Continued from Part 3 of Identity Theft Plagues Consumers and Businesses…

Observers say small business owners are particularly vulnerable to ID theft, though, since they often use personal assets and their own name for business transactions.
The damage can be severe, as Campana explains: A farmer who wanted to buy a crop duster was turned down for a loan because his I.D. was used for heart surgery. In another case, a small business owner’s I.D. was stolen by a prostitute, affecting the legitimate entrepreneur’s ability to gain new customers.

Duty to Protect Customer Data

Businesses in California are required by law to notify their customers in the event of data breach – failure to comply, and failure to make a good faith effort to protect customer data, can lead to serious liability. A lawsuit over a data breach can cost roughly $25,000 in legal fees before it even makes it to court or a settlement, Campana says.

Steve Bearak, CEO of identity protection company Identity Force, says merchant protection is the fastest-growing segment of his business. Although there is no way to guarantee protection from a data breach, sound regulatory compliance can at least protect a business from most liability.

“There is a simple risk-analysis, there is a policy that addresses that and there is employee training,” says Bearak, based in Framingham, Mass. “Once you put those three things together, you’ve mitigated your risk or at least created some sort of shield against potential legal damages.”

The second part of this series lists ways individuals and businesses can protect themselves against identity theft. And since experts say there is no fool-proof way to guard against I.D. theft 100%, knowing what to do once the crime occurs is just as important.