Unemployment Fraud And Your Credit
The historically high unemployment rates resulting from COVID-19 pandemic layoffs, furloughs and work closures has led to a massive number of unemployment claims. During the first six months of the pandemic, U.S. unemployment claims averaged approximately 1 million weekly. Although the labor market is starting to show some small signs of improvement, unemployment benefit requests are expected to remain high for some time. Sadly, the availability of unemployment benefits has been accompanied by a surge in unemployment fraud. Learn what to do if an unemployment claim has been filed in your name and how to minimize any impact this could have on your credit rating.
Understand How Unemployment Fraud Occurs
As reported in the Wall Street Journal, there has been a steady increase in the number of false unemployment claims since businesses started shutting down at the very start of the pandemic. These fraudulent claims could translate to billions of lost dollars for individual states. In fact, estimates from the U.S Department of Labor suggest there could be some $26 billion dollars in wasted unemployment benefits due to fraudulent activity. These are benefits that unemployed individuals and their families desperately need right now.
Unemployment fraud is typically conducted by stealing PII (Personally Identifiable Information), using that data to file claims and then collecting the unemployment benefits. This data theft can occur in a number of ways:
- Data breaches, particularly by cyber criminals targeting dated state employment systems.
- Email phishing scams.
- Purchase of stolen personal information.
- False websites put up to resemble government unemployment websites.
- Cold-calls from scammers trying to obtain personal information.
- Physical theft of social security numbers or other personal data.
Determine If You’ve Been A Victim Of Unemployment Fraud
Often, people don’t find out they’ve been a victim of unemployment fraud until it’s too late. An individual may see a notification from the state or from his or her employer indicating they filed an unemployment claim and collected benefits, or they may receive an IRS Form 1099-G listing their “collected” benefits. In a worst-case scenario, a person who has recently been laid off realizes they have been a victim of unemployment fraud when they file an actual unemployment insurance claim and are rejected for previously “collecting”.
Unemployment fraud can have a devastating impact on a person’s financial situation, particularly those who are already facing financial hardship. Victims often endure significant stress as they try to sort out the fallout from the theft of their personal information. Because unemployment fraud is generally perpetuated through personal identity theft, victims may find they have incurred other fraudulent debts as well. A victim’s credit score can plummet as fraudsters open new lines of credit in the victim’s name without paying off the debts.
Protect Your Identity
There are several actions that consumers can take to protect themselves against personal identity crimes such as unemployment fraud:
- Monitor all bank accounts and review credit card statements to look for unauthorized transactions.
- Subscribe to a credit monitoring program and frequently review credit reports.
- Be aware of any correspondence for unemployment benefits that you did not apply for or did not receive.
- Do not engage with social media sites or websites that appear to mimic government agencies.
- Do not share personal information through unsolicited text messages, phone calls or emails.
- Be aware of surroundings and keep important documents, such as a social security card, within your personal control at all times.
Take The Next Steps
If you find you have been a victim of unemployment fraud (or any type of personal identity theft), follow these steps:
- Submit a report to the three credit bureaus so they can generate a credit fraud alert.
- Report the fraud to law enforcement, the IRS, your state’s unemployment agency and to your employer’s HR department.
- Report any suspicious or fraudulent online activities to the FBI’s Internet Crime Complaint Center.
Cleaning up a credit report following identity theft can be a time consuming and tedious process, and until resolved the victim’s credit rating may be negatively impacted. Bankruptcy is a legitimate financial tool to consider in personal identity theft cases of significant magnitude. Bankruptcy can wipe away any fraudulent debts that occurred as a result of identity theft, and can be less expensive and time consuming than going through the laborious processes of identifying and addressing each sham debt one-by-one. Bankruptcy allows victims of identity theft and unemployment fraud to begin rebuilding their financial future. For more information about filing for bankruptcy after having your identity stolen, contact Sirody & Associates.