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Financial Services Law Insights and Observations

CFPB reports on servicemember identity theft

Federal Issues CFPB Consumer Finance Servicemembers Identity Theft

Federal Issues

On January 12, the CFPB released an Issue Spotlight discussing identity theft affecting servicemembers. According to the report, servicemembers, veterans, and military family members are more likely to report identity theft than civilians, with military consumers reporting almost 50,000 cases of identity theft to the FTC in 2021. The Bureau also noted that a steady income could make servicemembers a target for identity thieves looking to create fraudulent credit accounts or tap into bank accounts, and warned that frequent relocation may also increase servicemembers’ risk of identity theft. 

Many servicemembers and all officers are required to pass a national security clearance check that includes a review of their credit history and ability to meet their financial obligations. The report found that security clearances are “continuously evaluated” with credit checks being part of the process. If a review reveals a history of failing to meet financial obligations, being in excessive debt, or having a high debt-to-income ratio, a servicemember’s security clearance may be revoked. Bad credit can also lead to rejected or higher-cost rental or mortgage applications, limiting housing options the Bureau said.

The report also found that unrecognized debt is often the first sign of identity theft. Between 2014 and 2022, military consumer complaints to the CFPB about debts that resulted from identity theft increased nearly fivefold, from more than 200 annually in 2014, to more than 1,000 in 2022. The Bureau noted that addressing credit report inaccuracies related to identity theft can be “a particularly complicated process.” The report also provided recommendations for servicemembers on how to protect their credit, such as reviewing credit reports regularly and disputing inaccurate information and taking advantage of free credit monitoring services.

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