Torn-up Credit Card Apps Not So Safe

Maximum Prophet writes "This dude tears up a credit card application, tapes it back together, sends it in with his cell phone number and father's address, and voila, gets a credit card. Who would have thought security at a credit card company was so lax? The company recommends that consumers "tear up" financial solicitations before throwing them away, "so thieves can't use them to assume your identity.", but according to them, "Applications that arrive in damaged form are customarily transferred to an electronic format, he said -- often by machine. So it's possible a human being never handled the taped-up application and never had the chance to spot the obvious sign of trouble." In this era where we worry so much about identity theft, this sort of thing really makes you wonder what the point really is.

Comments

shred shred shred

[Luyseyal]

I always shred this kind of thing.
-l

Re:shred shred shred

[TimeTrav]

That may be, but theres nothing stopping a would-be identity thief from raiding your mailbox in the morning before you can get to it. I really loathe these pre-approved credit card ads that come with large bright "0% for six months!!!" print on the outer envelope.

The reason these are considered "safe" is that most all credit card applications require a social security number. So, that means the identity thief has to steal a piece of mail from your health insurance company, which is a pretty reliable way of obtaining a social security number, since most insurance companies use it as a unique subscriber identifier. Theres no way to win.

Re:shred shred shred

[Skater]

In the US, you can now use a phone number (it's something like 1-888-3OptOut) to opt out of the prescreened credit card offers. I did so several weeks back and the offers have slowed to a trickle.

I do kind of miss shredding the fake AmEx cards that came with their offers, though.

Re:shred shred shred

[sacherjj]

Yep, cross cut shread everything that I throw away that even might have encriminating data. If you are more paranoid, you can keep a burn bag of the shreaded stuff.

Re:shred shred shred

[johnkoer]

The FTC has an alert that gives you a few options, including the phone # to call for opting out.

Re:shred shred shred

[cr0sh]

The reason these are considered "safe" is that most all credit card applications require a social security number. So, that means the identity thief has to steal a piece of mail from your health insurance company, which is a pretty reliable way of obtaining a social security number, since most insurance companies use it as a unique subscriber identifier. Theres no way to win.

Actually, if you sign up for insurance, for most applications you can write the words "please assign" in the space for the SSN, and the company will assign a number for your policy. I should note that some brokers will get smart with you, and try to "guilt you" into providing your real social "in the event you are incapacitated" and "so your loved ones can help". Don't let them guilt you (if I am incapacitated or dead - I don't care anymore, now do I?). Also, don't put in a "fake SSN", as these get caught fairly easily (and you'll get a phone call or letter) - or if they aren't, then it might be YOU who are guilty of "identity theft", if it is found out it matches someone else's real number in the system...

Re:shred shred shred

[shabble]

This is a recognised way of making money out of CC's in the UK - http://www.moneysavingexpert.com/cgi-bin/viewnews. cgi?newsid1076883546,34894,

The basis: Where Credit Comes From

[dada21]

Why do banks accept any application, even ones with errors?

Banks want you to have credit -- of course they'll accept any application as long as the name and social security number match their lookups, and your FICO score is reasonably high (although banks are now lowering standards to give out even more credit).

When a bank offers credit, it does so based on money it has (of course). Yet it is very important for the average person to understand where this "money" comes from -- especially digital money such as you'd have when you have an available credit line.

All banks that are part of the central banking system (the Federal Reserve) are required by the Federal Reserve to stick something called a money multiplier. I believe the current money multiplier is 12% or so, but it varies. This basically means that a bank must keep a reserve of that amount versus the actual money is sends out. If a bank loans out $1000, it has to keep $120 in the bank. Even if it loans out the $880 ($120 in reserves) the bank can stil say it has $1000 in demand deposits available -- even though it doesn't.

The collusion comes into place when the first bank is given $1000 by the Federal Reserve. The Federal Reserve is allowed to print new money out of thin air by creating loans against government property and future government income. This initial $1000 is placed in Bank A as available cash. Bank A holds $120 but loans the remaining $880 to Bank B which is also part of the Federal Reserve banking system. Bank A still holds a demand deposit value of $1000 which is available to be withdrawn! Bank B also has $880, but has to reserve 12% of it ($105). It then loans the rest ($775) to Bank C, but still lists $880 as its available balance of demand deposits. Bank C reserves its 12% ($93) and loans the rest ($682) to Bank D, while still listing the original $775) as its available balance. This collusion continues to go around until there is no more reserve balance available. In the end, the original $1000 the Federal Reserve created is held as a base reserve for the $9000 or so "new money" that is created.

Banks need people to accept this money in loans or in credit -- this is the way the bank actually makes money. Eventually all the loans are hopefully paid back into the system, so the bank makes a nice interest rate. On the new $1000 created, each bank wants to loan out as much as possible -- and these loans are used to buy goods, which recycles money back into the banks which can be kept as reserves to create even more money! If the bank takes $1000 and loans out $880 but receives $400 of that bank in, it can now loan out a portion of that $400 that it has in reserves.

In the long run, the system wants debt out there because it is created out of fake inter-bank loans anyway. Most of you don't even see your physical money because it doesn't exist -- there are about $600 billion dollars in circulation worldwide, but there are over $10.2 trillion dollars on the books!

And people have faith in the system.

Re:The basis: Where Credit Comes From

[jaoswald]

The collusion comes into place when the first bank is given $1000 by the Federal Reserve.

This is an idiotic post. The Federal Reserve does not just give money away to banks. They give paper currency and coin against electronic balances held by member banks at the Federal Reserve, but that is just trading one type of money for another, not creating it. The Federal Reserve also offers a "discount window" from which banks can request loans at a particular overnight rate, but they charge interest, and can refuse to give the loans if they feel it is not wise to do so, and banks typically do not rely on this for day-to-day-operations. They *do* engage in open market operations to buy and sell government securities, but that is separate from the multiplier.

Banks put their money in reserve accounts at the Federal Reserve, and can lend those reserves to one another at what is basically a market-determined rate. But this is irrelevant to the multiplier. Changing which bank's reserve account at the Federal Reserve holds money does not create or destroy it.

The key link that you've missed out on is that the money goes through the participants in the economy. Your local bank gets deposits because you decided your piggy bank was full and you'd rather earn interest on it. Or because you did work that your employer decided to pay you for.

What is the bank supposed to do with that money? Stick it in a super-sized mattress until you want it? No, they'll lend it to people who want to buy things or to run a business, or through the Federal Reserve to other banks that have customers who want to borrow money.

The trick is that people do not typically take that loan money and keep it in a nice little pile of green paper. Instead, they borrowed the money because they had a good idea of how they could *spend* it. They spend it, let's say at a local merchant, who doesn't need to spend it himself right away, and decides to deposit in a bank.

THAT idea, that all currency, including loans, ends up virtually immediately being redeposited into the banking system, is what causes the multiplier. This happens because currency itself is not particularly useful, whereas deposits can earn interest.

That's not hocus-pocus or collusion. It simply means that when the Federal Reserve DOES engage in changing the money supply by buying and selling government securities, that it has to account for the multiplier effect to know how much money is actually added to the economy for a given operation.

http://federalreserve.gov/pubs/bulletin/1997/19971 1lead.pdf

The $600 billion dollar figure is for physical paper currency. Unless *everybody* dealt in cash all the time, there is no reason this number has to agree with the total money supply.

http://federalreserve.gov/releases/h41/Current/

Re:The basis: Where Credit Comes From

[ZeLonewolf]

The 12% or whatever is called the Reserve ratio. In any case, it's actually much worse than you stated. Once a bank is fully loaned up (e.g. the currency to outstand loan value is only 12%), it's not done. To a bank, a loan is an asset - after all, it's earning interest. The bank can then turn around, and get a loan from the Federal Reserve at the discount window, using their existing loans as collateral. Then they loan the new (smaller) pot of money out to the public. Then, the bank turns around and gets a new smaller loan from the Federal Reserve using the new smaller pile of loans as collateral. This goes around and around until the bank is fully loaned up at a ratio that's something like 35:1.

If you want to read more about how this works, I suggest reading "The Creature from Jekyll Island" by Ed Griffin.

Re:The basis: Where Credit Comes From

[ZeLonewolf]

Unfortunately the government has the wool over your eyes a bit: inflation is a way for the government to tax you in a hidden way. In fact, it is entirely possible for the government to stop taxing alltogether and simply fund itself through inflation. This was actually tried in Alabama a few hundred years ago, before states were prohibited from printing their own money. Since the Alamaba legislature could print as much money as it liked, there were no constraints on government spending, and the whole system collapsed within a few years.

As long as the government has the power to weaken the value of your dollar, it's JUST as bad as taxation.

So the question is, if taxing is so unpopular, why not just use inflation? Well, then, people would probably start to wonder where the money came from, in addition to the constraint of public spending problem stated above.

Make the banks liable...

[John Whitley]

Once again, I like Bruce Schneier's proposed solution:

The bank must be made responsible, regardless of what the user does.

That quote is from Mitigating identity theft, which provides a refreshing perspective on the problems collectively labelled as identity theft. Bruce points out that many of the "solutions" to identity theft focus on authentication, which misses a critical part of the equation: the fradulent transaction itself. By providing a strong financial incentive to banks to mitigate fraud, the only party which has a real chance to do anything about the problem will fix it and fast.

Pre-approved applications

[Beryllium Sphere(tm)]

>I really loathe these pre-approved credit card ads that come with large bright "0% for six months!!!" print on the outer envelope.

Amen. The reason I opted out of receiving those was exactly the one you mentioned, that they're a security problem.

The number to stop them at least used to be 888-5OPTOUT.

Bruce Schneier Says:

[Anonymous Coward]

From: http://www.schneier.com/blog/archives/2006/03/cred it_card_com.html

To understand why it's happening, you need to understand the trade-offs and the agenda. From the point of view of the credit card company, the benefits of giving someone a credit card is that he'll use it and generate revenue. The risk is that it's a fraudster who will cost the company revenue. The credit card industry has dealt with the risk in two ways: they've pushed a lot of the risk onto the merchants, and they've implemented fraud detection systems to limit the damage.

All other costs and problems of identity theft are borne by the consumer; they're an externality to the credit card company. They don't enter into the trade-off decision at all.

We can laugh at this kind of thing all day, but it's actually in the best interests of the credit card industry to mail cards in response to torn-up and taped-together applications without doing much checking of the address or phone number. If we want that to change, we need to fix the externality.

Stop them at the source

[klossner]

Better than a shredder, ask the banks to stop sending you the applications in the first place: http://www.optoutprescreen.com/. I used to receive several per month, now I get two per year.

Re:Stop them at the source

[dcraigw]

If you're not comfortable with their website, you can give them a call at 888-567-8688. This number is usually listed somewhere in the fine print at the bottom of the credit offers you receive in the mail. If you call the number, however, they do encourage you to use the website if you can. I'm not sure that entering the information over the phone is significantly safer than entering it online, but it's nice that they provide both options for folks like you.

Re:Stop them at the source

[Anonymous Coward]

For those concerned about the site (https://www.optoutprescreen.com/ the FTC links right to them: http://www.ftc.gov/bcp/conline/pubs/credit/prescre en.htm

Re:For the extra paranoid

[Anonymous Coward]

You want effective, use the shredded paper for kitty litter!! I dare you to go diving in my trash!!

Re:Solution!

[clamantis]

You can also Opt Out by calling 1-888-5-OPTOUT.

Re:Possible? Yeah, but highly improbable

[paeanblack]

If humans aren't involved in the letter opening process, it's time to have some real fun...see how well their machines handle foreign substances

1) Save the return envelope.
2) Fold up a blank piece of paper with a nice wad of chewing gum/peanut butter/diaper contents/etc
3) Mail your "application"
4) ???
5) Profit

Re:Possible? Yeah, but highly improbable

[thparker]

What, a machine opened the letter, recognized it was an application (and not, say, other junkmail that got stuffed into the nearest bulk reply envelope), fed it into a scanner, then trashed the hard copy? At no point in the process does a human see it? Sounds like bullshit.

I'd guess yes, at no point in the process does a human see it.

Here's one vendor -- OPEX. This one does opening and extraction but isn't particularly fast at 17,000/hr. They have a scanning solution as well -- significantly slower but the mail goes straight from envelope to scan.

This is just what I've found in a quick search because I knew something like it existed; I'm not that familiar with the high-speed mail processing industry. I'd imagine that the technology would surprise most people.

Opt out

[thermopylae300]

For folks in the US: To opt out of receiving offers of credit in the mail, call: 1-888-5-OPTOUT (1-888-567-8688). http://www.ftc.gov/bcp/conline/pubs/credit/idtheft .htm#Minimizing/

Re:Possible? Yeah, but highly improbable

[HogGeek]

Working in the mailing industry, I'll call your bullshit, and raise you a scanner.

Not only is it possible, but probable. While I would expect a lot of errors, or "bad" data from the scan, I promise you it was scanned...

This is just the tip of the iceberg!

[HellYeahAutomaton]

1) Credit card companies send out blank checks with your account info on them, in feeble attempts to get you to spend up with a lower interest rate where they will charge you jacked up rates when you don't pay in full.(and anyone swiping your mail can use your CC
as good as cash)

2) Credit card companies are sending out more and more "authoritative looking" mail offers that makes it look like a check is being made out to you, but it swindles you into some sort of agreement that will cost you more.

Even if you opt out with various agencies, all bets are off if you have a service with any company, and they will adwhore you until you submit!

These companies are extremely shady.

OptOut - Get off their prescreen lists.

[gjcamann]

From the http://www.ftc.gov/ websight: "1-888-5-OPTOUT (1-888-567-8688) or visit http://www.optoutprescreen.com/ for details" This will prevent companies from pre-approving you for credit stuff. Cut down my mail by half.

Re:whose fault

[Skim123]

Can MCI provide you with a copy of a document you signed regarding the charges? If not (and if I'm not mistaken), what they're doing is illegal. Next time you get a call, request this information and if they can't or won't provide it, tell them that if they call you again it's off to the FCC and your state's attorney general.

Re:Possible? Yeah, but highly improbable

[Deagol]

I send most junk mail solicitations back to the sender in their own return envelope. If they send those neat colorful stickers, I stick a few of those on the envelope's outside border for good measure. So you have an over-stuffed envelope with stickers to gum up the machines.

My wife did a few months on graveyard shift at a First Security payment processing center (before Wells Fargo assimilated them). She said those machines are *really* cool, really fast, and jam up so easily that they have dedicated staff on-hand to fix particularly nasty jams.

So if you want to put a (albeit small) dent in the productivity of the Evil Credit Card Sharks, send back those handy self addressed envelopes stuffed with their own junk mail. Be sure to fold, spindle, and mutilate the envelope, too. :)

Re:gymnasium and scotch tape no longer required

[Anonymous Coward]

The big industrial strength shredders I've seen for classified material reduce it to literally dust. Nothing is going to reconstruct anything from that.

Something else the credit card companies do...

[Hamster Lover]

is send you endless reams of "balance transfer" cheques or convenience cheques. Not only are they a complete rip off to use as interest and endless fees apply the second you use one, but they get mixed in with all the other crap they love to send you in the envelope and you don't realize they're there. You end up throwning them away in the trash without voiding or otherwise defacing them to make them worthless. Any enterprising thief scrounging through your garbage can come across them and use them. This happened to a good friend of mine when she threw them away thinking they were some sort of advertising without realizing they were real cheques. Cheque fraud isn't the easiest thing in the world to do anymore, especially in Canada where no merchants will accept cheques anymore, but it does happen.

Ask them to stop sending them to you and they swear up and down it will happen, but it never does. It's just too lucritive for them to stop sending them to you.

Re:Pimply faced kids

[Danse]

Does the number really need to be ON the card? It's on the magnetic strip, which the machine reads. It never needs to be displayed. Sure, it's security through obscurity, but it is better than the current system.

A lot of cc and identity theft has been committed by running people's cards through readers that simply record the info from the card and store it to be retrieved later by the thieves. Often happened at grocery stores, convenience stores, restaurants, etc.

Re:gymnasium and scotch tape no longer required

[The Snowman]

The big industrial strength shredders I've seen for classified material reduce it to literally dust. Nothing is going to reconstruct anything from that.

Classified paper shredders have specific requirements for their output. Suffice to say that nothing short of divine intervention will reconstruct a document shredded by modern standards.

Re:Possible? Yeah, but highly improbable

[StikyPad]

You know, I've had other friends suggest the "smear some of substance X on the paper" idea. I'm no lawyer, but I think sending biohazardous material through the mail is probably a felony, and would likely be the target of a much larger investigation in a "Post 9/11 era" than I'd care to be a party in. While peanut butter may not count, its less tasty digested form probably would.

Re:Why PO Boxes are not a solution.

[R2.0]

"Can someone explain to me why a PO Box is not acceptable as an address?"

One reason, which has nothing to do with your problems, is that UPS/FedEx/etc. cannot deliver to PO boxes.

Re:Why PO Boxes are not a solution.

[Anonymous Coward]

Another reason is that people use P.O. Boxes to pretend that they are residents of other states. This causes all sorts of headaches, for example, with voter registration.

Another problem is when you have people doing it to dodge taxes. For example, my state (Washington) used to have very high costs for vehicle tab renewal. So people would grab a P.O. Box in Oregon, and then use that to get Oregon plates and pay the $30 - or whatever the ridiculously low cost was in Oregon. Plus Oregon has no sales tax.