How much do you know about free protective measures and your liability under federal law? Take this WSJ quiz
These days, financial fraud is everyone’s problem.
Roughly 16.7 million U.S. consumers had their identities compromised in 2017, resulting in $16.8 billion in losses, according to consulting firm Javelin Strategy & Research. The number affected was up 8% from 2016 and the highest since Javelin, a unit of Greenwich Associates LLC, started tracking identity fraud in 2003.
Some consumers may be more aware of the widespread potential for fraud after last year’sEquifax EFX 0.97% breach, which exposed the personal information of nearly 148 million, including an additional 2.4 million who were recently identified. Others, however, remain unaware of the potential dangers.
How much do you know about financial fraud? Take our quiz to find out.
1. True or false: Fraud victims tend to be older and less educated.
ANSWER: False. A 2016 study from the Better Business Bureau found that people between the ages of 25 and 34 are the most likely to lose money to fraud. And more than half of those who lose money due to financial fraud have a college degree, the study showed.
2. True or false: It is expensive to protect oneself against identity theft.
ANSWER: False. There are several low-cost, or free, ways people can guard against identity theft. For instance, federal law requires each of the three major credit-reporting firms—Equifax, Experian EXPGY 2.60% and TransUnion TRU 1.42% —to provide individuals with a free credit report once a year. People can request their report online at annualcreditreport.com, by calling 1-877-322-8228 or by mailing their request via the U.S. Postal Service. People can space out their requests to receive one report every four months, for example.
Another free protective measure: Carefully reviewing monthly credit-card, bank, retirement, brokerage and other account statements; consumers can monitor account activity more frequently if these records are available online. Consumers also should review their explanation of benefits statements from health-insurance providers and swiftly alert their insurer and medical providers if they see treatments they never received, according to the Federal Trade Commission.
3. People who suspect a security breach, should immediately:
A. Place an initial fraud alert with one of the three credit-reporting companies.
B. Close all their bank accounts.
C. Cut up their credit cards.
D. Do nothing.
ANSWER: A. A good first step is to contact one of the three credit-reporting firms to place a fraud alert on your credit report. Ask that company to report the request to the other credit firms. Once an alert is placed on a credit report, a business must verify the consumer’s identity before issuing credit. The initial alert stays on the report for at least 90 days and can be extended, all at no cost to the consumer. Placing an alert also allows consumers to order one free copy of their credit report from each of the three credit reporting agencies, regardless of when they last requested a report.
4. True or false: Hiring a third-party company will guarantee one’s identity is never stolen.
ANSWER: False. Many companies refer to their services as identity-theft protection services, but it’s a misnomer; Even a paid company can’t prevent people from having their personal information stolen, according to the FTC. Deciding whether to hire a service to monitor credit is a personal choice that requires a careful cost-benefit analysis.
Generally, there are two types of paid services: Monitoring services watch for signs that an identity thief may be usurping personal information, such as a bank account number or Social Security number. Recovery services, by contrast, are designed to help individuals regain control after identity theft has already occurred.
5. True or false: Wiring money or using reloadable payment cards are among the safest ways to avoid fraud when paying for items online or over the phone.
ANSWER: False. Wiring money or using reloadable payment cards are considered some of the riskiest ways to pay because it’s nearly impossible to get your money back in the event of fraud, the FTC says. Credit cards have more fraud protection built in; some even offer you the ability to create unique numbers with a specified spending and time limit to use for online purchases.
6. When it comes to credit-card fraud, your liability under federal law is typically capped at ______.
ANSWER: D. Under federal law, a consumer’s liability for unauthorized charges on a credit card is $50. However, consumers who report the loss promptly, before the card is used, aren’t responsible for any charges they didn’t authorize, according to the FTC. The maximum loss for debit cards ranges from zero to a complete loss of funds in accounts linked to the debit card, depending on how quickly the card is reported lost or stolen, according to the FTC.
7. One good way to make online accounts more secure is to ______________.
A. Reuse the same passwords for multiple accounts.
B. Use multifactor authentication.
C. Respond to emails that ask for personal information.
D. Both B and C.
ANSWER: B. Multifactor authentication requires more than one set of credentials to verify a user’s identity. That could mean a combination of a password, pin, special login code, biometric authentication or hardware token. It is considered more secure because if one factor is compromised, there is still an additional layer of protection, making it harder for thieves to steal personal information.
8. Financial abuse is estimated to cost seniors $2.9 billion a year, according to a MetLife study cited by the National Center on Elder Abuse. More than half of financial abuse in the U.S. is committed by family members, caregivers and friends. Red flags of possible abuse include ______________.
A. Unusual activity in an older person’s bank accounts such as large, frequent or uncharacteristic withdrawals, or unusual credit-card activity.
B. Checks written as “loans” or “gifts” to unfamiliar people or charities.
C. Evidence of newly opened accounts that the senior doesn’t seem to need or understand.
D. All of the above.
ANSWER: D. Family members or friends who notice any of these activities should speak to their loved one right away to try to determine if something is amiss, according to tips provided by the American Bankers Association. Suspected fraud should be reported to the bank and the local Adult Protective Services, the ABA says. As added protection, family members can request that their loved ones list them as a “trusted contact” on brokerage accounts, so they can be informed if financial exploitation is suspected, thanks to Financial Industry Regulatory Authority rules that took effect earlier this year.