Because That's Where The Money is: Ethan Leib's ID Theft
Ethan Leib blogs about being the victim of a fraudster:
An individual in California posing as “Ethan Leib” (with phony ID to match) has been walking into branches of my bank across the state and taking all my money — despite a fraud alert on my accounts. They even stole thousands from my 6-week old daughter’s college fund. How mean! The tellers and “credit fraud analysts” are not doing their jobs so I am poorer and less “Ethan Leib” than ever. Even though many credit agencies and banks have measures in place to prevent identity theft, they all still rely on tellers, banks, and others being properly trained.
I’m sorry this happened to Ethan, who I don’t know, but whose blog posts I’ve enjoyed for a while.
I’m curious, and maybe Ethan (as a lawprof) can answer this: At what point do the bank’s actions cross the line into negligence? There’s clearly an epidemic of fake and fraudulently issued IDs; there’s clearly an epidemic of fraud by impersonation. If banks have measures in place to prevent it, and those measures are ineffective, as they clearly are, when can a customer sue?
Another form of this fraud is mortgage fraud, where a fraudster takes out a new mortgage-backed line of credit on property, and absconds with the cash, or land title fraud, which Schneier talks about in “Land Title Fraud.”
Much of the problem with identity theft has been the exceptions to libel laws under which the credit agencies don’t have to take responsibility for their statements, and the trouble involved in cleaning up those statements. These emergent forms of fraud could be a lot worse.
It isn’t a negligence issue. The bank is liable so the issue of negligence does not arise. The bank has accepted a deposit, they have an obligation to return it. The fact that they have paid a sum of money to a different party is irrelevant.