Both business and personal assets could be at risk for some people
Business owners, small-business owners in particular, may suffer even more at the hands of an identity thief, according to financial experts. Aside from having their personal finances ruined, victims’ businesses are just as vulnerable to the effects.
“If there is no corporate protection around that company, their business assets are just as vulnerable as their personal assets,” said Ronda Warrener, a certified financial planner and financial advisor for Legg Mason in Providence and president of the Rhode Island chapter of the Financial Planning Association. “They’d be in the same situation as a private person, but worse. If their identity is stolen, not only are their personal finances jeopardized, but also their business finances.”
And while traumatic, identity theft against a person who works at a corporation means that only that individual’s information has been stolen and their privacy invaded. A small-business owner, whose business finances are usually attached somehow to their own, suffers the violation twofold.
An identity thief might somehow gain access to personal and business records on a computer, like accounts due and received, Warrener said. There might be client data on a computer that is now in the hands of the guilty party as well. Identity theft may also affect a business owner’s ability to extend their business loan credit.
“If he or she has a loan for that business – and sometimes people don’t realize their identity has been stolen right away – if they need a new line of credit or need another loan, if the loan officer finds all of these detrimental things on their credit, that limits their access to capital,” said Norm Deragon, a spokesman for the Small Business Administration’s Rhode Island District Office in Providence. “If they have a loan for a vehicle or equipment leasing company … or if they’re dealing with vendors and suppliers” any of them can check the owner’s credit and then freeze all leases or contracts, he said. A lower credit score due to bad credit from theft can also be a detriment to future loans and business.
Identity theft wouldn’t necessarily put an existing loan at risk, unless the business owner could no longer make those payments and do so in time, Deragon said. In this case, having an established business and line of credit would be a benefit.
“If you’ve been in business for a while and you have a good relationship with the lender and good credit, maybe they’d be willing to work with you,” he said. “But with a new business that’s tough to do.”
If disaster strikes, Warrener advised that business owners meet with their insurance personnel, and take all of the suggested reactive steps – canceling all credit cards and notifying lenders and credit bureaus. Both Warrener and Deragon, however, stressed a proactive approach to protecting both personal and business information.
As for legal recourse, “it probably depends on whether you report it right away,” Deragon said. “Act on adverse information as soon as you find it is vital. As an individual, protect all your ID numbers and take all the steps to protect your identity.”
Warrener suggested that business owners keep a list of all credit card numbers, bank accounts and other financial information, and keep them in a safe place.
“If your purse is stolen and you had 50 credit cards (personal and business-related) in there and you don’t have any idea which ones you have,” it makes it more difficult to take the proper actions if your identity is stolen, she said. “Check your credit report regularly, at least once a year, and invest in a good shredder.”
Insurance is another device for protection. Insurance agencies provide an array of different policies, including identity theft insurance, crime insurance, hacker insurance and Internet liability insurance, which protect different aspects related to theft, according to Loretta Worters, vice president of the Insurance Information Institute, based in New York.
Identity theft insurance is usually reserved for consumers and not businesses, but hacker insurance and Internet liability insurance can protect computer files.
Most of the advice is common sense, Warrener and Deragon admitted, but owning a business means that consumers need to be careful above and beyond guarding their personal information. Simply – don’t make it any easier for thieves.
From a legal standpoint, there isn’t much business owners can do to protect themselves from the effects of identity theft.
“Unfortunately, businesses of all sizes and consumers are all in the same boat, and it’s stormy weather out there,” said Mike Healey, a spokesman for R.I. Attorney General Patrick Lynch’s office. “Businesses don’t have any more protection than consumers do. The best advice the attorney general could give to small-business people is the same for consumers – vigilance. The more people become aware of the overall issue, the better they can protect themselves.”
Two state bills have been proposed this session to help. One requires any company that has experienced a security breach to notify all Rhode Island residents in its database. The other would allow ID theft victims to apply for an identity theft passport, after they have filed a police report and contacted the credit bureaus. The passport would include personal information to help the victim re-establish their finances.
