New Approach to ID Theft Called For
If credit reporting agencies and creditors were liable for the losses caused when they report the transactions of identity thieves as the transactions of the consumer victims, they would have greater incentives to take more aggressive steps to reduce incidences of identity theft. This is the argument put forward by Jeff Sovern, professor of law at St. John's University School of Law, in his article The Jewel of Their Souls: Preventing Identity Theft Through Loss Allocation Rules, published in the Winter 2003 edition of the University of Pittsburgh Law Review.
The current reality of identity theft is that those who bear the greatest costs associated with identity theft, the consumer victim, are often powerless to prevent it, while those able to prevent it have either no incentive to do so or have a disincentive. Mr. Sovern argues in his article that a better solution is to create a system in which the same person would absorb both the cost of identity theft and the benefits of preventing it. This argument is framed within a traditional goal of loss allocation rules: to put the loss on the party who can avoid the loss at the least cost. "If the loss were put on the party best able to prevent the loss, that party would have an incentive to take precautions to avoid the loss," contends Mr. Sovern in his article.
The article also details the impediments created by the current approaches to identity theft. Mr. Sovern discusses the inadequacies of the Fair Credit Reporting Act (FCRA) in properly addressing identity theft. Under the FCRA, credit-reporting agencies are liable only when they fail to follow reasonable procedures to assure maximum possible accuracy. He argues that the bar here is set too low. The article considers a strict liability standard to the credit-reporting agencies for attributing the transactions of identity thieves to innocent consumers, as well as liability to creditors for reporting the transactions of imposters to the credit agencies as the transactions of others.
The Jewel of Their Souls: Preventing Identity Theft Through Loss Allocation Rules, Jeff Sovern, 64 U.Pitt.L.Rev. 343.
Fair Credit Reporting Act (FCRA), 15 U.S.C. � 1681 et seq.
