Identity theft 101: what is new account fraud?

July 23, 1:17 PMIdentity Theft ExaminerJoe Campana

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New account fraud occurs when an identity thief commits identity theft by opening new financial accounts by using the name and social security number of the victim. In many cases, the financial institution also requires the victim’s date of birth to establish an account. Typically, new account fraud involves financial accounts--credit card, bank and trading accounts. Bank loans can include auto, mortgage and student loans. It can take years for a victim to learn about these new accounts unless the victim frequently reviews their credit reports. 

While other types of new non-financial accounts may be opened including medical, insurance, telephone and utility, these types of identity theft have unique names—medical identity theft, insurance fraud and utility fraud.

The identity theft uses a post office box or address of a vacant home or apartment to have the new account information mailed. In some cases, inexperienced identity thieves may use their personal or business address, which would increase their risk of getting caught committing the crime.

Because the victim’s address is not used, the victim will not receive any notification of a new account, monthly statements, overdue account or account collections by mail. Because the victim may not find out for years that they have been a victim of new account fraud, their risks and liabilities increase because of the financial debt incurred by the identity thief but also by the many financial, credit, government and other records that are generated through the financial misdeeds of the identity thief.

Consumers may check their credit report to detect new account fraud. The credit report may reflect several changes as the financial institution issuing the credit to the identity thief processes the new account. Upon application, there will be a credit inquiry by the financial institution; and if the credit history is acceptable, the new account will be approved, then established and there will be a change of address.

Credit monitoring services  monitor these types of changes, and for many  this is a convenient and affordable service to help in the early detection of identity theft. Alternatively, consumers have the right to view their credit reports annually under the Fair and Accurate Credit Transactions Act of 2003 (Fact Act).