FiCEP Identity Theft and Fraud

Question 1

What is the primary difference between a fraud alert and a credit freeze?

Accepted 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

Answer

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?

Accepted Answer

Place a fraud alert with one of the three major credit bureaus

Answer

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?

Accepted Answer

Federal Trade Commission (FTC) via IdentityTheft.gov

Answer

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?

Accepted Answer

Vishing

Answer

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:

Accepted Answer

An Identity Protection PIN (IP PIN) from the IRS

Answer

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.

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP Identity Theft and Fraud