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Tips to Help Clients Weather Data Security Breaches

Preventing identify theft is about a lot more than protecting clients’ privacy. Indeed, sophisticated hackers that breach data firewalls can use the stolen information to gain control of individuals’ financial accounts and take out loans in victims’ names. What’s more, data breaches appear to be occurring more frequently and are becoming more threatening to individuals’ financial health. With that in mind, advisors should help their clients take appropriate actions—some of which may not be commonly known—to help halt identify theft. At the same time, many Americans who use data monitoring services may be enjoying a false sense of comfort.

Most recently, health insurance company Anthem was hit with a massive data breach that exposed personal information of 80 million clients and employees. While the company has emphasized that no credit card data was released, some reports say that hackers obtained individuals’ Social Security numbers.

Armed with that data and other information, such as individuals’ addresses, hackers can take out loans in victims’ names or potentially gain control of investors’ financial assets. Identity thieves can also use ill-gotten information to commit tax-refund fraud.

The Anthem mess, of course, isn’t an isolated episode. In a highly publicized event, data of 350,000 Morgan Stanley clients’ was breached and some of the information was even posted online. The retail sector has also had its share of data breaches. Late last year, Staples said personal data from as many as 1.16 million payment cards had been stolen and Home Depot reported a breach that involved an estimated 60 million payment cards. Target was also hit by hackers who obtained data on 40 million cardholders.

Most companies that have been hit with data breaches respond by offering to provide credit monitoring services to customers. Broadly speaking, the services notify customers when creditors run credit checks when processing loan applications. While the services can help customers learn about credit inquiries from suspected criminals, they may not prevent loans from being taking out by inappropriate parties. In other words, many of the services provide information after illegal loan activity occurs and won’t prevent thieves from using individuals’ credit card numbers.

With that in mind, advisors should urge clients to implement credit freezes, which will prevent credit rating bureaus from releasing information to creditors. That way, when thieves use a false identity to apply for a loan, their applications for debt financing will be rejected because creditors won’t be able to run credit checks.

Credit freezes also prevent credit history inquiries that are being made for legitimate reasons, such as when individuals apply for mortgages or when employers run background checks on job applications. With that in mind, individuals who implement credit freezes will need to ask their banks or potential employees to identify which bureaus will be used to research credit histories. That way, individuals can temporarily remove the freeze so that credit checks for legitimate purposes can be conducted.

Many individuals will find the inconvenience of having to temporarily lifting a freeze a small price to pay for the peace of mind that results from knowing the nefarious activity is being thwarted. Clients may also have to pay a minimal fee to implement or to temporarily remove the freezes, but most people consider the expenses to be money well spent when considering the level of security that the action provides.

In addition, the costs for implementing the freezes may be less than the cost of commercial credit monitoring services.

Clients can use the following links to implement the credit freezes.

https://www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp

 

https://www.experian.com/freeze/center.html

http://www.transunion.com/securityfreeze?tab=freezefees

https://www.innovis.com/securityFreeze/index

Clients should also check their credit reports. Each credit bureau must provide one free report each year. With that in mind, clients should stagger their inspection of credit reports throughout the year.

They can obtain the reports through www.AnnualCreditReport.com. Credit reports from Innovis, however, must be obtained at https://www.innovis.com. Advisors should also explain to clients that they are only responsible for a maximum amount of $50 per credit card when credit card theft occurs.

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