During 2018 alone, nearly half a million identity theft cases were reported to the Federal Trade Commission, making it the third-most-common type of fraud.1
Identity theft, which can be defined as taking someone else’s personal information and using it for fraudulent purposes, takes two principal forms: hacking into the electronic records of banks and companies that gather personal information about their customers in the normal course of doing business; and credit card fraud.
Their Credit Cards Are at Risk
Credit card fraud is the most common type of identity theft.2 Americans use credit and debit cards more than 123 billion times every year.3 During the first half of 2019, more than 15 million credit cards with card numbers issued in the US were stolen.4
Sometimes, the cards themselves go missing. More frequently, the data they contain is stolen through “skimming” (their data is captured on a small electronic device placed at gas stations, ATMs, etc.) and other indirect methods. Stolen credit cards can be used by the thief or sold on the “dark web.” Often, it’s the fact that the credit card isn’t physically missing that prevents the theft from being detected for weeks or even months, and then only if and when victims take the time to review their charges carefully.
Bank Accounts Are Being Hacked
Electronic hacks can yield credit card numbers, financial account numbers, and social security numbers, as well as other personal information that can be used to steal from existing accounts or create fraudulent accounts. Hacking was responsible for 39% of data breaches in 2018.5 We’ve all heard about the 2017 Equifax data breach, which compromised the personal data of 147 million Americans, and the 2019 Capital One data breach, which affected more than 100 million people. The majority of the more than 5,000 data hacks in 2019 were incidents of bank fraud.6
The Biggest Potential for Loss: Debit Cards
How big of a financial problem is identity theft for its victims? That depends in part on what is stolen and how. According to the Fair Credit Billing Act (FCBA), if a credit card number was skimmed or otherwise hacked, but the card itself is still in your possession, you’re not liable for any unauthorized charges. If the credit card itself was stolen you could be liable for a maximum of $50 in fraudulent charges. Today, however, most major credit card companies offer “zero liability,” so card holders are freed of responsibility for any and all fraud against them.
In the case of a hacked bank account, it’s still relatively clear cut. Generally, the bank is obligated to replenish stolen funds. That full liability, however, does not continue indefinitely, so it’s important to report fraud as quickly as possible.
It’s a very different situation with debit cards. If your card is stolen, your maximum liability is $50, providing you reported the missing card within two days. If you report it after that, but within two months’ time, you could be responsible for up to $500 in fraudulent charges. After 60 days, you might be responsible for the entire amount charged by the thief.7
The Benefits of Offering an Identity Protection Benefit
In 2017, half of all workers said they would like their employer to provide identity theft protection.8 At that point, only 24% of bosses agreed.9 But as identity theft has continued to grow, and as its costs both to employees and employers have become more apparent, many companies are embracing ID theft protection as a perk.
Having employees who know they are protected against fraudulent charges (up to a dollar amount you choose) can help reduce lost productivity. In their efforts to prevent liability for bad charges employees are frequently absent or distracted.
Offering Identity Theft Protection is attractive today thanks to a 2016 IRS decision to make employer-provided identity theft protection a tax-free benefit to all companies, not just those which had previously suffered a data breach. That means you can offer it without a tax penalty to your company or your employees. This benefit can cover employee bank accounts, credit cards, and debit cards, including their employee benefit cards.
When you think about it, protection against fraudulent charges is another kind of “insurance” employers can offer to be an employer of choice in attracting and retaining talent. And don’t underestimate the good will that comes from employees grateful that you helped them out of a tough spot.
Editor’s Note: TASC includes Identity Theft Protection at no charge with TASC Universal Benefit Account.
1. “Identity Theft and Credit Card Fraud Statistics for 2019,” The Motley Fool, Nov. 2019: https://www.fool.com/the-ascent/research/identity-theft-credit-card-fraud-statistics/
3. “23 Million Stolen Credit Cards For Sale on the Dark Web in the First Half of 2019,” Sixgill, July 2019: https://blog.cybersixgill.com/23million_stolen_cc_blog
5. “Identity Theft and Credit Card Fraud Statistics for 2019,” The Motley Fool, Nov. 2019: https://www.fool.com/the-ascent/research/identity-theft-credit-card-fraud-statistics/
6. “The Five Biggest Data Hacks of 2019,” CNBC, Dec. 2019: https://www.cnbc.com/2019/12/17/the-5-biggest-data-hacks-of-2019.html
7. “Lost or Stolen Debit Cards: What to Do Now, Minimize Risks,” The Balance, March 2019: https://www.thebalance.com/stolen-debit-card-risk-315319
8. “Workers Want More Help in Finance Than Employers Think They Should Provide,” Benefits Pro, Jan. 2018: https://tinyurl.com/alightstudy