Innovative Identity Theft Protection Offered by the State of Texas – Closed Account Notification

Identity theft is on the rise, and is fast becoming one of the top five most often occurring crimes. This crime cost victims, money and time, as well as in some cases even further damages to their health and family. In many instances, it can take up to 400 hours to be resolved, with monetary damages measuring at $5,000.00.

Many states have taken steps to help protect consumers from identity theft, as well as to assist them in recovering. There are now special investigative units within many police departments, as well as State Attorney Generals. However, the state of Texas has recently passed new legislation to help victims of identity theft overcome one of the most significant problems with identity theft that of bank (checking) account theft. Thousands of people each year have had checking accounts opened in their names, checks drawn on the account and thousands of dollars spent, committing identity theft in the form of check fraud.

In the past, check fraud and identity theft victims believed that by simply closing the accounts, after the crime has been discovered, would be enough to stop the unauthorized use of their identity and the account. However, banks had no way of sharing the information about closed accounts with check verification companies that merchants use to determine if checks are legitimate. Identity thieves could use victim’s checks on an account for weeks even though the owner had closed the account and merchants believed they had a reliable system for verifying accounts. This left many retailers with “bad checks” and gave the thieves the opportunity to cash in on this weakness in the banking system.

The Texas Department of Banking adopted the

, or CANS, in March 2008. It is believed that this form of protection against identity theft for banks, individuals and retailers is the first of its kind. Representative Helen Giddings (Dallas) authored House Bill 2002, resulting in this protection system and service.

House Bill 2002 requires banks and credit unions in Texas to submit information concerning suspected compromised bank accounts to a secure electronic notification system at a customer’s request. This notification then alerts companies who offer check verification, to the potential identity theft and fraudulent use of checks from a specific account.

The use of House Bill 2002 establishes a secure electronic notification system, for consumers, banks and check verification systems. According to Representative Giddings, “Notification happens by the second business day so that thieves are stopped in their tracks. No longer will identity thieves be able to profit from their crimes by passing bad checks for weeks. Millions of dollars will be saved, but most importantly, stopping identity theft early will help victims restore their credit and good name.”

The new law gives financial institutions additional options to help customers when identity theft or fraud has compromised their accounts. In addition to closing any compromised deposit accounts, the customer may ask the financial institution to send a notice to all major check verification companies.

In order to for consumers to use this service, they must request the action through their bank. It does not happen without their request. Additionally, consumers must provide their financial institutions with: a copy of the incident report or police report case number; a sworn, signed statement that the customer has been a victim of identity theft; and

a written, signed authorization allowing the financial institution to submit the account information to CANS.

This service is provided at no cost to all financial institutions in Texas. To participate, banks must register through a secure web page provided by the Texas Department of Banking. So it is not only important for consumers to request these services, but it is important that your banking institution is participating in this service. To determine if you bank is using this service or has registered to participate in this program talk to your branch or contact the Texas Department of Banking.

Each and every transaction that occurs as a result of identity theft adds to the financial and emotional burden experienced by the victim. With each fraudulent check passed, victims and retailers are both left with losses of time and money. This new law will help consumers to stop identity thieves sooner, as well as stop the cycle of future crimes.

Will other states follow the innovations begun by the state of Texas in providing protection from identity theft for their constituents with House Bill 2002? How effective will this service be? This is yet to be seen, but it all starts with the consumer, they must request participating in the notification system and begin the using the services provided to them to counter the effects of the crime of identity theft.

Maksim Fadeev