It’s Known as Identity Fraud, but by Any Name It’s an Ugly Crime

Lesley Wenger brushed off the first inkling of credit fraud as a bizarre marketing stunt.

A credit manager from an electronics store called to verify her credit application.

But Wenger had never been in the store and had never applied for credit. When the store representative continued to press, asking for her Social Security number and other identifying information, she just thought it was an aggressive marketing tactic to get her to apply for a card she didn’t want.

“I told him to forget it. I wasn’t in the store. I didn’t apply for credit. And I wasn’t giving out personal information,” she says. “The nerve of these guys,” she clucked to her husband as she hung up. They promptly forgot about it.

In retrospect, Wenger has realized the call was a red flag signaling something called identity fraud, a rapidly growing type of crime that involves somebody’s obtaining your credit information and using it to get a host of high-limit credit cards. The store was actually calling to verify information on an application from someone attempting to use her name to get credit.

Credit cards or other credit accounts obtained this way are used liberally, then abandoned. The victims are left to fend off collection agents and patch up their bloodied credit records.

In Wenger’s case, repairing the damage took three years and cost her the chance to buy what she describes as her dream home. The Los Angeles interpreter who has since moved to San Antonio, now says she has a lesson to share with other victimized consumers: You can take on the big credit reporting bureaus and you can win.

Wenger says credit reporting companies, in particular Trans Union of Chicago, failed to adequately investigate her claims of fraud. Earlier this month, a Los Angeles jury agreed and awarded her $200,000 in compensatory damages.

The legal victory notwithstanding, Wenger’s story should make consumers uneasy. Hundreds or maybe thousands of consumers are fighting similar battles, and very little has changed to assure them of a happy ending.

Wenger’s woes began in 1993. She’s not sure exactly when or how, but somehow, someone got her Social Security number. Wenger, then 51, had a modest amount of credit and a perfect payment record. That made her an ideal target.

Despite the fact that the criminal frequently misspelled her name, changed addresses five times in three months and was the wrong sex, he was able to get 15 credit cards in her name from retailers across the country--Los Angeles, Atlanta, Arkansas, Ohio. He ran up $15,000 in debt, defaulted and pitched the cards before law enforcement even knew a crime had been committed.

Wenger first learned of it when collection agencies began to send her letters and call her at all hours of the day and night. Wenger called the police, credit agencies and retailers.

“Day after day, I was dealing with people [collection agents and retailers] who insisted that I was a crook and a deadbeat and taking advantage of them,” Wenger said. “I can tell you, people are always afraid to deal with the IRS, but I’ve dealt with them before and had no trouble. They’re human beings. The IRS is nothing compared to this.”

Part of Wenger’s woes stemmed from the fact that she objected to part of the standard procedure that credit reporting companies use to deal with consumer claims of fraud.

Standard procedure for a consumer who suspects fraud is to call the credit reporting companies, which then send copies of that person’s credit report. The consumer examines the report, lists the accounts that don’t belong to him or her, and either calls or mails the information back.

The credit reporting company then contacts the retailers and credit card issuers involved and suggests that the consumer do the same. The retailers who issued credit to the crook then send forms to the consumer that the consumer is supposed to complete, notarize and mail back.

In Wenger’s case, however, there were 15 retailers. That would have meant 15 notary fees. And all the forms required her to give out her Social Security number and other identifying information to retailers she was unfamiliar with.

“Since I didn’t know where the number had been stolen from before, I didn’t want to give them more information so that somebody might co-opt that information too,” she says. “I said I would not fill out a form that put me at greater risk. I never doubted for a minute that filling out the forms was the wrong thing to do.”

Credit reporting firms confirm that this procedure remains in place today.

Wenger explained why she was unwilling to fill out the forms: Some retailers--Nordstrom, Robinsons and a few others she had dealt with in the past--were understanding and were able to determine that the accounts in question were fraudulent by comparing the credit application information to what Wenger provided over the phone. But other retailers weren’t as accommodating. And the credit reporting firms, who say they merely reiterate what they are told, left the erroneous information in her files month after month, preventing her from getting new credit.

Finally, last year Wenger found a lawyer--Andrew Henderson of Hall & Associates in Los Angeles--who was willing to take her case on a contingent-fee basis. She sued, claiming the credit bureaus’ fraud-redress procedures were unreasonable and violated the Fair Credit Reporting Act.

TRW and Equifax, which finally corrected her records shortly before the suit was filed, settled out of court. (TRW Information Systems & Service is in the process of being purchased by Bain Capital & Thomas H. Lee Co., which plans to call it Experian.)

Only Trans Union remained.

In the meantime, two other law firms--the Center for Law in the Public Interest and Greenberg Glusker Fields Claman & Machtinger--joined forces on Wenger’s side.

Wenger’s victory has encouraged the lawyers. The Center for Law in the Public Interest is now starting a credit fraud unit, says Gus May, a staff attorney.

Gerald Sauer of Greenberg Glusker is shuttling Wenger from one media interview to the next, crowing about how the case has changed how credit reporting firms “must” deal with their clients.

However, Henderson acknowledges that what credit firms should do and what they will do might differ. The encouraging news, he says, is that the Wenger award is enough that other lawyers might be willing to do what he and his compatriots did: take such cases without requiring an upfront fee.

The Wenger case established that two sections of the Fair Credit Reporting Act require credit reporting firms to do more than simply reiterate what credit issuers tell them, Henderson says.

The law says that credit reporting companies must “follow reasonable procedures to ensure maximum possible accuracy.” And case law imposes a reasonable standard of re-investigation when a consumer disputes information in his or her file. Although the law doesn’t say what must be done, the standard procedure is clearly not enough, he says.

Wenger advises all consumers to do one simple thing: Put a fraud “alert” on your credit files. This alert message requires retailers to call you before new credit can be issued in your name.

One downside is that an alert would prevent your getting instant credit unless somebody was at home to approve the deal. But the bright side is that it will prevent someone from ruining your credit through an identity fraud.

Unfortunately, some credit reporting companies won’t allow you to place an alert on your file unless you’ve already been victimized--in other words, until it’s too late.

You really can’t preempt fraud by requiring merchants to call you before issuing credit in your name?

“No, ma’am,” says Equifax spokesman Dave Mooney.

Kathy M. Kristof welcomes your comments and suggestions for columns but regrets that she cannot respond individually to letters and phone calls. Write to Personal Finance, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or message Kathy.Kristof@latimes.com on the Internet.