When parents say they would do anything for their children, financial fraud isn't the first thing that springs to mind. But for some, part of being mom (or dad) includes using their offspring's identity to write checks and take out loans in their names, letting poor financial decisions fester on the children's credit report for years before the full extent of the rot is revealed.
"Once the bank ran our credit, I saw a list of items that weren't familiar on the report," Tonya McKenzie recalls when applying for a mortgage loan with her husband as a newlywed and recent college graduate. "Cell phone bills, utility bills … but once I saw the addresses, I knew immediately."
McKenzie's mother had amassed around $5,000 in outstanding debt under her daughter's name, some of it dating back to when McKenzie was 13 years old, and this wasn’t the first time her mother had used her identity for financial gain. McKenzie's story isn't a rare tragedy, but the sort of all-too-common malfeasance that dashes dreams and rips apart families. With wages limping along, despite a strong economy, and the level of debt the average American carries rising, it's likely this intimate act of financial predation will only keep growing.
The motives driving a parent to wreak havoc on a child's financial well-being by stealing their identity run the gamut from greed to desperation. It's not just about uncaring parents maxing out credit cards to pay for Gucci bags and Xboxes. It's also the story of those gripped in the throes of addiction of all sorts needing to fund their latest fixes, as well as people struggling financially who need a fresh line of credit to keep the water running.
"I think there are a lot of these parents who feel 'I have to get the lights turned on,' and they simply don't have the means to do it," says Eva Velasquez, president and CEO of the Identity Theft Resource Center, a nonprofit that advocates for and educates victims of identity theft. "They fully intend to pay it back and don't realize the harm. They're not understanding this can have long-term consequences."
The crime is difficult to detect, remaining invisible for years before anyone suspects something is amiss. Once a parent uses their child's Social Security number and other personal information to apply for a credit card or any other similar financial product, they find it's generally easy to get approval. Creditors rarely confirm the age of an applicant, meaning they don't see the person asking for a personal loan is actually a minor. And once a credit history is established with the child's information, it only gets easier to obtain more lines of credit.
Often it takes years for the victim to discover the violation, usually when he or she tries to open a bank account or get a credit card for the first time in adulthood, only to be rejected because of an appalling credit history. In McKenzie's case, she first found out about her mother playing fast-and-loose with her finances when she tried to open a bank account at the age of 21. After examining the checks, some of which were made out to businesses near where her mother lived, McKenzie confronted her mom and the two had what she described as "a bad and brutal" conversation. "It was a knock-down drag-out fight without getting physical," she says. McKenzie thought the checks were the end of it—until six years later when she tried to take out a mortgage loan for the house where she and her husband wanted to start their life together.
By this time, McKenzie's mother had passed away, sparing her daughter from a choice many victims of child identity theft face—whether to file a police report on the perpetrator, even though the criminal is a beloved relative. Once a victim sets the wheels of justice in motion by reporting a crime, they have little say in the ultimate fate of a convicted relative.
"It takes on a life of its own," Velasquez says. "You can certainly give your opinion that you don't want this prosecuted, but [law enforcement] doesn't have to take that into consideration and a lot of times they don't."
The prospect of sending Mom or Dad to jail can cause even the angriest of identity theft victims to pause, but the alternative means convincing individual creditors the outstanding debt was built under false pretenses and needs to be forgiven—a brutal slog that can take years to complete, if at all. In McKenzie's case, talking with creditors and collection agencies became a second job. Often she had to weigh the obvious financial benefits of getting a debt cleared with the time she lost to frustrating negotiations with skeptical debt collectors. "Some of it was easier to pay than to fight it," she says.
Forking over $50 may seem like the preferable option when you're staring down a four-hour unpleasant phone conversation, but the hidden cost of that payment is assuming the outstanding debt on the credit report, which sticks around for seven years. Your payment history accounts for 35% of the credit score assigned to you by FICO and is "extremely influential" to your VantageScore credit score. A low credit score brings with it all sorts of bad personal finance voodoo, from having to pay higher interest rates on loans to getting denied credit cards offering the best rewards, so it pays to consider carefully the ramifications of assuming debt you know isn't yours.
McKenzie was both lucky and tenacious enough to climb out of the pit of debt after a year and a half, and today she runs Sand & Shores, a public relations and marketing firm. She hopes her experience can not only offer advice to others whose identities were stolen by their parents, but educate the perpetrators as well. "Even people who do stuff like this, they may not understand what kind of problem they're creating for other individuals," she says. "I don't think they go into it thinking 'I'm about to kill her credit,' but 'This time, I'm going to do better than last time.'" It's a tragedy born of ignorance that McKenzie's story—and the stories of thousands like her—can hopefully help being repeated elsewhere.