At the FTC Forum on Senior Identity Theft quite a bit of time was devoted to exploring a little-known, but quickly growing, form of identity theft — government benefits identity theft — a type of crime in which seniors are disproportionally the victims.
Seniors are being victimized by scammers who hijack their federal benefits and direct them into the scammers' own pockets.
Over the last several years, the government has tried to reduce the number of paper checks it mails to recipients of benefits such as Social Security, federal retirement payments and disbursements from a wide range of programs that collectively can be called aid to the poor.
Under a Federal regulation, in effect since March 1 of this year, to cut costs associated with issuing paper checks, the Treasury will require almost all beneficiaries to receive payments through direct deposit, though paper checks will still be available to some beneficiaries under very limited circumstances.
In most cases, recipients designate where they want their benefits sent. Almost always, sent directly to an account at a bank, an S&L or some other financial institution. But quite often people change banks, or other institutions, so now want their monthly benefits deposited in another account at a different institution.
Here's where the problem begins. The Social Security Administration, which oversees the issuance of its own monthly checks and other benefits, offers a number of helpful ways that beneficiaries can make changes to direct deposit information: in person at an SSA field office, over the phone, via the Internet, or through the beneficiary's old or new financial institution.
I think you can see the problem. A person's identity is stolen; including SSN, name, address, etc. The scammer simply goes into the SSA's system and, using the victim's SSN, accesses his or her direct deposit information, and then changes the destination to an account, or prepaid debit card, the scammer controls.
Usually the first inkling a victim has that something is wrong is when the benefit deposit does not show up. The victim waits a few days then calls the SSA to report the missing deposit. Sometimes the victim does not know what to do, and seeks help, which delays the notification to the SSA that a deposit has not been made. Then the process takes some time before the SSA determines the deposit destination has been changed. By then a second disbursement might already have been made. So the crook makes off with twice as much and, in the meantime, the rightful recipient is struggling to live without the money.
Last year, Patrick P. O'Carroll, Jr., Inspector General of the Social Security Administration, told the House Subcommittee on Social Security "The threat of identity theft and misuse of Government funds is evident, as unscrupulous individuals continue to target some of our most vulnerable citizens."
O'Carroll told the House subcommittee, "We continue to encounter beneficiaries who have been victimized and severely affected by this scheme.
"My office has received more than 19,000 reports from various sources concerning questionable direct deposit changes to a beneficiary's record; we continue to receive about 50 such reports per day. These reports have involved either an unauthorized change to direct deposit information, or a suspected attempt to make such a change."
The SSA has already implemented one method by which the illegal changes can be curtailed. A concerned senior can place an auto-enrollment "block" on their direct deposit account. This block requires any changes in the destination of a benefit to be made in person at am SSA office. As you can imagine, it would be difficult for some scammer in his 20s to convince a SSA agent he is really a 73-year-old woman whose account he is trying to change.
In addition, the SSA is developing an automated notification system to alert beneficiaries of changes made to their direct deposit information; for example, through an automatic email, a text message, or a notice mailed to both the old and new addresses on record when a caller requests and SSA processes an address and direct deposit change at the same time.
On many occasions, the destination of a government benefit is changed to a prepaid debit card. I'll examine this growing means identity thieves use in my next blog.