The driver’s license has become the “de facto” identification card for proving identity. In many cases, it is presented to a financial institution by a consumer when they open a new account or cash a check. Although it was never intended to do anything more than provide someone with a license to operate a motor vehicle, the driver’s license has evolved into a tangible piece of evidence that is used to positively identify an individual. However, in the wrong hands, a driver’s license can lead to serious consequences for both the rightful owner and financial institutions.
Today, there are more than 250 different machine-readable formats for driver’s licenses across the United States. Given the vast number of formats, it has become a challenge for most institutions to know if the identification being presented is authentic or fraudulent. The Real ID Act, recently adopted by Congress and signed into law by the President, serves as the legislative response to these challenges, as it mandates a single, machine-readable format.
To some, the Real ID Act seems reasonable. It creates strict standards that states must adhere to in order to award driver’s licenses. State motor vehicle departments will be required to verify at least four forms of identification, and only U.S. residents and legal immigrants will be allowed to secure a license. If a state does not comply with the Act, its licenses will most likely not be accepted for many other uses, such as opening a new account with a financial institution or cashing a check.
As many recent articles point out, the Real ID Act also presents a new set of issues:
- The Act gives states three years to comply, and many are concerned that with the lack of federal funding, they may not make the date. Some states have estimated that the initiative will cost them as much as $500 million. For example, one of the provisions within the act would establish minimum standards for the issuance of a state driver’s license if it is to be used for federal identification purposes, including to board commercial aircraft and enter federal buildings. However, figures are not yet available regarding the cost to add card readers that validate the new uniform identification when presented at an airport or financial institution.
- There are changes to existing technology and systems that offices issuing the new identification card must implement. For example, technology must be added to scan and digitize the four forms of identification required from the applicant.
- The rules do not combat the sale of fake licenses or breeder documents. In fact, some people believe the Real ID Act could increase the value of fake identification and lead to new insider fraud.
- Many organizations, including civil liberties groups, have voiced concern that the standardized licenses created by the Act would amount to a national identification card, which could track residents’ movements and habits.
- Other concerns include the ability to access your personal data by electronically scanning your driver’s license. Who now has access to this data, and how will it be used?
The process of bringing a single, national standard to driver’s licenses and identification cards still has an array of challenges that lie ahead. From the shaky public perception of a national identification card to the financial implications of implementing a single standard, until a viable and broadly accepted plan is in place, financial institutions should continue to utilize solutions that use proven models to protect their consumers’ identity and data.