- The Social Security Administration is inviting banks and other lenders to join a real-time electronic system to verify that credit applicants' names match their Social Security numbers. The effort aims to help banks curb synthetic identity fraud, which can happen when fraudsters apply for credit cards using Social Security numbers that aren't in use.
- Lenders have until July 31 to enroll. But participating, businesses will have to pay to help build the verification service. The Social Security Administration has to have 50% of startup costs funded before it can develop the portal, which it said it hopes to roll out in June 2020 to a limited number of users, then expand six months later. Lenders may pay up to $5 million to be part of the initial group, based on the entity’s annual number of transactions.
- Congress required the Social Security Administration to begin developing the verification system for banks last year under a law signed by President Donald Trump. The agency has required consumers to give handwritten consent to let lenders confirm identities. And banks have paid a one-time $5,000 enrollment charge plus a fee every time they look up someone. Social Security numbers were created as a recordkeeping measure for government benefits but have expanded to serve as a unique personal identifier.
A Federal Reserve report this month called synthetic identity fraud the fastest-growing financial crime in the U.S. That type of fraud cost lenders $6 billion in 2016, business consultant Auriemma Group reported.
The Federal Reserve encourages banks to help prevent synthetic identity fraud. U.S. prosecutors in New York last month alleged that 11 people participated in a scheme using synthetic identities to charge $3 million on lines of credit from banks including JPMorgan Chase & Co. and Synchrony Financial between 2013 and 2017, according to Bloomberg News.
Synthetic identity fraud is often a years-long process. Those committing fraud may pay monthly credit card bills under a false identity for years as credit limits build. Then, they max out the cards without intending to repay the debt.
Lenders that want to participate in the verification system must fill out Form SSA-157 (with additional Form SSA-157s for other financial institutions they service) according to included instructions.