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Do You Know Your Debt-To-Income Ratio? Using Credit Cards Data-Breach Victims at 4x Greater Fraud Risk How Much Is Peace and Quiet Worth? Young Adults at High Risk for ID Theft Recovering From Identity Theft
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By Jennifer M. Zeberkiewicz
MoneyMix Contributor

The Federal Trade Commission (FTC) estimates that as many as nine million Americans have their identities stolen each year.

Who pays for ID theft expenses? According to Betsy Lordan, a FTC spokesperson, "This is largely ... governed by contracts between the institutions, not by the law. Typically, under the VISA and MasterCard issuer rules, if the card is swiped at the time of purchase, the issuing credit union takes the hit for a fraudulent transaction. If the card is not present, such as in an online purchase, the merchant bears the cost of the fraudulent transaction."

Lordan adds, "The Fair Credit Billing Act prohibits the credit card owner from being responsible for more than $50 for any fraudulent purchase. Most credit card companies now have a zero-liability policy for verified identity theft transactions." The key is proving to the credit card company that a transaction was fraudulent and related to identity theft.

Contact the major credit bureaus:

 Experian: Call 888-397-3742 to set up a fraud alert or request a copy of your credit report

 Equifax: Call 888-766-0008 to set up a fraud alert. Call 800-685-1111 for a credit report.

 TransUnion: Call 800-680-7289 to set up a fraud alert. Call 800-888-4213 for a credit report.

Victims cannot be held liable for more than $50 when fraudulent activity occurs, as long as they notify their card issuer of the fraudulent charges within 60 days. Victims need to notify their card issuer within two business days after an ATM/debit card is lost or missing.

Under most state laws, victims are liable for a limited amount for fraudulent share drafts/checks issued on their credit union account, as long as they notify the credit union promptly. If someone opens a fraudulent account, most state laws ensure that victims are not liable for any debt.

Annual fraud amounts total $54 billion, a rise of $6 billion over 2008, according to a 2010 Javelin Strategy & Research Identity Fraud survey report. The report also notes:

  • Even though your liability may be limited, it can cost anywhere from $400 to $2,000 in time and money to undo an identity theft depending on the type of theft.
  • Consumers who detect fraud by monitoring their accounts online experience lower costs ($300 on average) than consumers who are instead notified by police at a later date about the fraud (on average $1,197).

Many companies now offer identity theft insurance. The Consumer Federation of America has found that it may not be worth the cost. However, some consumers choose this extra insurance for peace of mind. Before you sign up, consider the coverage, the deductible, and the exclusions. If you have homeowners insurance, your policy already may contain coverage. Do some thorough research before committing to any policy.

To avoid succumbing to ID theft:

  • Call 888-5-OPT-OUT (888-567-8688) to opt out of receiving prescreened credit card offers in the mail.
  • Contact the U.S. Postal Service at 800-275-8777 or online at to request a vacation hold if you're planning to be away from home and can't pick up your mail.
  • Visit the FTC's identity theft Web site.
  • Request help from your state attorney general's office.

Published May 3, 2010

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