On January 12, 2023, the Consumer Financial Protection Bureau (“CFPB”) issued a report highlighting an increase in reported incidents of identity theft by servicemembers. The report, titled “Servicemember reports about identity theft are increasing,” cited to data from the Federal Trade Commission (“FTC”) that showed nearly 50,000 cases of identity theft involving military consumers (including servicemembers, veterans, and their family members) in 2021. According to a 2020 FTC report, active duty servicemembers were 76% more likely than their civilian counterparts to report that identity theft occurred on an existing account and 22 percent more likely than their civilian counterparts to report that their stolen information was used to open a new account.
The CFPB report mentions some specific attributes of the servicemember population that make them attractive targets to identity thieves, including steady income and frequent relocation that may increase the risk of exposure of their personal information through housing searches, spousal employment searches, and other application processes. It also details the unique and heightened repercussions of identity theft on servicemembers, who are subject to continuous evaluation of their credit history and ability to meet their financial obligations in order to maintain their security clearance. As the report states, “[i]f identity theft results in fraudulent credit accounts and past-due bills showing up on a servicemember’s credit report, it can swiftly derail the servicemember’s career, undermining military readiness and national security.” According to the CFPB, military consumer complaints about identity theft increased nearly fivefold in the past 8 years, from just over 200 annually in 2014 to more than 1,000 in 2022.
Like other consumers, many servicemembers only learn that they have been victims of identity theft after it occurs, when they see a debt they do not recognize on their credit report or receive collection calls. The report concludes that financial institutions and creditors must be the first line of defense against identity theft. Citing to obligations under the “Red Flags Rule,” the Bureau instructs financial institutions and creditors “to identify possible signs of identity theft in day-to-day operations, have a process to detect red flags of identity theft when they occur, design a course of action for use when they detect these red flags, and provide a plan to stay current on new threats.” The Red Flags Rule, which sets forth duties regarding the detection, prevention, and mitigation of identity theft, is not enforced by the CFPB, but is implemented and enforced by other regulators, including the FTC (16 C.F.R. § 681.1(d)), the Office of Comptroller of the Currency (12 C.F.R. § 41.90), the Federal Reserve (12 C.F.R § 222.90), the Federal Deposit Insurance Corporation (12 C.F.R. § 334.90), and the National Credit Union Administration ( 12 C.F.R. § 717.90).
The Red Flags Rule is not specific to servicemembers, but financial institutions and creditors should also be particularly mindful of consumer requests and complaints from servicemembers involving identity theft based on their unique vulnerability and reputational risk considerations.
The CFPB’s primary focus in the report is on steps military consumers can take to protect themselves from identity theft, including:
- Requesting an active duty alert or security freeze when they are about to deploy. This protects servicemembers by alerting businesses through Experian, TransUnion, or Equifax that a servicemember is probably out of the country and that the business must take reasonable steps to verify the servicemember’s identity before granting new credit in the servicemember’s name. Active duty alerts are free, last for 12 months, and are renewable for the length of a servicemember’s deployment. A request for an active duty alert made to one credit reporting agency will apply to all three credit reporting agencies. A request for a security freeze, on the other hand, must be made separately to each of the three agencies, but a security freeze is also free and prevents prospective creditors from accessing a servicemember’s credit.
- Reviewing their credit reports regularly and disputing inaccurate information.
- Signing up for free credit monitoring services. Active duty military, reservists on active duty, and members of the National Guard can get free credit monitoring from each of the three credit reporting agencies (but must place a separate request with each one).
Finally, the report encourages military consumers to report any incidents of identity theft to IdentityTheft.gov and to contact their base’s Personal Financial Manager or Legal Assistance Office for assistance in fixing problems resulting from identity theft.