly obtain interest rate reductions at the discretion of each creditor.
DMPs benefit creditors by lowering the risk of consumers filing for an assignment bankruptcy with the probable loss by the creditor of the full outstanding debt balance. In turn, the debtor obtains a benefit in the form of the relief described above, with the advantage of making payment in a consolidated form to the CCCA, instead of obligations to multiple creditors.
However, the main requirement for a customer to be eligible to have a debt consolidation plan approved, is a stable and regular source of income. Consumers who are unemployed, employed temporarily or without a reliable source of income are not eligible for debt consolidation, as creditors would not agree to consolidation in a context of income uncertainty regardless of the agency selected to set up the plan.
CCCAs have become an important stakeholder in the credit system and provide valuable assistance to consumers and in general, to over indebted individuals. However, in the United States, some of the largest CCCAs have been heavily criticized over the last years for a variety of reasons ranging from their close connection with the consumer credit industry and to their apparent failure to act in the best interest of their clients, financially vulnerable consumers.
Download the full report [pdf file: 0.16mb]

Canadians Attitudes to Financial Services

National Survey conducted for PIAC by EKOS Research Associates on Canadians Attitudes to Financial Services [pdf file: 0.65mb]
 

Advocis/POLLARA Report on Canadian’s Views of Banks and Life and Health Insurance

Currently, restrictions prevent banks from selling life and health insurance from their branches. In order to understand the public’s views on this issue, Advocis commissioned POLLARA to conduct a telephone survey of the Canadian general public. The primary objective of this study is to explore Canadians’ attitudes toward the removal of consumer protections related to the sale of life and health insurance by banks. Specifically, this study explores the public’s:
• Perceptions of the provision of service by banks and bank branch employees;
• Concerns about privacy and coercive tied-selling;
• Opinions of current consumer protections regarding the sale of life and health insurance from bank branches; and,
• Perceptions of the amount of access they have to information about life and health insurance.
PIAC does not endorse the specific findings of this poll but is providing this link as part of its coverage of the debate over the appropriate regulation of banking.
 

CBA Research Report on Banks and Insurance: Canadian Attitudes toward Access to Insurance Information and Obligation to Purchase

The Canadian Bankers Association (CBA) today released the results of a poll that shows that, when it comes to shopping around for insurance, Canadians want to be more informed. Insurance salespeople and brokers have claimed that Canadians have enough insurance product information and that they would feel obligated to buy insurance from a bank source if they read a brochure or received a referral to a qualified insurance professional through a bank branch. A new poll by The Strategic Counsel, commissioned by the CBA and released today, found the exact opposite.
PIAC does not endorse the specific findings of this poll but is providing this link as part of its coverage of the debate over the appropriate regulation of banking.
 

Bank Mergers and the Public Interest

This report looks at the rules and legislation that govern mergers of large Canadian banks from the consumer point of view and assesses how large bank mergers would likely affect consumers in relation to issues of access, choice and price of banking services. Large bank mergers are permitted in Canada, subject to a series of reviews, with final approval by the Minister of Finance, but none have been approved in recent years.
This report was prompted by a public review, initiated in 2002 by the federal government, of some of the policies that govern bank mergers. The purpose of the review was to look at the public interest implications of large bank mergers and determine what public interest considerations should be taken into account by the Minister of Finance in making a decision concerning a bank merger proposal. Despite the subject matter of this consultation there was minimal representation from the general public or consumers to the legislative committees that were tasked with this matter in contrast to significant representation and input by banks.
Media Release: Bank Mergers and the Public Interest [pdf file: 0.02mb]
Bank Mergers and the Public Interest (Full Report) [pdf file: 0.13mb]
Executive Summary [pdf file: 0.02mb]
Sommaire exécutif [pdf file: 0.03mb]
 

Credit Reporting: How Are Consumers Faring?

This report looks at the consumer’s experience of credit reporting. Credit reporting agencies are private companies that collect and organize information about a consumer’s credit history and current transactions and then sell it in the form of a consumer report.
Download Report [pdf file: 0.88mb]

Bank Mergers Flash Presentation

Flash Presentation on Bank Mergers.

PIAC and the law firms in the recent mortgage prepayment penalty class actions bring you this flash presentation on bank mergers (requires free Macromedia Flash Player).
The presentation is available here.[flash file: 1.66mb]
 

Canadian Consumer Initiative Identity Theft Policy Position

Identity theft affects consumers

Identity theft is a crucial issue for today’s consumers. Identity theft is deeply disturbing emotionally, financially debilitating and unfortunately, largely beyond the control of consumers.¹Victims find that learning of ID theft is only the first hurdle. Attempting to stop the losses in a timely fashion is a time-consuming and frustrating experience and resolving credit problems is a long-term task.

Business and government, not consumers, must lead the battle on ID theft

Business and Government have to lead the ID theft battle, not consumers. Business practices cause many ID theft opportunities and may impede consumer recovery. Opportunities for ID theft often result from the implementation of technology to improve the corporate bottom line. Businesses that handle sensitive personal information may not be implementing procedures required to protect this data.
Business must limit collection of personal data to the minimum necessary for the purpose of the transaction. Expansive collection for potential secondary marketing purposes simply risks over-collection and subsequent data loss or risks abuse. Use of sensitive personal identifiers such as Social Insurance Numbers (SIN) and drivers license numbers (DLN) exacerbates this problem and provides identity thieves with the golden key to unlocking victims’ personal finances.
Simple changes to business models must be made immediately. For example,truncating credit card number receipts should be demanded by business of credit card and debit card terminal suppliers, not simply waited for when eventually rolled out. Secure destruction of personal information holdings after appropriate hold periods for privacy and other legal challenges should be routine. Business should carefully check ID, should not give out account details to third parties and should be extremely careful in extending credit. Phasing out of reliance on SINs and DLNs is essential. Above all, consumers should be immediately notified when personal information leaks occur.
Credit bureaus stand at the cross-roads of detecting, responding to and preventing ID theft, however, consumers lack meaningful awareness of, and control over, their credit reports.
Business and government must realize that they hold personal information in trust for consumers. ID theft due to their information holdings and handling practices is a real possibility and business and government must take steps to manage the risk.

Legislation is required

While many businesses and governments have taken measures to protect against ID theft, a patchwork of initiatives with no mechanisms for enforcement and compliance poses a serious threat to consumers.
The individual and collective impact of ID theft is far too serious to be left to the whim of governments and businesses that may not always place consumer interests ahead of established business models and data handling practices.
An effective war on ID theft requires specific legislation and real enforcement measures.
The CCI recommends that Canada’s federal and provincial governments move quickly to develop and adopt the following new laws to protect consumers in the personal information and identity theft age:

1. Data leaks notification. Require business and government to report leaks of personal information to CONSUMERS not just credit bureaus and police.
   1. Notice should be made as soon as possible and no later than 48 hours.
   2. Notice should include what was compromised and steps consumers should take to protect their identity (e.g. contact credit bureaus).
   3. Notice should be given if there is a breach or potential breach.
2. SIN use. Business must ERADICATE its reliance on SINs. (Two year phase out).
   1. SINs are used for ID theft more often than anything else.
   2. The Office of the Privacy Commissioner of Canada has advised directly against its use for all but income reporting and direct employment purposes.²
   3. Business should not be permitted to ask for SINs for any other purpose.
   4. Business must develop and alternate unique identifier.
   5. Use of similar sensitive identifiers (DLNs, Health Card Numbers) likewise should be prohibited for identity or other business information-processing purposes.
3. Credit Freeze. Consumers should have a free credit freeze facility
   1. The consumer should be permitted to lift credit freezes with a special code or for certain creditors either permanently or for a period of time.
   2. Consumers should be notified of attempts to access credit reports or credit scores after a credit freeze has been issued.
   3. Consumers should have a right to a credit report clean-up where entries relating to fraudulently obtained credit are removed.
   4. Businesses and credit bureaus should educate consumers on the central role of the credit bureaus in detecting and preventing loss through ID theft.
4. Identity Theft Criminal Offences. Criminalize identity theft related offences.
   1. Police are presently unable to prosecute many identity theft related crimes effectively due to a lack of criminal offences relating to ID theft.
   2. Consumers require police reports and investigations to support their efforts to halt identity theft and re-establish their identity and credit.
   3. Making ID theft specifically illegal provides consumers with additional remedies in other contexts such as making valid insurance claims and in dealing with creditors.

Secondary Threats of Identity Theft

Identity theft is spawning a number of secondary threats to Canadian consumers.
The first of these is the trend to making consumers pay for combating identity theft. This takes the form of credit monitoring services and identity theft insurance. For the most part these forms of monitoring and insurance cannot stop identity theft and may be an unnecessary expense. It is inappropriate for businesses to have improper or insecure data safeguards and then charge consumers for this shortcoming. Businesses should not profit from ID theft.
Secondly, identity theft has frequently been cited politicians and others as an excuse for implementing national ID cards or similar schemes, often with biometric identifiers. Identity cards with or without biometrics will not significantly impact identity theft, as most major ID theft occurs from sloppy information handling by government or business coupled with easy credit. Identity cards and biometrics will, however, reduce civil liberties by requiring consumers to self-identify in a traceable way as they go through life. Identity theft must not be used as an excuse to introduce privacy-invasive technologies such as biometrics and national ID cards.

One Stop Shop

Government can do more to help stop identity theft. In the U.S., the Federal Trade Commission is a “one stop shop” for consumers with identity theft questions. Canada should have a similarly convenient and authoritative government resource for Canadians dealing with the threat of identity theft.
Notes

1. See P. Lawson and J. Lawford, “Identity Theft: The Need for Better Consumer Protection”, November 2003, Public Interest Advocacy Centre. Online:http://www.piac.ca/our-specialities/identity-theft-the-need-for-better-consumer-protection/
2. Office of the Privacy Commissioner of Canada, “Fact Sheet: Best Practices for the use of Social Insurance Numbers in the private sector”, August 2004. Online:http://www.privcom.gc.ca/fs-fi/02_05_d_21_e.asp Specifically, the OPCC states:

The Office of the Privacy Commissioner of Canada has long held the position that the Social Insurance Number (SIN) should not be used as a general identifier and that organizations should restrict their collection, use and disclosure of SINs to legislated purposes.

While recognizing that some private-sector organizations are required by law to request customers’ or employees’ SINs, we remain opposed in principle to the practice of requesting the SIN for general purposes of identification. We recommend that no private sector organization request the SIN from a customer, and that no customer give the SIN to a private-sector organization, unless the organization is required by law to request it.