Texas Rep. Helen Giddings said that when she became a victim of identity theft — a box of her checks was stolen in 2004 — it took her close to a year to straighten out her finances.
Now, determined to make sure other victims do not go through what she did, the De Soto Democrat has sponsored a bill to create an information-sharing network that would spread word quickly to merchants and check-verification companies when a consumer's identity has been stolen.
The industry-supported bill would establish the Texas Department of Banking as the clearing house for collecting and disseminating the information. The measure passed the Texas House Business and Industry Committee last week and is waiting for a floor hearing. It would be the first law of its kind in the nation.
Customers whose checks have been stolen would notify their financial institutions, which would pass word through secure e-mail to the Department of Banking. The agency would alert all the verification companies operating in the state, such as TeleCheck International Inc. and CheckRite International Inc., so they would know to reject the fraudulent checks.
Rep Giddings has estimated that $38,000 of the $40,000 of checks written fraudulently on her account would not have been cashed if such a network had existed when her checks were stolen.
Information about check fraud is not shared among the verification companies. Typically, when a bank learns that a thief has written a check on a customer's account, the bank sends the bogus check back to the merchant, which notifies its verification provider, but other providers might not learn or the fraud until they are notified by merchants that work with them.
Texas had the second-highest number of identity thefts reported in the United States in 2005, more than 26,600, according to the Federal Trade Commission. Twenty-two percent of the cases involved some sort of bank fraud, which would include stolen checks.
Dwain James, executive director of the American Collectors Association of Texas, which represents verification companies, said its members support Rep. Giddings' bill.
"The bill has two purposes," he said. "It helps cut off merchant losses at a faster pace, and, second, to make it easier on the consumer to report the theft. It will speed up the process and hopefully save a lot of people a lot of money and trouble."
Though the bill would require banks to go an extra step in reporting fraud, the industry supports it, because it would provide further protections that are needed for both retail and merchant customers.
"We are happy with it," said Steve Scurlock, executive vice president with the Independent Bankers Association of Texas.
"It might take a little extra work on our part and some minor expense on our part, but in the grand scheme of things, it's for the greater good."
Should the bill pass, the Texas Finance Commission would decide the specifics of how the system would work.
Several law enforcement Web sites recommend that identity theft victims report the theft to check-verification companies, but nobody knows for sure how many companies are operating in Texas. The bill would require such companies to register with the Department of Banking.
