FiCEP Identity Theft and Fraud — Questions and Answers
Question 1: What is the primary difference between a fraud alert and a credit freeze?
- A fraud alert permanently blocks access to a credit report; a credit freeze is temporary and renewable
- A fraud alert requires creditors to take extra steps to verify identity before opening new accounts; a credit freeze blocks access to the credit report entirely (Correct answer)
- A fraud alert costs a fee at each bureau; a credit freeze is always free
- A fraud alert must be placed at all three bureaus separately; a credit freeze at one bureau automatically covers all three
Correct answer: A fraud alert requires creditors to take extra steps to verify identity before opening new accounts; a credit freeze blocks access to the credit report entirely
A fraud alert is a notice on a credit report that warns lenders to take additional verification steps before extending credit; it does not block access. A credit freeze (security freeze) locks the credit report so it cannot be accessed by new lenders at all, making it far more effective at preventing new fraudulent accounts. Since 2018, both fraud alerts and credit freezes are free under federal law.
Question 2: If a client discovers fraudulent accounts on their credit report, what is typically the FIRST recommended step?
- Dispute each fraudulent account directly with the creditor by certified mail
- File a formal complaint with the Consumer Financial Protection Bureau
- Place a fraud alert with one of the three major credit bureaus (Correct answer)
- Close all existing bank and credit accounts immediately
Correct answer: Place a fraud alert with one of the three major credit bureaus
The FTC recommends placing a fraud alert with one major bureau first — that bureau is then legally required to notify the other two. This single step immediately alerts all future creditors to verify identity before extending credit. Disputing accounts and filing reports with agencies like the FTC or CFPB are important follow-up steps, but the fraud alert is the fastest first protective action.
Question 3: Which federal agency operates the primary one-stop resource for identity theft victims to report theft and receive a personalized recovery plan?
- Consumer Financial Protection Bureau (CFPB) via ConsumerFinance.gov
- Federal Trade Commission (FTC) via IdentityTheft.gov (Correct answer)
- Social Security Administration via SSA.gov
- FBI Cyber Division via IC3.gov
Correct answer: Federal Trade Commission (FTC) via IdentityTheft.gov
The FTC's IdentityTheft.gov is the official federal resource where victims report identity theft, receive a customized recovery plan, and generate an FTC Identity Theft Report. This report is used when disputing fraudulent accounts with creditors and credit bureaus. Other agencies handle related aspects (SSA for SSN fraud, FBI for cybercrime), but the FTC is the primary hub for individual victims.
Question 4: A client calls to report that someone phoned them claiming to be from their bank, asking them to 'verify' their account number and PIN. What type of fraud is this?
- Skimming
- Phishing
- Vishing (Correct answer)
- Pretexting
Correct answer: Vishing
Vishing (voice phishing) uses telephone calls to manipulate victims into revealing sensitive information. Phishing typically refers to email-based deception. Skimming uses physical devices to steal card data at ATMs or payment terminals. Pretexting involves fabricating a detailed scenario to gain trust, though it often overlaps with vishing. Recognizing vishing helps clients avoid giving information to callers regardless of how legitimate they seem.
Question 5: To prevent a tax identity thief from filing a fraudulent return using a client's Social Security number, the counselor should advise the client to request:
- A new Social Security number from the SSA
- An Identity Protection PIN (IP PIN) from the IRS (Correct answer)
- A credit freeze at all three major bureaus
- A fraud alert specifically flagged for tax fraud with the IRS
Correct answer: An Identity Protection PIN (IP PIN) from the IRS
The IRS offers an Identity Protection PIN (IP PIN), a six-digit number that must be included on the taxpayer's federal return. Without the correct IP PIN, the IRS will reject any return filed with that SSN, blocking fraudulent filings. A credit freeze protects against new credit accounts but does not prevent tax fraud. The SSA rarely issues new SSNs and has strict criteria for doing so.
Question 6: Under the Fair Credit Reporting Act (FCRA), a victim of identity theft has the right to:
- Have all negative items permanently removed from their credit report within 30 days
- Obtain free credit reports indefinitely from all three bureaus
- Block fraudulent information resulting from identity theft from appearing on their credit report (Correct answer)
- Sue creditors for any amount lost due to fraudulent accounts
Correct answer: Block fraudulent information resulting from identity theft from appearing on their credit report
The FCRA gives identity theft victims the right to block fraudulent information from their credit reports. To do so, victims must provide the credit bureau with a copy of an identity theft report (from IdentityTheft.gov or a police report) and identify the fraudulent information. The bureau must block the information within four days of receiving the required documentation. This is distinct from a standard dispute and is a stronger remedy.
FiCEP Identity Theft and Fraud
What is the primary difference between a fraud alert and a credit freeze?