A 2011 federal law says when foster children turn 16, child welfare agencies must help them get annual credit reports and clear up any mistakes. States are now implementing programs to do just that
Every year, some of the 26,000 American youth who age out of foster care have to not only start out on their own with no support system, they have to do so while trying to clear up credit problems caused by identity theft and errors. Those problems make it harder to land a job, get an apartment or car, and secure college loans and other types of credit.
Some help is on the way. Thanks to a federal law passed in 2011 — the Child and Family Services Improvement and Innovation Act — when foster children turn 16, child welfare agencies must assist them in getting annual credit reports and clearing up any mistakes. State community welfare agencies have been working with credit reporting agencies and are putting systems in place to do just that.
|Children in foster care are especially vulnerable to identity theft, which can cripple their ability to get credit when they age out of the system. Our reports examine the roots of the problem, what the system is doing about it and how you can help.|
They have their hands full. Children are a favorite target among identity thieves and the crime often goes undetected until they’re grown up and applying for credit or a job.
Foster kids have it even tougher. “Young people in foster care are particularly vulnerable to identity theft,” says Jennifer Miller, partner at the nonprofit organization Child Focus and co-author of a 2013 report from the Annie E. Casey Foundation on protecting the credit of youth in foster care. “They may move frequently between foster homes, group homes and relatives, and their Social Security numbers are accessible in each of these placements. For some young people, the identity theft occurs even before they enter the system.”
It’s hard to pin down exactly how widespread the problem is. But a 2010 pilot study in California reviewed the files of 2,110 youth in foster care and found that 5 percent had accounts reported in their names because of errors or identity theft. The most common accounts were for telephones and medical bills. Utilities also ranked high. The median account balance was $322. The largest: a $217,000 home loan.
Family often to blame
Steven Toporoff, attorney in the division of privacy and identity protection at the Federal Trade Commission, notes that parents in financial straits are sometimes the culprits. “It’s a question of turning on the lights, turning on the heat,” Toporoff says. “They very well may use their children’s Social Security numbers to open up an account. In some instances, they may fully expect to pay the bill and they don’t think it’s going to cause any kind of problem. If they become delinquent, it becomes a problem.”
Ashley McCullough, 26, knows that all too well. McCullough was put in foster care at age 10. In 2006, when she was a sophomore in college, collection agencies wrote saying she owed more than $400 for accounts that had gone into default 10 years earlier.
Young people in foster care are particularly vulnerable to identity theft. They may move frequently between foster homes, group homes and relatives, and their Social Security numbers are accessible in each of these placements.
|— Jennifer Miller|
She later discovered her birth mother had used her Social Security number to open landline and cellphone accounts. “I was really upset,” McCullough recalls. “I wasn’t talking to her at the time and this was more reason not to talk to her. Now that I’m older, I realize it was the only way she could keep the phone on.”
Solo cleanup is messy
Resolving identity theft issues is hard for anyone. It can be a nightmare for youth who have grown up in the foster system. “One adult friend of mine told me that clearing up identity theft was like having a full-time job for a couple of months,” says Child Focus’ Miller. “Now imagine doing that at age 18, sometimes with limited English proficiency, and without the help of a parent or other supportive adult.”
Case in point: Suamhirs Rivera. According to the Casey Foundation report, when Rivera got to college and tried to rent an apartment, several landlords told him he had the worst credit they’d ever seen. He checked his credit report and found it showed he owed more than $75,000 in accounts set up fraudulently. It has taken him four years to clear $35,000 of it off his reports. But his record still shows $40,000 of back debt and two banks are suing him for fraud, the report says.
“It has been difficult to resolve my credit problems, especially because I have no support from anyone — no family in the United States and no one to back me up,” Rivera says in the report. “Young people should know about bad credit before they leave care.”
I was really upset … Now that I’m older, I realize it was the only way [my mother] could keep the phone on.
|— Ashley McCullough|
Victim of child identity theft
Instructions from credit bureaus for victims of child identity theft are sometimes easier said than done. “All we need is proof of your age and proof that it’s fraud,” says Maxine Sweet, vice president of public education at Experian, one of the three big credit reporting agencies. “Lots of things can be handled online.”
But the victim must also file a police report — which is sometimes a sticking point. Miller says foster youth often feel conflicted about filing a police report against someone they know, especially if they are trying to maintain or rebuild a relationship.
Other complications arise when two different identities are mingled online — for instance, if a thief opens an account using his own name but the child’s Social Security number. The victim may not be able to answer all of the necessary questions and authenticate information online. Unraveling the damage can take months or more.
Assistance: freezes, fixes and education
Maryland provides a good example. In 2012, the state instituted the country’s first law to allow parents and guardians to freeze the credit reports of minors in their care. This would keep fraudsters from opening an account in the child’s name. If the youth does not have a credit record (and they shouldn’t, since a child under 18 is not legally allowed to enter into a contract that would require credit), the parent or guardian can request that the credit reporting agency create a record that prohibits the agency from releasing information about the child to potential creditors.
An even more comprehensive Maryland law takes effect in October that freezes the credit of children after they enter foster care. At age 18, the foster child will be provided information on how to unfreeze the account.
Prevention is just the first step. The law also requires foster care agencies to act to resolve any issues in the child’s credit report. The credit reporting bureaus have been working with Maryland and other states to make pulling records and resolving problems easier.
For instance, traditionally if a parent or guardian wanted to access a minor’s credit record, they would have to write a letter to each credit bureau and send it by post. New electronic systems will allow child welfare agencies to access the records of foster children in large batches.
The eventual goal is to be able to sort issues by creditors and remediate any problems in batches, too, says Robin McKinney, director of the Maryland CASH Campaign, a nonprofit network of organizations promoting financial stability for working families. If, say, 50 kids have had utility accounts opened in their names, the Department of Social Services could work with the utility company to clear up all 50 accounts at once, she says.
The final piece is getting foster children ready to handle money and credit on their own as adults. A Maryland Department of Human Resources initiative, Ready By 21, works to connect youth with the financial resources, education and coaching they need to be ready to make good financial decisions when they age out of foster care (in Maryland, that happens at age 21), according to McKinney. “We want the ability to build credit to be in the hands of these youth,” she says.