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Financial Literacy - Protecting your identity Click Here
SPOTLIGHT
Banks: Fess up
Financial institutions should have to publicly report basic statistics on their fraud rates, says this privacy law expert.
Protecting your identity

Spotlight: Chris Jay Hoofnagle

Credit card fraud is a much different situation. I think banks have much more incentive to address the problem themselves. It seems that merchants are paying for a lot of credit card fraud, and that's another thing that's unknown: How much is being charged to merchants in the form of charge-backs?

Consumers: Be on high alert
Prevalence of ID theft
Identification/authentication
ID theft losses
Phone company ID theft
Benefits of banks reporting fraud
Protection for consumers
Weird impulsivity
Recent improvements

Phishing is another serious problem. People call me all the time and say, "Should people use online banking?" And my response is, "Well, it depends." Does the consumer understand phishing, and can they recognize those threats and understand not to respond to them? If a consumer can do that then yes, I think they should use online banking.

Online banking just has different risks than offline banking. Until a consumer can recognize those risks, they shouldn't use online banking. But I use online banking effectively and have never had a problem.

And this goes back to a problem of authentication that was kind of glossed over in the beginning of e-commerce. All of those authentication systems were built around businesses authenticating the consumer and getting a credit card number. Now it's clear that the reverse is necessary. We need tools that help the consumer authenticate the bank.

In the real world we know how to authenticate our bank. It's on the corner, it has a shiny sign. But in the online world, many of us don't understand that the same process has to go on in our heads before we write a check or transfer funds.

When you hear about people that fall for Nigerian scams, you think there must be some kind of critical thinking that should be going on that seems to go out the window in e-mail.

There's this weird impulsivity, there's this terrible tension that we have and there are people in the marketing community that know we're impulsive and want us to be. The marketing message is often, "Buy this, buy it now," and that same impulsivity in this other context results in fraud. I wonder if we should be arming consumers against impulsivity.

The 419 is, "Wow, I can make money and it's free."

-- Posted: April 21, 2008
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