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What Europe can teach us about identity theft

An epidemic of identity theft is sweeping the U.S., but it hasn't spread to Europe. Here's what they're doing right.

By Liz Pulliam Weston

Determining the rate of identity theft in Europe is difficult, and the reason is telling: Data security experts say it's not seen as enough of a problem to warrant a comprehensive survey.

The exception is the United Kingdom, where fraud experts estimate 100,000 people, or about 0.17% of the population, fell victim last year to account hijacking, new-account fraud or other types of identity theft.

Compare that to the U.S., where a Federal Trade Commission survey found 10 million ID-theft victims a year -- or 3.39% of the population.

So what is so different in the Eurozone? Several things:

Social Security numbers are for Social Security -- period. Most European residents have national identity cards -- the exception being the U.K., which is still struggling with the concept. Credit bureaus tend to have unique identifying numbers for the consumers in their databases. Social Security numbers are used for retirement benefits, not as an all-purpose identifier.

"It's much more difficult to steal your identity" in Europe, said fraud expert Jim Vaules, a vice president with U.S. database company LexisNexis. Vaules said the key piece of information an identity thief needs is a person's national ID number, and that appears in a lot fewer places than Social Security numbers do in the U.S.

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Information is kept private. Western European countries have laws that keep businesses from sharing and selling private personal or financial information.

"A lot less of their data is floating around," said Bob Sullivan, an MSNBC technology reporter and author of "Your Evil Twin: Behind the Identity Theft Epidemic" (2004, John Wiley & Sons). "They are far more strict about data sharing than we are in the U.S."

The massive databases maintained by ChoicePoint and LexisNexis simply wouldn't be possible in Europe, Vaules said. Both companies recently announced that their databases were breached and information on hundreds of thousands of people was stolen.

In Europe, "information is only available to the person to whom it pertains," he said. "The European Union privacy directives restrict data aggregation of public records, even of stuff we take for granted over here."

For example, companies aren't allowed to create or sell databases of people's former addresses and phone numbers. Such databases here are often used to contact neighbors or relatives of people who owe debts in an attempt to find out where the debtors have gone.

Related ID-theft resources on MSN Money

* 10 ways to stop identity theft cold

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* 8 signs you may know an identity thief

* High-tech answers to ID theft

* 22 ways to foil credit card thieves

* Sign up for Liz's newsletter on her home page

Credit bureaus aren't wide open. In many European countries, credit bureaus are maintained by groups of banks that share information with each other -- but not with outsiders, said Theodore Iacobuzio, vice president for European banking and payments at financial research firm TowerGroup.

Three countries -- France, Spain and Denmark -- allow the bureaus to report only negative information about consumers, Iacobuzio said. That makes the databases of limited use to lenders, who must use other factors to gauge credit risk.

Contrast that with the U.S., where just about any business can subscribe to a credit bureau and use credit scoring to instantly assess someone's risk of default. The ease of accessing all that information has enabled lenders to make credit decisions in a matter of seconds.

The process is often much slower in Europe -- which also means it's not as easy for the bad guys to open new accounts in someone else's name.

"It's much more difficult to establish credit over there," Vaules said.

Credit isn't king. Interestingly enough, Europeans are far more likely to use debit cards or deferred debit cards (where charges are deducted from checking accounts once a month, instead of daily) than credit cards. And they get those debit cards from their banks, which generally know enough about them to verify their identities.

"A credit card is