Banking Law News

Banks, Credit Companies to Get New Federal Anti-Fraud Tool (1)

June 7, 2019, 2:22 PMUpdated: June 7, 2019, 3:44 PM

The Social Security Administration is ready to lend a hand to banks and credit card companies in their fight against synthetic identity fraud.

Companies will be able to verify social security numbers with other consumer information through an online government portal beginning in June 2020, the agency said in a June 7 notice. The e-CBSV (consent based SSN verification) system will be open to a limited number of users initially and then expanded after six months.

“eCBSV will change the game in the fight against synthetic identity fraud, which costs the country more than $8 billion annually,” said Jeremy Grant, coordinator of the Better Identity Coalition. The group is a coalition of financial services companies including US Bank, Mastercard, TransUnion and Experian, working toward improving identity verification standards.

The ability to verify the combination of name, date of birth and social security number when consumers file new credit or account applications is expected to greatly enhance anti-fraud efforts.

Synthetic ID fraud involves individuals combining real information, like a social security number, with a fictitious name and identity. Fraudsters use the spoofed identity to establish a good credit history before eventually maxing out credit cards and disappearing. Often the identities of children, who don’t have existing credit reports, are used as part of the scheme.

Industry Funded

Banks, financial institutions and credit and fraud risk scoring companies can apply to participate in the first round of users between July 17 and July 31, 2019.

Building and maintaining the eCBSV will be funded by users. Companies that want to participate in the initial rollout will have to commit to helping fund the project up front, so that the Social Security Administration can meet a requirement set by Congress to collect at least 50% of the startup costs from industry before it starts to develop the system.

Companies will pay a fee to use the system thereafter.

Getting Away from Paper

The portal may serve as a template for other agencies to follow as they look to modernize their legacy, paper-based systems, said Grant, former senior executive adviser on cybersecurity and identity at the National Institute of Standards and Technology.

The Internal Revenue Service is looking to create a similar electronic portal to replace an existing process that requires lenders to fax in a borrower’s signed approval to release tax return data. Proponents say an online portal could greatly speed up loan underwriting.

The SSA may prove the first agency in a broader push to overhaul how government entities provide identity services. The White House issued a May 21 policy memodirecting other agencies to establish “establish privacy-enhanced data validation APIs for public and private sector identity proofing services to consume.”

“The table is set for a new wave of tools that not only help fight identity theft and fraud, but also give consumers new ways to more easily do business online,” Grant said.

(Adds additional information, quotes from Better Identity Coalition organizer)

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Seth Stern at sstern@bloomberglaw.com

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