How Does Identity Theft Happen and Can You Avoid It?

The Federal Trade Commission (FTC) collects extensive information each year about consumer fraud situations. This data is compiled into a Consumer Sentinel Network Data Book that describes the many types of consumer concerns and nationwide statistical trends. If you have ever wondered, how does identity theft happen and whether there is there anything you can do to protect yourself, read on. 

Unfortunately, identity theft cases have exploded in the past few years, especially during the pandemic. Before 2018, the FTC received 200,000 to 300,000 reports of identity theft each year. That number jumped to 444,344 in 2018 and then soared to more than 1.4 million reports in 2020. Because not all victims of identity theft report their situation to the FTC, the true number of ID theft victims is potentially much higher. 

How Does Identity Theft Happen? 

Each year identity thieves develop new and innovative ways to steal consumers’ personal information for financial gain. Most ID theft schemes fall into seven categories: 

  1. Online scams 
  2. Telephone contact 
  3. Medical records and Medicare fraud 
  4. Tax fraud and stolen government benefits 
  5. Physical theft 
  6. Public Wi-Fi use 
  7. Corporate data breach 

To answer the question, how does identity theft happen, let’s review each type of identity theft in more detail and discuss ways to avoid becoming a victim.  

1. Online Scams 

How does identity theft happen most often? Online scams are the broadest category of potential ID theft attempts. Common online threats include: 

Phishing – These are emails that promise a benefit in exchange for personal information. These emails appear legitimate and are often from a company that you’ve dealt with in the past asking you to click a link to the business home page. The link takes you to a fake site where they ask you to enter your information. The fake site may also download a virus into your computer that steals your identity. 

How to avoid phishing scams: Check the email address that the email was sent from and be wary of any urgent emails that ask for your personal information. Don’t click on any links in an unsolicited email and contact the company directly to see if there is truly a problem.  

Fake websites – Savvy identity thieves create false websites that look just like the real company’s site using the company logo, design, colors, and other features that confuse consumers into believing they are on the true website. Ecommerce sites such as Amazon and Walmart are often fraudulently copied to fool unsuspecting buyers into voluntarily entering credit card information. 

How to avoid fake websites: Look closely at the URL address, contact information, and other identifying information for errors or anything suspicious. Call the company to verify the web address and whether someone from the company contacted you. 

Prize notifications – These emails congratulate you for winning a jackpot, a free cruise vacation, or a foreign lottery but you need to supply information or pay a small processing fee to receive your gift. Chances are good you never entered a contest and you’ve never heard of the entity offering the prize.  

How to avoid a prize scam: First, you will never win a contest that you didn’t enter. Second, if you did enter and win an event, you would not be contacted by email and asked for information or payment to accept your prize. Consider reporting this scam to the FTC to protect others. 

2. How Does Identity Theft Happen by Telephone?  

Many identity thieves prefer calling scams because some consumers don’t have a computer or don’t use email often. Most people have a phone, so the target group is larger for these scams. 

Smishing – Similar to phishing, these victims are targeted by text messages. The thief may impersonate a friend, trusted organization, or government entity and ask for personal information by text. Smishing has become more popular because people tend to trust a text message more than an email or phone call. 

How to avoid smishing: Again, be wary of any unsolicited text messages from an unknown number or one that requests personal information by text. No legitimate company will ask for your social security number or date of birth in a text.  

Spoofing – These fraudsters create a fake caller ID number. When you receive a call from a spoofer, the number appears to be from a local number or trusted company.  

How to avoid spoofing: Never give personal or financial information over the phone during an unsolicited call. Ask if you can call them back and confirm that the caller is legitimate. If the caller hesitates, hang up. 

3. Medical Records and Medicare Fraud 

How does identity theft happen with medical records? You may be contacted by email, phone call, or text from a person who claims to work for your doctor’s office, insurance company, local pharmacy, or clinic. You are asked to provide or confirm certain personal information that allows the thief to use your identity to obtain medical services, insurance benefits, or steal your government payments such as Medicare. 

How to avoid medical records and Medicare fraud: Never give your social security number, Medicare identification number, or health insurance information to anyone over the phone, by text, or through an email if they contacted you first. Review your medical records annually and compare insurance claims to the services you received. Call the Medicare office at 1-800-633-4227 if anyone threatens to cancel your coverage or demands information to maintain coverage. 

4. Tax Fraud and Government Benefits 

Identity thieves in this category usually contact victims by email or phone pretending to be an IRS official. They may say you have a refund coming, but they need your personal information to verify how and where to send it. Or they may claim that you owe taxes and offer to take your payment information over the phone.  

Some scammers have resorted to preying on natural disaster victims such as flood and hurricane survivors. They offer federal disaster aid in return for personal information. Once an ID thief has your information, they might apply for government benefits under your name or try to steal your tax refund.  

How to avoid tax and government fraud: The IRS will never contact a taxpayer by phone, text, email, or social media to request personal details. Never provide this information to someone who claims to be from the government. 

5. Physical Theft 

Identity thieves may physically steal your information using card skimmers installed on ATMs or point of sale credit card readers or with low-tech methods like stealing your wallet, mail, or trash.  

How to avoid physical theft: Be cautious when giving your card to someone during a purchase or while using an ATM. Keep an eye on your card if possible and cover your movements when entering a PIN. Look for parts of the ATM that don’t seem to fit, especially around the card slot and keypad. Shred all financial documents before throwing them in the trash and don’t let your mail pile up where someone could steal credit card offers or statements.  

6. How Does Identity Theft Happen in Public? 

It’s easy to log in to open internet sources when you need to check your email or glance at social media. However, when you join a public Wi-Fi source, you may expose your data to hackers. Also, some ID thieves use public USB charging stations, like the ones you see at airports or hotels, for “juice jacking.” When you connect to recharge, malware infects your device with a virus or gathers your information without your knowledge.  

How to avoid public Wi-Fi theft: Never use a public internet source or recharging station. Keep your device charged, use your personal data package to surf the web in public, and always carry a charging cord with you. 

7. Company Data Breaches 

Identity thieves may hack into company databases and steal customers’ information. If this happens, the company should let you know about the breach and what data may have been stolen. 

How to avoid data breaches: As a consumer, you can’t stop a data breach. You can be careful about which companies keep your information and if you learn about a breach, be sure to check your accounts and credit reports to catch unauthorized transactions quickly. 

If You Are an Identity Theft Victim, Trust the Financial Justice Initiative to Help Protect Your Rights 

You now understand how identity theft can happen and how to possibly avoid it. But what should you do if it happens to you? The identity theft lawyers at the Financial Justice Initiative – a joint project of Schlanger Law Group, LLP and Terrell Marshall Law Group, PLLC – have nationwide experience dealing with all forms of ID theft and helping consumers navigate the legal system to recover their financial losses and get their lives back on track.   

Don’t face identity theft alone. The Financial Justice Initiative is dedicated to serving consumers throughout the country. Call (206) 809-8675 or complete this simple form to schedule a free case consultation today.