Numbers…Numbers…Numbers

We live in an information age. At every turn we are asked to produce the threads of data that add up to produce a fabric of our identity. Numbers, numbers, numbers….we yield credit card data, our social security numbers, our driver licenses at the shopping mall, to rental car agencies, to online marketers and at the grocery checkout stands.

The “information monster” is hungry and has not overlooked the millions of distributors involved in MLM, Direct Sales, Network Marketing and Party Plan businesses. Social Security identification must be collected by law so that MLM companies can issue form 1099 reports to the IRS for their independent contractors. Credit card information is essential to process online and telephone orders. Individual banking information is required to establish automatic debit of check accounts for auto ship programs. And of course, credit card, address, telephone, email and other identifying information is collected from the millions of customers to whom MLM distributors sell products or for whom Direct Sales distributors place drop ship orders.

Too Much Information

Being awash in a sea of information has its consequences. In a computer driven and highly technological society, such easily retrievable data fuels conventional commerce as well as e-commerce. In an ideal world of completely honest souls, no unintended problems would occur. However, welcome to the real world where small legions of thieves stand ready to steal and manipulate your information for financial gain. Call it credit card fraud, banking fraud, or any other type of fraud, the end game has come to be known as “identity theft.”

Identity theft is a serious crime in which misappropriated personal information is used to rob you when you are completely unaware. Each year millions of individuals are affected, often spending months or years to clean up their credit record. All of life’s activities ranging from loans to educational opportunities, to housing, car ownership or credit card usage may be impacted. In some odd instances, individuals may even be arrested mistakenly for crimes they did not commit.

Ask Your MLM Company

Although your interaction with a MLM, Direct Sales, Network Marketing or Party Plan company may represent only a fraction of your daily financial experience, it is reasonable to inquire of mechanisms implemented by the company to protect your privacy and information. A call or inquiry to Distributor Relations or Operations should yield some comfort when you are informed of systems in place to protect your information. You will likely be informed that all internet and ecommerce transactions are secure and encrypted. You should also be informed of security and privacy policies instituted by the MLM company to safeguard information.

One specific area of concern by distributors has been the use of Social Security numbers as the same number for distributor identification. Although common practice in the past and in a more honest world, this approach is being rethought by forward thinking Direct Sales companies that now encrypt such information or issue distributor identification numbers that do not reveal Social Security data. For instance, an early leader in this practice, Florida based National Companies, a leading Direct Sales company that markets consumer benefits services, was nominated for a prestigious Direct Selling Association award of excellence after being one of the first network marketing companies to implement a broad reaching privacy program for distributors and customers to specifically combat identity theft. The hallmark of the program was the substitution of coded distributor identification numbers rather than taxpayer identification numbers.

Enter the FTC

The problem of identity theft obviously impacts the life of the MLM distributor in ways far broader than their MLM experience. In everyday affairs, individuals are exposed to this financial scourge. The FTC has taken a leading role in both education and enforcement on this subject. They have published highly practical information on the subject of identity theft, found at http://www.consumer.gov/idtheft/index.html.

Bottom-line: Be Careful

Obviously, there is no fool proof way to prevent identity theft. However, MLM distributors and their companies can engage in prudent and careful behavior to minimize this tremendous abuse of individuals and our economic system. In the end, the watch words must be “Be careful, be cautious and ask questions.”

Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad. Babener & Associates, 121 SW Morrison, Suite 1020 Portland, OR 97204, www.mlmlegal.com