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I. Introduction
Identity theft, already rampant, is among the fastest growing financial crimes in America.1 The best estimates2 place the number of victims in excess of 100,000 per year and the dollar loss in excess of $2 billion per year.3 The growth of identity theft appears to be geometric,4 reflecting the
fact that the consumer-credit system has no effective defenses against it. Congress's first attempt to respond to the problem--the Identity Theft and Assumption Deterrence Act of 1998(5)--has had little effect. Several bills directed at identity theft are now pending in Congress6 and nearly all states have enacted their own legislation. But even the staunchest advocates of the proposed reforms admit that they will not solve the problem.8 Identity theft is out of control.9
Used broadly, "identity theft" refers to any impersonation of a specific individual.10 In the scheme most commonly referred to as identity theft--the one principally addressed in this article--the thief opens a credit account in the name of the victim.11 That account may be a credit-card account, an
account for telephone or utility service, a lease of an apartment, or some similar credit extension.12 The thief obtains money, goods, or services, charges them to the account, and then disappears. This type of identity theft has two victims. First, the firm that extends credit (hereinafter the "creditor" or the "defrauded creditor") will lose the amount extended. Second, the person whose name is used (hereinafter the "victim" or the "impersonated victim") will be blamed for the fraud. Defrauded creditors have both legal and practical means for dealing with the problem. They are likely to employ such means as are cost effective, and pass the remaining costs on to their other customers. As developed further below, impersonated victims have neither legal nor practical means for dealing with the problem. This Article principally addresses their plight.
Although the impersonated victim is not involved in the fraudulent credit transactions perpetrated by the identity thief and suffers no direct loss from those transactions, the victim usually suffers from various secondary effects. Thinking that it extended credit to the victim, the defrauded creditor initiates collection action against the victim. The action may include phone calls, written demands for payment, refusal to extend future credit, legal action, and perhaps most...