Mellody Hobson is President of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS news.
TOM: Digital security is our topic this morning. It seems this topic is raised almost daily!
MELLODY: Unfortunately, in the tech driven world we all live in, it is something we need to think about on a regular basis now. And if this year’s cyber breaches are any indication, protecting your personal and financial information is going to become more and more important, and require ever greater vigilance. In the first six months of 2014, there have been major attacks against big-name retailers like eBay, Michael’s, and Neiman Marcus, as well as hotels and other websites. Five million credit cards were compromised and over half a billion web accounts were breached just through June! And last week, a group of Russian cyber thieves pushed that number up by 1.2 billion.
TOM: What are our financial vulnerabilities because of this?
MELLODY: The biggest vulnerabilities here are your credit and debit cards, precisely because they are the most wildly used financial tools with your information attached to them. Every year, Americans swipe credit and debit cards millions of times per day. On top of that, online transactions with cards are booming. In each of these transactions, whether it is simply letting your waiter walk away with your card, or making an online purchase, there is potential for your information to be stolen.
Beyond cards, online banking or financial management sites are vulnerable. With the rise of online banking tools on your laptop or phone, greater risk accompanies the greater convenience. If you are using your phone, use your cellular data network rather than wireless networks if you are using financial management apps. If you are using a laptop, be very careful about the security of your network. Both of these are vulnerable to hackers seeking access to your information.
Finally, the most long lasting impact that you could suffer could very well be the impact to your credit score. If you don’t catch the breach of your information and any subsequent financial fraud, you could be in for a world of hurt when it comes to future financial plans, such as mortgages or auto loans.
TOM: What steps should we take to prevent fraud from happening to us?
MELLODY: As I mentioned, the uptick in information breaches means that we have to place increasing emphasis on our efforts to secure our information. There are a number of ways that we can do this. First, be conscientious about credit card and debit card use. Any time you hand you card to someone there is potential for hackers to gain your information – particularly when they walk away with it, as is the case a restaurants. If you are going to hand your card over, give them a credit card if possible, as credit cards have more fraud protections.
Secondly, you HAVE to stay on top of your passwords, and make your passwords strong. This means changing your passwords frequently – experts actually suggest every month for sensitive sites – using different passwords for each site, and using as many layers of security as possible. If you are given the option to set security questions, do so, and do not make the answers well known information.
Next, make it a habit to use secure connections and websites. Watch out for wireless networks. If you have your own wireless network, be sure to secure it from hackers. Also, avoid using public wi-fi networks that are not password secured. If you do have to use public wi-fi, make sure that your phone or laptop is not set to share with other users, and that your device is not set to automatically connect, and that your firewall is on.
When it comes to websites – especially online retail or sales site – make sure the site begins with “https” rather than just “http” and try to stick to trusted, well-known retailers such as Bed Bath & Beyond or Amazon.
TOM: What if we have already been a victim of fraud?
MELLODY: If you have just been a victim or identity theft or fraud, the first thing that you should do is put an initial fraud alert with one of the three main credit agencies. Once you have done this, the agency you have notified must inform the other two. An alert lasts for 90 days and will make it more difficult for credit accounts to be opened in your name.
Next, order your credit reports. Since you have filed an initial fraud report, you are entitled to your credit reports free of charge. This will allow you to check recent activity and identify potential tampering or new changes that you were not responsible for.
Once you have proceeded with these stops, there are also a few items that will help you recover. A major step? Filing an Identity Theft Report. To create one, you need to file a complaint with the FTC and print your Identity Theft Affidavit, then use this to create your Identity Theft Report with your local police. This is important because you are entitled to certain rights, such as having fraudulent information and charges removed from your credit report, and preventing companies from collecting on debts incurred through fraud.
You should also consider placing a security freeze on your credit reports and signing up for a credit monitoring service so you’ll be alerted to changes in your credit report.