Identity Theft in the Digital Age: Causes, Costs, and Protection

Introduction: Identity Theft in the Modern Era

Identity theft has always been possible, but the internet and technology have made it something that can often be accomplished far too easily. According to Hoar (2001), identity theft is the "crime of the new millennium." Identity theft involves stealing someone's personal information and using it without their knowledge, causing the victim countless problems, thousands of dollars in losses, and literally years of effort to correct. The problems are not limited to credit reports, either. Some people even file tax returns using the social security numbers of others, obtaining large refunds from the government. When the real person then files his or her tax return, the federal government rejects it, stating that the return has already been filed (Hoar, 2001; McFadden, 2007). Sorting out such a situation can be an enormous burden for any victim.

Simply telling authorities that one was the victim of identity theft is not enough. A police report should always be filed, and there are often many steps that must be taken to prove which person is the legitimate owner of a given name, social security number, and associated information (Measuring, 2011). Correcting the damage caused by identity theft is difficult, and restoring a person's credit and good name after identity theft has been discovered and proven is rarely a quick or simple process.

Hacking into a company's database can yield hundreds or even thousands of names, addresses, and social security numbers for identity thieves to exploit (Measuring, 2011). Because technology has made it so much easier to steal a person's identity, the public must be more careful than ever. At the same time, social security numbers and other identifying information must be provided for many legitimate purposes, and there is no truly reliable way to keep that information completely private—nearly every company with which one does business retains it on file.

How Identity Theft Harms Individuals

It is possible to protect oneself to a certain degree, however. Placing fraud alerts on credit reports or even freezing one's credit are two such measures. With a credit freeze, however, even the legitimate account holder cannot obtain new credit until the freeze is lifted. This process can be time-consuming and frustrating, and usually involves a small fee. Nevertheless, it is one way to ensure that no legitimate company running a credit check will extend credit to someone attempting to misuse another person's identity.

There are significant ways in which identity theft hurts businesses, too (Hoar, 2001). Some businesses, especially in border states, unknowingly hire individuals who have stolen social security numbers and other information from people who are in the country legally. These workers often do not pay taxes, yet they do earn wages and may receive other benefits. A business can face serious legal trouble if this is discovered, even if the employer had absolutely no knowledge that the person hired was using someone else's identifying information illegally.

Businesses also take active steps to combat identity theft, such as requiring identification when customers use a credit card and implementing other verification procedures to confirm that personal information belongs to the person presenting it (Hoar, 2001). These measures demand additional manpower and time, increasing operating costs. Those costs are sometimes absorbed by the business, but they are usually passed along to the customer. In this sense, identity theft costs everyone money, because the precautions businesses must take to protect consumers ultimately raise prices across the board.