How do Credit Card Companies stop you from getting a credit card under a false name?

Credit card fraud wrenches millions of dollars every year from the credit industry. And even though that’s only a fraction of a percent of credit card issuers’ profits, most issuers, such as banks, are careful to review applications.

Hypothetically you could call yourself Spot, so long as you paid your bills. But in reality, it’s illegal to take a phony name, and you’d get caught: your bank wants to know the real you. The real you is a lot more likely to pay.

Credit card cheats can be pretty creative. Their scams using false names vary considerably. Sometimes they read the obituaries and apply for credit using the name of a dead person. And some actually have tried using their dogs’ names or made-up names.

But the most common ploy by far is to steal somebody’s wallet and credit cards, then apply for credit under the victim’s name. This works nicely because it gives the thief access to his victim’s driver’s license, social security card and possibly even such things as a job ID card.

The thief fills out an application for credit under the victim’s name. He uses the victim’s address as “previous address” and uses his own address as “current address.5, That way, of course, the new credit card gets mailed straight to the thief at his address, which is usually a post office box he can change in a pinch.

Criminal groups tend to apply for credit many times a year using this very method, with all sorts of assumed names. A high number of applications coming from the same address is one clue to a credit card company that something is amiss. In the early days of credit cards decades ago, at least one man collected thousands of cards under false names before he was caught.

So how do banks and credit card companies stop you from getting a card under a false name? Using computers and tele-
phones, they monitor your application patterns and catch your slipups.

Visa and MasterCard, the two biggest credit card companies in the world, have a joint “Issuers’ Clearinghouse Service,” which keeps millions of computer records of addresses, phone numbers, number of applications per year, Social Security numbers of deceased people (numbers supplied by the U.S. government) and past fraudulent applications. When you apply to a bank for Visa or MasterCard, the bank is required to run your application through the ICS computer. In a few minutes, your bank knows whether to suspect you of fraud.

When the computer notices, for example, that more than five credit applications have come from your current address in the
past year, a flag goes up.

The ICS tells your bank, and any other banks that have issued you credit recently, to review their relationships with you. Have you been paying your bills? Are you the person you say you are? Or perhaps the computer notices that you’ve used the name and Social Security number of a deceased person. You’ll have to explain why (and for that matter, how) you could still want a credit card when you’re dead.

While computer records can catch schemes that follow patterns like these, the one-time fraud can also be caught with a few
telephone calls.

The thief who stole the wallet is a good example. A bank employee would check the phone book and call the applicant’s previous-address phone number. If the person whose name is on the application still lives at the old address, then whoever lives at the “current address” is highly suspect.

Similarly, a call to the applicant’s employer verifies that the person actually exists; talking with the applicant where he works can confirm that the application form was filled out by him.

Some chiselers set up elaborate answering machine systems, or ask someone to verify their employment. But banks can sometimes get around that tactic by using their own phone books. They look up the main number of the company and call that number instead of the one given on the application.

Still, even massive computer records and intensive telephone inquiries can fail. It’s nearly impossible to keep computer files completely up to date; obituaries run before death certificates are filed, for example, and a fraud can take advantage of the lag time.

Perhaps the most difficult cheat to stop is one who uses any one of these schemes to apply for credit under a false name, and then maintains good payment patterns for a while before vanishing into thin air.