WASHINGTON, DC – U.S. Senator Gary Peters (D-MI) joined a bipartisan group of Senators urging the Social Security Administration to prevent identity theft by requiring financial institutions to match each customer’s identity with their Social Security number when applying for loans, mortgages and credit cards. Identity thieves are increasingly stealing Social Security numbers (SSN) from children, pairing them with fake names, birth dates, and addresses to create new “synthetic” identities. The synthetic IDs are used to open fraudulent accounts that ruin the credit scores associated with the children’s stolen SSNs. In 2016, synthetic identity fraud resulted in more than $6 billion in economic losses.
“Identity thieves are targeting Michigan children and ruining their financial futures before they even finish school,” said Senator Peters.“This commonsense step will modernize the way lenders verify identities, protect children from identity theft and help prevent billions of dollars in losses from fraudulent loans.”
Currently, the Social Security Administration’s database is only used to verify that SSNs match other identification details for mortgage applications, and that process requires a written signature from the loan applicant. Peters, along with U.S. Senators Claire McCaskill (D-MO), Tim Scott (R-SC), and Bill Cassidy (R-LA), are pushing the Social Security Administration to expand their verification process to other types of loans, including credit cards, and modernize the system to allow for electronic signatures that could identify synthetic identity fraud more quickly.
The full text of the letter is copied below and available here:
Dear Acting Commissioner Berryhill:
We write regarding the growing problem of synthetic identity fraud. The Government Accountability Office describes synthetic identity fraud as involving “…the creation of a fictitious identity, typically by using a combination of real data from multiple individuals and fabricated information.” This type of fraud most often impacts vulnerable populations – particularly children, given that their Social Security Number (SSN) is not yet associated with any live borrowers – and is estimated to result in losses of $6 billion per year.
The data points often used by criminals to commit synthetic identity fraud are stolen, but valid. The SSNs are paired with fabricated identity information, such as names and dates-of-birth (DOBs). Criminals are able to exploit these data points because there is no efficient, modern method to confirm that a name, SSN, and DOB belong to a real person. This issue has been exacerbated as consumers’ expectations around “instant” delivery of financial products and services have evolved.
The Social Security Administration (SSA) recognized the need to address this issue when, in 2002, it created the Social Security Number Verification Pilot for Private Business program. The creation of this program acknowledges that the private sector – particularly financial institutions – needed the ability (with the individual’s consent) to verify whether a given name, DOB, and SSN match a government-derived source of truth in order to fight fraud. That pilot program has since evolved into today’s Consent-Based Social Security Number Verification system (CBSV), which serves the same role. The CBSV can and should serve as a powerful tool to protect vulnerable populations from identity theft. However, the SSA requirement that users of the CBSV system first obtain the written, physical signature of the individual prior to accessing the database unnecessarily impedes CBSV’s usefulness in preventing identity theft. While some financial transactions, such as mortgage applications, are still paper-intensive, rapid technological change has made access to many financial products and services increasingly digital with instant access. In situations, where consumers expect – and financial institutions often make – quick determinations, the physical signature requirement negates the utility of CBSV to combat synthetic identity fraud.
Given the push by SSA and the broader federal government to modernize IT infrastructure, we strongly believe that SSA should make provisions to accept the consent of an individual electronically in order to access CBSV. It is within your authority to make this reasonable and overdue change to accept consent electronically without new legislation. The Social Security Act provides authority and flexibility for the head of SSA to determine appropriate parameters surrounding requests for information and services by private entities.
It has long been government policy to encourage electronic signatures. Two relevant federal statutes – the Electronic Signatures in Global and National Commerce Act (E-SIGN) and the Government Paperwork Elimination Act (GPEA) – encourage acceptance of e-signatures. For example, as the Office of Management and Budget (OMB) points out, GPEA “…specifically states that electronic records and their related electronic signatures are not to be denied legal effect, validity, or enforceability merely because they are in electronic form, and encourages Federal government use of a range of electronic signature alternatives.” In our view, a consumer’s consent given electronically and received by a financial institution in order to access the CBSV is clearly in the spirit of both of these laws.
We are very sensitive to privacy concerns, particularly when SSNs and other personally identifiable information of consumers are involved. We are pleased, therefore, that the only information provided to users of the CBSV system are machine-to-machine numerical responses corresponding to “yes,” “no,” or, “deceased.” We would not expect SSA to provide users of the CBSV any information on individuals beyond this. Also, as you look to modernize the hardware and software of the CBSV system, we encourage you to ensure the security and integrity of the system are maintained.
The operational costs of the CBSV are funded through enrollment fees and per-transaction fees paid by end-users of the system. In fact, to fund initial start-up costs to build the original system, SSA asked participating private sector firms to: 1) pay an initiation fee and 2) pay upfront for their estimated annual transactions. Since private sector end-users of CBSV seem willing to maintain and support this funding structure, we see no budgetary concerns that should negatively affect your decision to upgrade and modernize this system to handle expanded demand and ensure near-continuous availability.
Thank you for your attention to this critical issue and interest in fighting synthetic identity fraud. We look forward to working with SSA to better protect our constituents against this crime.