Credit Card Companies and Agenda
This has been making the rounds on the Internet. Basically, a guy tears up a credit card application, tapes it back together, fills it out with someone else’s address and a different phone number, and send it in. He still gets a credit card.
Imagine that some fraudster is rummaging through your trash and finds a torn-up credit card application. That’s why this is bad.
To understand why it’s happening, you need to understand the trade-offs and the agenda. From the point of view of the credit card company, the benefits of giving someone a credit card is that he’ll use it and generate revenue. The risk is that it’s a fraudster who will cost the company revenue. The credit card industry has dealt with the risk in two ways: they’ve pushed a lot of the risk onto the merchants, and they’ve implemented fraud detection systems to limit the damage.
All other costs and problems of identity theft are borne by the consumer; they’re an externality to the credit card company. They don’t enter into the trade-off decision at all.
We can laugh at this kind of thing all day, but it’s actually in the best interests of the credit card industry to mail cards in response to torn-up and taped-together applications without doing much checking of the address or phone number. If we want that to change, we need to fix the externality.