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Rise In Child Identity Theft Prompts Push For Solutions

Gerry Smith   |   December 21, 2011    8:04 AM ET

"Burdened Beginnings" is a series examining the problem of child identity theft. Other stories in the series can be found here.

When Jennifer Andrushko applied for public aid two years ago, a state employee entered her son Carter's Social Security number into a computer and discovered something strange: The boy appeared to have been earning wages for the past eight years.

"I thought, 'How could this be happening? He's only three years old,'" Andrushko said.

It turned out an undocumented immigrant had been using Carter's number to acquire jobs since before he was born. But Carter proved relatively fortunate. Unlike many child identity theft victims who do not realize their credit is ruined until they reach adulthood, his case was caught while he was young, giving him time to recover his good name.

In Carter's case, the crime was foiled by a unique campaign underway in Utah to eradicate the growing problem of child identity theft. The state cross-references an employment database with a list of children receiving public assistance to reveal people who have used children's Social Security numbers to secure employment. Since 2007, Utah's checks have found "thousands" of instances of child identity theft, including one in which nine people used a nine-year-old's Social Security number to gain employment, according to Utah Assistant Attorney General Richard Hamp.

Utah's successful efforts highlight the existence of potentially potent responses that can be wielded to limit the problem of child identity theft, an emerging crime that leaves young adults with tattered financial histories. But such efforts remain patchy and scarce, providing thieves with substantial opportunities to tap into the pristine credit histories of children, experts say. Parents too willingly hand over their children's Social Security numbers to schools and health care providers, and these institutions are not sufficiently vigilant about preventing the data from falling into malevolent hands. One agency alone -- the Social Security Administration -- could significantly reduce the vulnerability by making it easier for credit agencies to discern that a given Social Security number belongs to a child, experts say.

"All of us have a little bit to do with solving the problem...We are no longer going to passively hand our children over to bad guys, who are only focused on exploiting their good names," Michelle Dennedy, chief privacy officer at the security firm McAfee, said at a July forum on child identity theft.

Last year, more than 18,000 cases of child identity theft were reported to the Federal Trade
Commission, compared with about 6,500 cases in 2003. The real figure, however, is probably much higher because the crime often goes undetected, experts say. ID Analytics estimates that more than 140,000 children are victims of identity theft each year, based on a one-year study of those enrolled in the firm's identity protection service.

In the largest study on child identity theft to date, researchers at Carnegie Mellon University found that 10 percent of children were victims of identity theft, compared with less than 1 percent of adults. The study, which was published this spring, analyzed more than 800,000 records -- including 40,000 belonging to minors -- compromised by data breaches in 2009 and 2010. The data was provided by the credit monitoring service Debix.

The stolen identities were used to purchase homes and cars, open credit card accounts, gain employment and obtain driver's licenses, the report found. The youngest victim was five months old. In one case, eight people were suspected of opening 42 accounts and racking up more than $725,000 in debt using a 17-year-old's Social Security number.

Thieves now exploit a gap in the system used by the three major credit bureaus to check consumer credit. When the bureaus pull reports, they look for matching names, birthdates and Social Security numbers. But identity thieves escape detection by pairing a child's number with a different name and birth date, creating the appearance of a consumer who is applying for credit for the first time. Debix says it recently ran credit reports on 381 cases of confirmed child identity theft and found that credit reports only turned up fraudulent activity in four cases, or 1 percent.

Experts say the Social Security Administration could fix this flaw by allowing companies to validate whether a given Social Security number belongs to a child. Since 2008, companies have been able to check this information with the Social Security Administration, but the agency charges a $5,000 fee upfront, plus $1 for each check, because the service is not part of the agency's mission, according to agency spokeswoman Kia Green.

Bo Holland, chief executive at Debix, said companies are likely unwilling to pay those fees, so Congress should pass a law that funds the agency to provide the service at no charge.

"It would stop every one of these attacks we've seen," Holland said.

Meanwhile, unique partnerships are forming in a growing effort to stop child identity theft. In January, Utah officials plan to team up with TransUnion, a credit bureau, to launch a new program aimed at catching identity theft of all children in Utah, not just those who receive public aid.

"It should effectively shut down people opening credit on kids' numbers," Hamp said.

Some also say lenders should be more diligent by raising questions about suspicious loan applicants -- such as older applicants with thin or empty credit files -- and requiring more documentation to qualify for loans.

"How can somebody open up any kind of account with just a name and Social on its own?" Stuart Pratt, president of the Consumer Data Industry Association, the trade association for the three credit reporting agencies, said at a July forum on child identity theft. "Authentication should be much more than that. It has to be robust."

For decades, most children did not have Social Security numbers. Then in the late 1980s, the Social Security Administration began requiring that parents list their children's numbers to claim them as dependents on their tax returns. This led to a rapid expansion of newborns being assigned pristine credit slates that are left unchecked until their 18th birthday, making them particularly attractive to identity thieves.

Many child identity theft cases are not caught sooner because laws do not permit minors to request their credit reports, according to Mark Fullbright, a fraud specialist with Identity Theft 911. If teens could access their credit reports at 16, victims would have time to restore their credit "before they turn 18 and everything counts," Fullbright said.

Instead, many victims are like Jaleesa Suell, of Oakland, Calif., whose identity was stolen to open a credit card when she was 17 but went undiscovered until she turned 21 and was denied her first credit card. The unpaid debt, which totaled $300, went to a collection agency, destroying her credit, she said.

Now 22, Suell has spent the last six months disputing the fraud with Plains Commerce Bank, based in South Dakota, where the account was opened. Before accepting the charges were fraudulent, the bank insisted that Suell provide a full police report. But the Oakland Police Department has refused to provide such a report because $300 does not meet the department's threshold.

Identity Theft 911, which is working pro-bono to help Suell, plans to write letters to the FDIC, FTC and the Better Business Bureau to pressure the bank to "do the right thing," according to Kelly Colgan, a spokeswoman for Identity Theft 911.

If her case is not resolved, Suell fears she will graduate college in May and be unable to rent an apartment or acquire student loans for graduate school due to her damaged credit.

"I'm at an impasse," she said. "It's extremely frustrating."

Even those who have resolved their cases have faced roadblocks. On the day after her 18th birthday, Katrina Haywood used her credit for the first time to apply for Internet service. She was denied. Then she was denied an apartment, a bank account, and jobs at retail stores in Sacramento.

The reason: Her credit report included a list of unpaid credit cards, utilities and payments to tow truck companies totaling about $6,000. The debt was accrued by her mother, she said.

"I was really upset," Haywood said. "I tried to clear it myself but didn't know how to do it and didn't get very far."

But recently, Haywood was able to acquire a detailed police report that proved she was only 11 when the fraud began. She sent the report to the three credit bureaus, which quickly removed the bad debt from her name.

Now, Haywood has a job at a clothing store at a mall. She has opened her first bank account. And this month, she moved into her first apartment with her 1-year-old daughter.

"Everything is going good now," Haywood said. "I have a fresh start."

In Push For Data, Schools Expose Students To Identity Theft

Gerry Smith   |   December 15, 2011    8:30 AM ET

"Burdened Beginnings" is a series examining the problem of child identity theft. Other stories in the series can be found here.

In El Paso, Texas, a hacker broke into the computer network of a local school district, finding a database of about 63,000 students' Social Security numbers.

In Wake County, N.C., school officials accidentally mailed out about 5,000 postcards with students' Social Security numbers printed on the front.

And in Palatine, Ill., two laptops belonging to a state contractor were stolen from a car, divulging the Social Security numbers of nearly 8,000 special education students.

These three incidents of vital digits surrendered to the winds, among dozens in recent years, highlight what experts say is a growing vulnerability to identity theft among children. Across the country, schools have become conduits for children's pristine Social Security numbers, which are increasingly falling into the hands of credit-hungry identity thieves. The frequent data breaches have prompted calls for schools to stop collecting sensitive student data and have angered parents like Art Staehling, whose 14-year-old daughter, Jenna, was among 18,000 Nashville students who had their Social Security numbers accidentally exposed online for three months in 2009.

"They left the gate wide open," Staehling told The Huffington Post. "It's clumsiness. There's no excuse for it. If schools want that information, there should be some sort of penalty paid if they don't guard it with their lives. I haven't found a reason why they honestly need it."

Data breaches leave people six times more likely to become victims of identity theft, according to a survey this year by Javelin Research. Schools warn parents to monitor their children's credit after a data breach. But credit reports only turn up 1 percent of fraud on children's credit histories because thieves pair children's Social Security numbers with new names and birth dates, according to a study by Debix, which sells identity protection services.

The collection of students' Social Security numbers is the result of a campaign to more precisely track their progress. But privacy experts say there are less risky ways to identify students, accusing schools of needlessly exposing children to identity theft by gathering their Social Security numbers in central databases with lackluster security.

"This is making a much bigger honey pot for people with malevolent purposes to gain access to children's information," said Joel Reidenberg, a professor at Fordham University School of Law. "It's a meltdown waiting to happen."

Identity theft in schools is more than theoretical. Last July, Sheyla Diaz, 44, a former Broward County, Florida high school teacher, was sentenced to six months of house arrest for stealing the identities of former students. In 2009, Jonathan E. Kelly, who worked as a police officer for the Palm Beach County School District, was sentenced to eight years in prison for stealing the identities of former students and teachers.

Last year, more than 18,000 child identity theft complaints were reported to the Federal Trade Commission, compared with about 6,500 cases in 2003. The increase comes as the recession has left many Americans with more of a need for clean sources of credit, making the temptation to hijack a child's pristine record even greater.

But experts say figures on child identity theft are likely much higher because the crime often goes undetected for years. ID Analytics estimates more than 140,000 children are victims of identity theft each year, based on a one-year study of those enrolled in the firm's identity protection service. When child identity theft victims turn 18, they find their credit has been destroyed, preventing them from taking out loans or renting apartments.

The push for collecting student data began under the federal No Child Left Behind Act and was spurred by incentives in the 2009 stimulus package, which included about $250 million in competitive grants to help states develop student databases, according to Reidenberg.

But the U.S. Department of Education has warned schools not to use students' Social Security numbers in their databases, urging them instead to create other unique identifiers. Social Security numbers are "the single most misused piece of information by criminals perpetrating identity thefts," according to a technical brief issued last fall by the National Center for Education Statistics, the research arm of the U.S. Department of Education.

Yet the collection and use of students' Social Security numbers in K-12 schools remains "widespread," according to an audit last year by Patrick O'Carroll, the Social Security Administration's inspector general. His audit found students' Social Security numbers printed on transcripts, tests and athletic education forms.

One elementary school held a poster contest and required students to write their Social Security numbers on the back of their entries, according to the audit, which said schools were using the numbers "as a matter of convenience." Since 2005, there have been at least 40 data breaches of confidential student information at K-12 schools, O'Carroll found.

"We believe the unnecessary collection and use of Social Security numbers is a significant vulnerability for this young population," O'Carroll wrote. "Each time a student provides his or her Social Security number, the potential for a dishonest individual to unlawfully gain access to, and misuse, the number increases."

But students' Social Security numbers are useful for education policy by creating "enhanced analytical opportunities" for evaluating school curriculum, said Elizabeth Laird, a spokeswoman for the Data Quality Campaign, a nonprofit organization that encourages states to build student databases.

"The more important conversation is not whether states are collecting Social Security numbers, but how they are ensuring the privacy, security, and confidentiality of all personally identifiable information," Laird said in a statement. "We can't speak to how Social Security numbers are collected and stored at the local level," she added.

According to one survey, they are not stored very securely. Only half of K-12 schools use encryption to scramble sensitive data in case it falls into the wrong hands, according to a February survey of more than 100 IT employees at K-12 schools nationwide. Seventy-two percent cited budget constraints as the primary barrier to improving their IT security, according to the survey by Panda Security.

School districts in 26 states now ask for students' Social Security numbers. One of those states is Texas, where education officials need those numbers to connect K-12 records to higher education and workforce data, according to Debbie Ratcliffe, a spokeswoman for the Texas Education Agency.

Ratcliffe said the agency takes pains to protect sensitive student information, storing data behind firewalls and using other identifying information in most data sets. But last year, the agency asked eight Texas school districts to send confidential student information, including Social Security numbers, through the mail on unencrypted CDs for research purposes.

In March, Laredo Independent School District learned the CD it sent got lost in the mail, exposing nearly 25,000 current and former high school students to identity theft, according to the Texas Tribune. Ratcliffe told The Huffington Post that the request came from an agency employee who operated "way outside" normal protocol.

It was not the only school data breach in Texas this year.

In September, just one week after El Paso Independent School District said a hacker had breached its internal network with students' Social Security numbers, Beaumont school officials told parents that Social Security numbers belonging to an estimated 15,000 students were accidentally exposed online for nearly a year.

A few weeks later, the San Antonio Independent School District told parents that names and Social Security numbers of up to 360 students were mistakenly made visible through a Google search.

Still, the Texas Education Agency has no plans to stop asking school districts for students' Social Security numbers, Ratcliffe said.

"We have so many databases that use them that it would require quite a bit of change to make that happen," she said.

Yet concerns over child identity theft have prompted at least five states -- Nebraska, North Dakota, Washington, Maine and Wyoming -- to create policies that restrict the collection and use of Social Security numbers in K-12 schools.

North Dakota students are assigned a 10-digit ID number when they enroll that sufficiently tracks their performance, leaving no need for Social Security numbers, according to Jerry Coleman, director of school finance at the North Dakota Department of Public Instruction.

"To protect those Social Security numbers would be a hassle we don't need," Coleman said in an interview.

In Texas, like other states, parents can refuse to disclose their child's Social Security number, and the student would be assigned a different identifying number. Ratcliffe, of the Texas Education Agency, said most parents disclose their child's number anyway.

But privacy experts say, in most cases, parents should keep that information to themselves.

"When someone asks for your child's Social Security number, say no," said Aaron Titus, chief privacy officer for Identity Finder, which helps organizations protect sensitive data. "I have found about 90 percent of the time, when I push back a little bit, I get my way."

Foster Children Struggle To Recover From Identity Theft

Gerry Smith   |   December 5, 2011   11:00 AM ET

"Burdened Beginnings" is a series examining the problem of child identity theft. Other stories in the series can be found here.

SAN DIEGO -- After bouncing between a dozen foster and group homes here in this seaside town where the Pacific shore meets the Laguna Mountains, Mercediz Hand wanted at least one thing in her adult life: a stable home.

But after aging out of foster care, Hand discovered someone had been using her identity since she was 10, taking out a mortgage and racking up $3,000 in unpaid cellphone bills.

Her credit was ruined. This summer, she slept in her car, a 2002 Chevrolet Monte Carlo, because she could not qualify for an apartment. Then her car was repossessed because she defaulted on a loan with a 21 percent interest rate -- the lowest rate that lenders would offer. She finally found a landlord who did not check her credit, but she wants to move because her apartment is infested with roaches and termites.

Sitting outside a coffee shop on a recent afternoon, the 24-year-old mother of two said she is considering filing for bankruptcy.

"It should be easier to get these things fixed, but it's not," she said in an interview. "It doesn't go away."

Experts say foster children are particularly vulnerable to identity theft because their personal information passes through many hands, increasing the chances their Social Security numbers will be used to commit fraud.

Now, lawmakers and child welfare advocates are looking at ways to protect the financial reputations of foster children amid growing concern over child identity theft. With increased frequency, thieves are hijacking children's unblemished Social Security numbers to take out credit cards, car loans and mortgages, thereby destroying the credit histories of young adults.

This fall, President Obama signed a law with a provision that requires all states to run credit checks on older foster children and help resolve cases of identity theft before they age out of the system.

But experts say that is not enough. The real problem, they say, is that foster children's Social Security numbers are overexposed. Matt Cullina, who has adopted three foster children, said he receives five to seven ID cards each year that include their full name, date of birth and Social Security number -- more than enough information to commit identity theft.

"There's probably no other segment of the population that has ID cards with those three pieces of information on it," Cullina, chief executive of Identity Theft 911, said at a July forum on child identity theft.

Rep. James Langevin (D-R.I.) has introduced legislation, the Foster Youth Financial Security Act, that goes further by prohibiting states from using Social Security numbers to identify foster children. The bill, which is still pending, would help protect foster children from identity theft by reducing the public exposure of their sensitive information, according to Amy Harfeld, a policy consultant for the Children's Advocacy Institute in San Diego.

"The point is, we need to stop putting kids' Social Security numbers on their ID cards and passing them around like candy," Harfeld said at the forum, which was hosted by the Federal Trade Commission.

Last year, more than 18,000 child identity theft complaints were reported to the commission, compared with about 6,500 cases in 2003. The increase comes as the recession has left many Americans with greater need for clean sources of credit, making the temptation to hijack a child's pristine record even greater.

But the real figure is probably much higher, experts say, because the crime often goes undetected until victims turn 18 and find their damaged credit is preventing them from acquiring student loans, jobs or apartments. ID Analytics estimates more than 140,000 children are victims of identity theft each year, based on a one-year study of those enrolled in the firm's identity protection service.

The profile of a child identity thief takes different forms. In some cases, family members who have ruined their own credit steal the identities of their children. In others, organized criminals target institutions such as foster homes where children's identities are lying around virtually unguarded.

Last February, Felix Nkansah, 28, of New York, was sentenced to six years in prison for participating in an identity theft ring that stole records of children in foster homes to file fraudulent tax returns.

Experts say such cases highlight the porous security of children's data in foster care, where personnel are focused on protecting children, but not their identities.

"Record management at foster agencies is a joke," Dan Hatcher, a professor at University of Baltimore Law School who does research on poverty issues, said at the forum. "Caseworkers either are not looking for these issues, or when they spot it, they don't know what to do."

In a study of about 2,100 foster children in Los Angeles County, more than 100 children (about 5 percent) had accounts opened in their names, with an average $3,600 in debt. One foster child was found to have a $217,000 home loan, according to the study, which was released in August by the California Office of Privacy Protection, a state agency.

Thieves who steal the identities of foster children are targeting a group that already faces financial obstacles. Less than 3 percent earn four-year college degrees after leaving the foster care system. By age 24, less than half find full-time jobs, and nearly 40 percent have been homeless, according to a study by the Children's Advocacy Institute and First Star, a nonprofit that works with victims of child abuse and neglect.

Mercediz Hand has been homeless twice, but not for a lack of money. She has a steady job working at a homeless shelter. But her credit is so damaged that she and her husband, who ruined his own credit, and their two children, ages 7 and 4, are forced to live in an unsafe neighborhood. On a recent night, a stranger assaulted her outside her apartment, she said.

"I don't want to stay where I'm at. It's not a good neighborhood," Hand said, wearing sunglasses to hide her badly swollen left eye. "But this is the only kind of apartment I can get because my credit is so horrible. I'm renting from anyone who is willing to rent to me."

In the foster care system, a wide range of people have access to a child's Social Security number, including parents, grandparents, foster parents, social workers and group home personnel. Each time a foster child is moved to a new home, their personal information goes with them, further exposing data that should be kept private.

Foster children are also less equipped to fix their credit problems because they do not have the safety net that family often provides, according to Lisa Schifferle, an attorney with the Federal Trade Commission. Every year, about 35,000 foster children age out of the system nationwide without being adopted.

"Once these children are emancipated from foster care, clean credit is essential in their process to establishing a strong start to adulthood," Schifferle said at the child identity theft forum.

Foster children are also more likely to become identity theft victims because they come from struggling families who may view their pristine Social Security numbers as a new source of credit, Cullina said. And children are less likely to report family members to police, making it more difficult to remove the fraud from a credit report, he said.

As more foster children have found their credit destroyed, child welfare advocates have sought to help. Over the summer, First Star and Identity Theft 911 taught 30 foster children from around Los Angeles how to protect themselves from identity theft during a five-week training course on the UCLA campus. First Star President Peter Samuelson said he plans to replicate the pilot program, which was funded through donations, across the country next summer.

Here in San Diego, the fallout of identity theft has presented yet another hardship for young adults who have seen their share. Mercediz Hand entered foster care after her uncle, a registered sex offender who lived with her family, tried to molest her, she said.

She discovered her identity had been hijacked when she ran her first credit report at 18. She has only been able to see a report from one of the three credit reporting agencies because she is unable to answer a security question: the amount of her mortgage.

"I keep telling them, 'I didn't open up a mortgage. I have no idea what you're talking about,'" she told The Huffington Post. "I'm a little scared to find out what's on the other reports."

When Suamhirs Rivera aged out of the foster care system in 2008, he tried to apply for an apartment and a cellphone, but was denied. That was when he learned someone had used his identity to rack up $75,000 on 30 credit cards while he was in foster care, he said. His credit score was 350, the lowest possible.

"I didn't know what to do," Rivera said in an interview. "I thought, 'Where the hell am I going to live if I'm not able to rent an apartment? What's going to happen to me? How am I going to get a job or how am I going to be a productive member of society?'"

Rivera, now 21, filed a police report, but still has been unable to remove the debt from his credit report, he said. As a result, he pays steep upfront costs for basic needs, putting down a $460 deposit for a cellphone and a $2,750 deposit for his $795-a-month apartment. He is unable to afford a car because the interest rate would be too high, he said. Three banks have sued him for failure to pay the debt, he said.

"It's been a constant battle," Rivera said.

Helena Kelly says banks would not give her loans because her credit was damaged by identity theft.

Helena Kelly, who was placed in foster care at age 10 after her mother went to jail for shoplifting, lived with 14 different people, shuffled between aunts, parents, cousins and a foster home. Along the way, someone stole her identity to take out student loans and lease cars and an apartment, ruining her credit, she said.

Now a full-time student at San Diego City College, Kelly, 22, said banks would not give her a student loan or a car loan because of her bad credit, so she paid for school and bought a car by borrowing government-issued student loans.

She spent three weeks this summer sleeping on friends' couches because she could not qualify for an apartment. She now lives in transitional housing for former foster children, but must leave soon because she is taking custody of her younger sister.

Meanwhile, someone is still using her identity, she said. When she applied for cable recently, she learned she had an outstanding balance dating to when she was 11. Kelly, along with Hand and Rivera, are working on their credit problems with the help of the Children's Advocacy Institute in San Diego.

Kelly said she feels angry that even after leaving foster care, her fate is still not under her control.

"My whole life in foster care, I was punished for choices my parents made," Kelly said. "Now I'm being punished as an adult for choices a stranger made under my name. I just want to live for the actions and choices that I make."

Family Secrets: Parents Prey On Children's Identities As Victims Stay Silent

Gerry Smith   |   November 11, 2011    8:43 AM ET

"Burdened Beginnings" is a series examining the problem of child identity theft. Other stories in the series can be found here.

Ana Ramirez rents a cramped, two-bedroom house in southern California with her husband and three young children. Someday, she hopes to buy a home.

But according to her credit report, the 25-year-old already owns a home. In fact, she has been a delinquent homeowner, at least on paper, since she was 10 years old, she said.

Ramirez said her mother stole her identity to take out a mortgage when she was a child, but failed to make timely payments and nearly fell into foreclosure. When Ramirez became an adult, she discovered her credit was trashed.

So Ramirez had a choice: She could either report her mother to police -- a necessary step to fixing her credit -- or say nothing and enter adulthood with a tarnished financial reputation.

She decided to keep quiet.

Now, her blemished record is preventing Ramirez and her husband from acquiring a home loan, she said. She feels helpless and frustrated, but out of a sense of family loyalty, she refuses to file a police report that would repair her credit.

"I get angry sometimes when I think about it," Ramirez said. "But it's my mom. I wouldn't want to do that to her."

Ramirez said she is a victim of child identity theft, a crime that is capturing the attention of authorities as young adults find their Social Security numbers have been abused for years without detection. When victims turn 18, they encounter a series of financial roadblocks, unable to acquire loans for college, cars or homes due to damaged credit.

But advocates say cases like Ramirez's are the most difficult to detect and resolve because the ones who are supposed to monitor children's credit -- their parents -- are the thieves, and victims are often unwilling to report them. Without a police report, experts say it is nearly impossible to restore a victim's good name.

An estimated 500,000 children have had their identities stolen by a parent, according to ID Analytics, which sells identity fraud protection. It is a crime of opportunity, with the culprits having total access to their children's unused Social Security numbers and the victims unaware they are victims at all.

"Why would a family member do this?" Russell Butler, executive director at the Maryland Crime Victims' Resource Center, said at a July conference on child identity theft. "Well, it's easy -- as easy as taking candy from a baby. Because you have a child, and they don't even want the candy. They don't even know they have credit."

An Unreported Crime

The concern over child identity theft comes as Americans have a greater need for clean sources of credit. Last April, 25 percent of Americans had credit scores of less than 600 -- the least-creditworthy category -- compared to 15 percent before the recession began, according to data compiled by Deutsche Bank. Therefore, the temptation to hijack a child's pristine credit may be greater than ever.

Government efforts to stop child identity theft have only created new problems.

In 1987, the federal government launched a program to encourage parents to apply for their newborn's Social Security numbers at birth so identity thieves didn't apply for them first. But the program had an unintended consequence: By issuing Social Security numbers in a predictable sequence based partly on the year a person was born, identity thieves could infer a child's 9-digit identifier based on public information, according to Alessandro Acquisti, associate professor at Carnegie Mellon University.

In response, the Social Security Administration in June began assigning a randomized series of numbers to children. But some say this may complicate future efforts to prevent child identity theft. The credit card industry, for example, relies on the older, predicable sequence to reject applications linked to Social Security numbers that appear to belong to children.

"I am concerned that it might make it a little easier for children to be victimized," said Doug Johnson, vice president of risk management policy at the American Bankers Association.

In the largest study on child identity theft to date, researchers at Carnegie Mellon University earlier this year found the identity theft rate among children (10.2 percent) was 51 times higher than among adults (0.2 percent) in the same population

The stolen identities of children were used to purchase homes and cars, open credit card accounts, gain employment and obtain driver's licenses, according the report. The study was based on data provided by Debix, which sells identity theft services and offers free scans for parents who want to find out if a credit file exists on their child.

Last year, more than 18,000 identity theft complaints were reported to the Federal Trade Commission by victims 19 and under, making up about 8 percent of all complaints. That number has remained mostly flat over the past three years.

But experts say figures on child identity theft are likely much higher because the crime often goes unreported. ID Analytics estimates more than 140,000 children are victims of identity theft each year, based on a one-year study of children enrolled in the firm's identity protection service.

Advocates say the lack of reporting is most common when parents hijack their children's Social Security numbers. The unwillingness of victims to report these cases can be found in a small survey taken this year by the Identity Theft Resource Center.

Out of 55 identity theft victims who were targeted by family members, 24 percent said they "did not feel right" about filing a police report, the survey found. An additional 13 percent said "my family is ashamed and remains in denial" and 9 percent said "my family will turn against me if I take any action against this person."

"They're really torn about whether they should do something or not," said Gabby Beltran, a spokeswoman for the Identity Theft Resource Center. "They'll say 'It's my mom' or 'It's my dad, and I don't want anything to happen to them.' A good number of them don't do anything."

Some states have stiffened penalties for parents or guardians who steal children's identities. Florida, for example, has made the crime a second-degree felony with a maximum punishment of 15 years in prison.

Still, experts say more should be done to help children sort through the time-consuming and expensive process of repairing credit fraud. Victims of identity theft spend an average of 330 hours fixing their credit and incur more than $850 in expenses, according to the Identity Theft Resource Center.

Police are often unwilling to take a report when parents use their child's Social Security number, viewing it as a domestic matter, experts say. And the child-welfare system is not equipped to handle cases of parents stealing their children's identities because children are not allowed to retain legal assistance on their own, said Butler at the Maryland Crime Victims' Resource Center. Advocates say the law should view these cases like child abuse.

"You don't have a system now that considers the financial abuse of a child as a gateway to needing assistance," Butler said. "There's got to be someone who can step into those shoes and act in the child's best interests."

A Family Secret

Parents use their children's Social Security numbers for a variety of reasons. Some use them to get jobs because they have felony convictions on their records. Others use them to apply for credit cards and utilities because their own credit is tarnished.

Last April, Maryland resident Jimmy Louis Craighead, 40, was convicted of stealing the identities of his three children -- ages 6, 4 and 2. He told a judge he and his wife were not able to get credit in their own names, so they used their children's names to get money for food, fuel and other necessities, according to the Carroll County Times.

"They have maxed out their ability to get credit, so they borrow their child's thinking, 'Oh, it's okay. I'll pay all the bills so by the time they turn 18, they'll have great credit,'" Linda Foley, co-founder of ID Theft Info Source and an expert on child identity theft, said at a conference in July. "Well, they haven't unlearned the bad behaviors that got them in debt in the first place, so at 18, the child ends up in debt."


That debt can take years to remove from a credit report. When Chip St. Clair was 15, his parents stole his identity to take out nearly $50,000 in student loans, utilities, apartment leases and car loans over the course of three years, he said. He didn't find out until 1998, when he was 22 and his father was charged with escaping from an Indiana state prison in the 1970s.

He also learned that his father, who went by the name David St. Clair, was actually Michael Dean Grant, a convicted child killer. Grant had used Chip's Social Security number to create a new identity.

After his father's arrest in 1998, Chip's mother wrote a letter for her son to give to his creditors. Written in cursive on stationery with a brown stuffed bear, the letter began "To Whom It May Concern: I am writing this letter in hopes it will straighten out my son's credit and financial problems."

It continued: "Chip is trying to regroup and make something of himself and all this from the past is holding him back. ... He should not be held accountable for the sins of his father. ... Please try to have compassion for Chip's situation and help him clear his good name."

Now 36 and a resident of Rochester, Mich., St. Clair said he has spent the last decade trying to remove fraudulent charges from his credit report while paying high interest rates on loans because of his poor credit. He has still not been able to erase student loans that his parents took out in his name, he said. In October, he tried to open a utility account, but was told he had an outstanding balance of $500 from an address where his parents lived 20 years ago.

"Your credit is your lifeline to society," St. Clair told The Huffington Post. "When it's stolen from you, it creates so many problems in your life. It still haunts me to this day."

Chip St. Clair (left) says his parents stole his identity when he was a child.

Dad Reports Mom

Diamond Daye's credit report shows she has applied for credit cards, cell phones and cable, with some bills so overdue they have been sent to collection agencies, according to her father, Darwin Daye. But Diamond shouldn't have a credit report. She is only 13.

Daye claims Diamond's identity is being used by her mother, Maurine Walter, who has a history of writing bad checks, according to court records. Daye said he found out when Walter's cousin called him a few years ago.

"She said, 'You better check Diamond's credit, because Maurine is using her Social Security number,'" Daye told HuffPost.

Daye, 39, of Clayton, N.C., who separated from Walter in 2005, began contacting Diamond's creditors, trying to remove unpaid bills linked to his daughter's name. Daye provided letters to The Huffington Post that he received from Time Warner Cable, Sprint and Citibank informing him that Diamond's Social Security number was used by someone else. Daye believes it was Walter.

Daye said he recently put a freeze on Diamond's credit report, but remains concerned that other fraudulent accounts may wind up under his daughter's name. So he asked a private investigator to look into Diamond's credit history. For his efforts, Daye said his relationship with his daughter has become strained.

"She thinks Dad has caused a bunch of trouble," he said. "But I'm looking out for my daughter's best interest."

Two years ago, Walter was charged with using Diamond's Social Security number to pass a credit check for an apartment in Winchester, Va., according to court records. Walter pleaded guilty and avoided jail time. She retains custody of Diamond -- a fact that frustrates Diamond's father.

"To me, there was nothing done," Daye said. "How can that happen? You have one parent fighting to protect the child and the other parent messing the child up."

Walter did not return repeated calls seeking comment.

Jeff Ramey once found himself in a similar situation as Darwin Daye, but his story has a different outcome. Eight years ago, creditors began calling Ramey's house in Zephyrhills, Fla., asking to speak with his daughter, Shelbi, who was only 5. That was when Ramey pulled his daughter's credit report and found eight different credit cards in her name dating to when Shelbi was 2, he said.

"My jaw hit the floor," he told The Huffington Post.

Ramey knew the culprit: Shelbi's mother, Shannon Godfrey. Ramey reported her to police and she was arrested in November 2007, according to court records. Godfrey was released the same day after posting $400 bail. As restitution, she was ordered to pay off the credit card debt under her daughter's name -- more than $5,000, records show.

Now 13, Shelbi is old enough to understand what happened.

"I've talked to her," Ramey said. "She kind of understands what her mom did was pretty bad."

To prevent the unpaid debt from damaging Shelbi's credit when she got older, Ramey sent copies of her birth certificates to his daughter's creditors, proving she was too young to acquire a credit card. It took him about three years to remove the fraud from her credit report, but he is relieved to have caught it when he did.

"It was a big pain in the butt to get it all straight," Ramey said, "but I'm glad I found out about it when she was 5 and not when she was older. I can't imagine how bad it would have been."

Swept Under The Rug

Fifteen years ago, Ramirez's mother divorced her father and began looking for a new home to raise her five daughters. Nearly broke, her mother took a job cleaning houses and offices. But with damaged credit, she did not qualify for a home loan.

So she used 10-year-old Ana's Social Security number to take out a mortgage on a four-bedroom house. Over the years, Ramirez said her mother also used her credit to buy a cell phone, a Ford station wagon and some jewelry.

Ramirez said her mother was able to steal her identity because they both have the same name, except for a different middle initial. Ramirez discovered the theft a decade later, when she and her husband were newly married and about to buy a home. Their real estate agent ran a credit check and found Ana's credit score was 300, the lowest possible.

"My mother wanted to do anything to get away from my father and build a whole new life," Ramirez said. "She did it out of desperation, but didn't think about the long-term effects."

Today, Ramirez, a full-time teacher, lives with her husband and three children -- ages 5, 4 and 5 months -- in San Bernardino, Calif., about 65 miles east of Los Angeles. With just two bedrooms, the house is too small and they want to buy a larger one. But while her husband's credit is good, they are applying for a mortgage under both of their incomes, which means credit checks are required on both of them.

Ramirez has started slowly rebuilding her credit by using credit cards with $250 limits -- the only ones she can acquire -- and paying them off immediately.

When Ramirez and her mother are together, they don't bring up the identity theft because it leads to an argument, she said. In Mexican-American families, children do not question their parents, she told HuffPost.

Still, her mother felt so guilty about damaging her daughter's financial reputation that she recently paid $800 to a company called Advantage Plus Credit Reporting, which offered to move the bad debt to her mother's credit report. But after Ramirez's mother sent the money, the company did nothing, and when she called to inquire, the phone number was disconnected, Ramirez said.

"They took her money and didn't do anything about it," Ramirez said.

Ramirez's husband, a barber, wants her to report her mother to police so she can fix her credit and they can buy a home. But Ramirez refuses.

"In our culture, it's always 'family first,'" Ramirez said. "I've just got to bite the bullet and sweep it under the rug."

Identity Thieves Target Children For Unused Social Security Numbers

Gerry Smith   |   August 21, 2011    9:21 AM ET

"Burdened Beginnings" is a series examining the problem of child identity theft. Other stories in the series can be found here.

Every few weeks, Stephanie McManis receives a phone call from a collection agency asking for someone she never met. She recently opened a letter from a bank threatening to sue her for defaulting on a loan she never took out. She checks her credit report monthly, disputing late payments on emergency room visits she never made.

McManis, 31, says she is a victim of identity theft, a well-documented problem these days. One detail elevates her case from the typical, however: her identity was stolen when she was 12 years old. Now, nearly two decades later, she still can't separate herself from a checkered financial past created before she was old enough to drive.

"It's frustrating because I'm constantly having to jump through hoops," McManis said. "I'm resigned to the fact that I will be dealing with this for the rest of my life."

Experts say children represent an emerging market for identity thieves who steal their Social Security numbers because they offer clean slates that can be used to commit fraud for years without detection. Many victims don't learn about the crime until they are young adults and find their credit in tatters as they are rejected for student loans, jobs and places to live.

Even as recent data breaches at large corporations have raised awareness about safeguarding consumer information, children's Social Security numbers are lying around little-guarded places not accustomed to fearing cyber-attacks -- like schools and pediatric centers -- constituting a goldmine for criminals seeking untainted identities.

If left unchecked, child identity theft poses risks not only to young adults, but also to the financial system by eroding confidence that loans will be repaid, experts say.

"There's a systemic financial impact, as well as what we should be doing morally, ethically and legally to help our children have a future that they design on their own," Michelle Dennedy, a privacy consultant and founder of TheIdentityProject.com, said at a July conference on child identity theft sponsored by the Federal Trade Commission.

With increasing frequency, cyberthieves are hijacking those futures, tapping the pristine Social Security numbers of children for adult purposes, enabling undocumented immigrants to gain employment and people with tainted credit to secure credit cards, mortgages and car loans, experts say.

Utah officials have started checking a state employment database with a list of Utah children on public aid, finding "thousands" of workers using children's identities to acquire jobs, according to Utah Assistant Attorney General Richard Hamp. In one recent case, nine people were using a 9-year-old's Social Security number to gain employment, Hamp said.

"I have prosecuted a number of those cases at this stage and can tell you -- I've got kids that are brick masons. I've got kids that are waitresses. I've got kids that are carpenters," Hamp said at the FTC forum.

A THEFT GOES UNDETECTED

Last year, about 8 percent of identity theft complaints came from victims 19 and younger, slightly more than the year before, according to the Federal Trade Commission. More than 140,000 children are victims of identity theft each year, according to ID Analytics, which sells identity fraud protection and based its estimate on a one-year review of children enrolled in its services.

Both figures are probably much higher, experts say, because parents typically don't monitor their child's credit report, assuming one should not exist. And even if they did, the fraud may go undetected by credit bureaus because identity thieves pair children's Social Security numbers with new names and birthdays.

Debix, which sells identity protection services, says it recently ran credit reports on 381 cases of confirmed child identity theft and found credit reports only turned up fraudulent activity in four cases, or 1 percent.

Child identity theft is driven largely by organized crime, but undocumented immigrants and family members are also using children's Social Security numbers to start new lives or pay bills, experts say. Foster children are particularly vulnerable to identity theft because their personal information is floating through the foster-care system, experts say.

Jaleesa Suell entered foster care when she was 8 years old and was placed in six different foster families. At some point, someone used her identity to apply for a credit card, she said.

When Jaleesa turned 21 last year, she said she was denied her first credit card. Then she noticed on her credit report an account opened when she was 17 with payments in default. Despite six months of corresponding with credit bureaus and the bank, she has been unable to have the fraudulent payments removed.

She fears the issue won't be resolved in time for graduation when she will need credit to rent an apartment -- a cruel irony for someone who grew up in foster care.

"I've spent my life wondering if I'll have a place to stay," she said. "And now that my identity is stolen I find myself in the same circumstance."

To combat identity theft among foster children, Rep. Jim Langevin (D-R.I.) has introduced legislation that would require states to annually obtain their credit reports and prohibit states from using their Social Security numbers to identify them.

"These youth already face so many unique challenges and it is unconscionable that we are seeing more and more evidence of identity theft that further hinders their ability to become self-sufficient young adults," Langevin said in a statement.

Jaleesa Suell's identity was stolen while she was 17 and in foster care.

17 YEARS OLD AND $725,000 IN DEBT

In the largest study on child identity theft to date, researchers at Carnegie Mellon University found that 10 percent of children were victims of identity theft, compared with less than 1 percent of adults.

Though not scientific, the study, which was published this spring, analyzed more than 800,000 records, including 40,000 belonging to minors, that were compromised by data breaches in 2009 and 2010. The information was provided by Debix, which sells identity theft services and offers free scans for parents who want to find out if a credit file exists on their child.

The stolen identities were used to purchase homes and cars, open credit card accounts, gain employment and obtain driver's licenses, the report found. The youngest victim was five months old. In one case, eight people are suspected of opening 42 accounts and incurring more than $725,000 in debt using a 17-year-old's Social Security number.

Many child identity thefts begin with a cyber attack, according to Bo Holland, chief executive of Debix. Hackers are now using computer viruses and botnets, or networks of infected computers, to search for specific documents on computers such as tax records and health records, which contain children's Social Security numbers, Holland said.

Once stolen, children's Social Security numbers are sold to human traffickers or thieves looking to open fraudulent credit accounts, authorities say. Last fall, two men in Newark, Del., were convicted of stealing the identities of more than 93 victims, including 44 children, and using them to open 343 credit cards, 54 bank accounts and two shell businesses over six years, resulting in about $1 million in losses.


For $40 to $80, websites illegally sell 9-digit "credit privacy numbers," which are clean Social Security numbers mostly belonging to children, according to Jennifer Walker, who works in the Office of the Inspector General of the Social Security Administration.

And if thieves are unable to buy or steal a child's Social Security number, they may be able to guess it. In fact, children's numbers are easier to predict than adults' numbers thanks to a government program created in 1987, according to Alessandro Acquisti, associate professor at Carnegie Mellon University.

The Social Security Administration's program encouraged parents to apply for their newborn's Social Security numbers at birth to prevent identity thieves from hijacking their child's Social Security numbers before they could apply for them.

But the program had the opposite effect because Social Security numbers have been issued in a predictable sequence based on when and where a child was born. So when nearly all children began receiving Social Security numbers at birth, thieves could infer all nine digits based on publicly available information, Acquisti said.

In June, the Social Security Administration hoped to fix this by assigning a randomized series of numbers, but the more predictable Social Security numbers will remain in effect for people born before this summer.

"We're talking about hundreds of millions of Social Security numbers that are still potentially predicable," Acquisti said. "We've made the job of identity theft way too easy."

LEAKY SOURCES OF IDENTITIES

While they have long focused on financial institutions, online thieves have also begun targeting organizations that store vast amounts of children's Social Security numbers, such as health care providers and schools. But those agencies often fail to properly safeguard the information or promptly disclose data breaches when they occur.

Last July, a Bronx man was charged with filing false tax returns by using Social Security numbers of children who were patients of pediatric cancer and other hospitals in New York City.

In January, health care insurer Health Net learned that computer servers containing data on nearly two million members, employees and health care providers went missing. But the company waited nearly two months to report the breach, according to the San Francisco Chronicle. Then it began offering free credit-monitoring services to enrollees whose information may have been compromised.

That was when Simon Umscheid learned his 6-year-old son Ian was apparently the victim of identity theft. After the data breach at Health Net, an identity thief set up several bank accounts and bought jewelry and cable television service under his son's name, racking up about $14,000. Umscheid said the fraud is being resolved, but he remains angry with Health Net, which also suffered a major data breach in 2009.

"It's incredibly frustrating," he said. "My son obviously doesn't understand what's going on and we haven’t talked to him about it. You feel victimized."

Meanwhile, at least 26 states now collect Social Security numbers from students to track their future performance in the workplace, according to the Data Quality Campaign.

But schools have struggled to secure children's identities. The education sector represented 12 percent of all data breaches last year, according to the security firm Symantec. And this year, data breaches at schools have continued.

In one example, officials at Lancaster County School District in Lancaster, S.C., sent letters in April notifying parents that hackers had broken into a system housing the Social Security numbers of about 25,000 students. In June, two laptops containing Social Security numbers of 10,000 students and staff from northern Illinois were stolen from a car, according to the Privacy Rights Clearinghouse.

"There are likely many schools that have exposed data that don’t understand how exposed it is," said Robert Hamilton, senior manager of product marketing at Symantec.

Some parents have fought efforts to collect sensitive information on their children. After strong opposition from parents and school boards, the Maine legislature this year removed language in a state law that required schools to collect student's Social Security numbers.

Such groundswells of protest should happen more often, privacy advocates say. Parents should be skeptical when giving out their child's Social Security numbers, particularly when there is no apparent need for it, Dennedy said.

"There's not enough education in the marketplace to tell parents to push back when someone asks you for their Social Security number to join a church canoe trip," she said at a forum last month. "They probably won't be trying to get a credit card in the canoe. I'm not sure why they're even asking for that kind of information."

Stephanie McManis, 31, says her identity was stolen when she was 12

A STRUGGLE TO REGAIN HER NAME

For victims of child identity theft, the damage can take years to unwind. After graduating college in 2001, Stephanie McManis applied for her first credit card, but was rejected.

Only after she requested her credit report did she learn that someone else had used her identity since she was 12 years old, she said. Her credit report was "inches thick," she said, filled with unpaid mortgages, car loans, cell phone contracts and credit card debt.

McManis filed a report with her local police department and authorities tracked down the woman who was using her identity and living just a few hours away in Avon, Ohio, just west of Cleveland.

Avon Police Officer Kevin Krugman, who investigated the case, said the Social Security numbers of the two women are one digit off and he believed the confusion was caused by "nothing more than a clerical error" by someone at a credit agency, not identity theft.

"Their identities are tied together for good until they take care of it," Krugman said.

But privacy advocates familiar with McManis' case still believe she is a victim of identity theft. Dennedy said local police departments often do not want to conduct thorough investigations of identity theft because they do not have the time or resources. And if it was an honest mistake, Dennedy said, why is this woman still using McManis' Social Security number today?

"Cops don’t want to believe it's identity theft because they have to close their cases," Dennedy said. "They don't understand the harm. Even if it was an honest mistake, and you still can't get a house or a loan, the impact is the same. You're still stuck with someone else's bad credit."

A few years ago, McManis was denied a mortgage on a house because the other woman had filed for foreclosure. The issue was eventually straightened out, but the calls from collection agencies asking for hospital bill payments continue.

To this day, McManis does not know how her identity was stolen. She knows the woman's name and has found her Facebook page, but has never contacted her directly because she does not want to appear to threaten her. The woman did not return calls for comment.

"I'm angry at her but also frustrated with the system," McManis said. "I shouldn’t have to prove myself when I've had good credit my whole life."

5 tips for parents to protect their children from identity theft:

1. Don’t carry around a child’s Social Security card. This increases the risk of losing the card, which is the most common way identity thieves obtain a child’s information.

2. Be discriminating when asked for a child’s personal information. If it has to be provided, ask how it will be stored. If the information will not be retained, inquire how any record of it will be destroyed or returned.

3. Cross-shred documents with personal identifying information before disposing of them.

4. Don’t post children’s pictures online. Most digital cameras have geocoding features that embed within images the location where pictures were taken. This gives identity thieves information they can use to steal children’s identities.

5. Don’t give children their Social Security numbers until they understand how and why to protect the numbers.

Source: Identity Theft 911