When a criminal uses stolen personal information to open a new account in someone else’s name, that’s new account fraud. Our alerts help you monitor for this fraud type, which is also sometimes referred to as “account opening fraud.”
You probably already know that an identity thief can do a lot of damage with a credit card in your name.
But did you know that new account fraud is a growing problem? In fact, it was the second most common fraud type reported by our members in 2022. And in the first quarter of 2023, we’ve already received hundreds more reports of this fraud type.
Fortunately, our identity specialists have learned a lot along the way. They’re here to share a few tips to help you better protect yourself as we continue to track this trend.
How does new account fraud work?
Anytime a criminal opens an account using stolen personal details, that’s new account fraud.
The fraudulent account could be with a bank, retailer, credit card company, peer-to-peer payment service, or another financial institution.
But according to Brian Stuart, Director of Customer Care at Allstate Identity Protection, checking and savings accounts are particularly vulnerable.
Most new financial accounts, including credit cards and car loans, require a credit check. As a result, the activity will go through one of the three major credit bureaus and appear on your credit report.
"Criminals know that certain types of credit activity, like credit inquiries and new accounts, go through the credit bureaus, where they're likely to be flagged,” Stuart notes.
But new checking or savings accounts don’t always undergo the same scrutiny, and fraudsters have caught on. They’re taking advantage by opening bank accounts in victims’ names, which can be used to write bad checks, take out new lines of credit, or launder money.
It’s particularly easy for a criminal to open an account in your name with a bank where you’re already a customer. If a bad actor obtains your login information, it may be possible for them to create an additional account without going through the same review processes required of a new applicant.
If they’re successful, that may be just the beginning.
“What we’ve seen is that the instances of theft are concentrated,” says Stuart. “When a criminal finds someone who is vulnerable, they’ll open not just one or two accounts, but 10 or 15.”
Steps to prevent new account fraud
Because new account fraud can apply to various types of accounts, our identity specialists recommend using a range of tactics to help you stay safe.
For new account fraud prevention, consider the following:
Keep a close eye on checking and savings accounts. Request a free annual report from a company like ChexSystems, a consumer reporting agency that can monitor your checking and savings account history for fraud. Then, look over your report for any unfamiliar accounts or activity you don’t recognize, such as overdraft fees.
Set up two-factor authentication (2FA), especially for financial accounts. Once activated, you will be required to log in with a password, then complete a second verification method (for example, entering a one-time code sent to your smartphone).
Keep your account information under wraps. Store account paperwork out of sight, and always shred financial documents before throwing them away. Be sure to erase personal information from your computer before disposing of it (see the Federal Trade Commission for tips on how to do this).
How to spot new account fraud
These preventative measures can help, but unfortunately, there’s no way to guarantee that you won’t fall victim to new account fraud.
If you’re a member, you may get an alert from us, such as an Early Warning notification. Here are three more indicators to watch out for:
You receive snail mail or an email with information related to an account you don’t recognize
You get a message from your bank that says someone has changed your account information, such as your phone number or email address
You see information about a new account you didn’t open when you review your bank statement, or when you log in to do online banking
Someone opened an account in my name. What should I do?
If you’re not covered by an identity protection service and you discover that someone has opened a new account in your name, notify the company where the fraudulent account was opened first.
After you make contact, the company should investigate and close or freeze the account.
Then, we recommend that you monitor your credit report closely. As Stuart mentioned, there is a possibility that the fraudster has opened more than one account in your name — so it's a good idea to check your credit reports with all three main credit bureaus (Equifax, Experian, and TransUnion). If you don't recognize an account, contact the credit bureau directly to dispute the error.
If you are an Allstate Identity Protection member and you think you may be experiencing account opening fraud, contact us right away, and we’ll get to work investigating the issue.
“Be encouraged knowing that we have the experience necessary to take on the problem and solve it,” says Stuart. “You won’t be alone.”
