Perspective: Debunking myths about identity fraud

It seems that we constantly are hearing horror stories about the perils of rampant identity fraud. However, a recent survey seeks to set the record straight by saying that in the United States, the problem actually is decreasing.

Javelin Strategy & Research has just released its Identity Fraud Survey Report. While identifying significant risk differentiators between age and income demographics, the report highlights an important reduction in fraudulent new account openings using private information. Interestingly, the report also says that more fraud happens via physical channels, such as in-person transactions, and by the direct theft of personal data by individuals, rather than taking place online.

Let's drill down a bit into some of the critical findings of the study, which is based on telephone interviews with 5,000 adults.

Identity fraud is declining in the United States--down an estimated 12 percent from the prior year--translating into total fraud reduction of approximately $6.4 billion. Indeed, about 500,000 fewer adults in the United States were victims of identity fraud in 2006 than 2005. It is estimated that 3.7 percent of Americans were victims in 2006, as opposed to 4 percent in 2005. Losses from identity fraud are calculated at $49.3 billion in 2006, down from $55.7 billion in 2005.

Fraudulent new account openings have dropped from the prior year, with average fraud amounts also decreasing significantly.

Why the decline? Factors cited in the report are better consumer education and awareness, and the increased use of online banking and financial sites that enable people to monitor their accounts more frequently.

Fraudulent new account openings have dropped from the prior year, with average fraud amounts also decreasing significantly. Such fraud has dropped from 1.5 percent for respondents for the prior year to a current rate of 1 percent. Plus, when fraudulent accounts are opened, victims are detecting the fraud more often using online channels, such as the viewing of statements. As such, average fraud amounts are dropping from $10,000 the year before to $7,260 now.

Here, too, education, awareness and online monitoring are attributed for the improvement.

Young adults are at the highest risk for identity fraud. This supposedly is because adults between the ages of 18 and 24 are least likely to take routine but important safeguards like shredding documents and implementing antivirus software and firewalls. This leads to more than 5 percent of them becoming victims of identity fraud, in comparison to an overall adult fraud rate of 5.3 percent. Strikingly, more than 50 percent of young adult victims know their perpetrators, which include their friends, neighbors and co-employees, contrasted to a rate of just 23 percent for all adults.

Thus, contrary to the notion that tech-savvy young adults are ahead of the game in the new Information Age, the report proves this not to be the case when it comes to identity fraud.

Americans earning less are least likely to be victims. Of those earning $15,000 or less, only 2.8 percent report identity fraud, compared to 7.3 percent who earn more than $150,000. However, when people with lower incomes are victimized, the misuse lasts twice as long and the fraud is more difficult to uncover, taking an average 70 percent longer to detect than fraud in higher income populations.

The results of identity fraud differ in the income segments. People who earn more than $150,000 are more than twice as likely to move from paper statements and bills to electronic alternatives in an effort to ward off fraud. Lower-income victims, on the other hand, are more than twice as likely to reduce their overall spending.

At the end of the day, the report certainly paints an illuminating picture in one very important respect. Namely, it debunks the notion that online transactions and activities increase the incidence of identity fraud when contrasted with physical interactions. Indeed, the report suggests that electronic alternatives have helped to protect potential victims of identity fraud.

In terms of practical advice to prevent unauthorized access to personal information, the report offers the following advice:

•  Only carry credit and identification cards that actually are used; do not carry a Social Security card, and lock personal information and sensitive documents in a secure location.

•  Protect accounts by adding difficult-to-discern PINs and passwords to them. Have PINs and passwords in a secure location, and change them frequently.

•  Replace paper invoices, statements and checks with electronic versions; utilize automatic payroll deposits.

•  Do not provide personal information over the phone unless you placed the call and are certain who you are speaking with; do not respond to automated phone messages or e-mails requesting you to call a number to resolve an account issue.

•  When responding to an e-mail from a business you have an account with, do not link to the business site from the e-mail; go to the business site independently by using your search engine and typing in the URL.

•  Install and regularly update firewall, antispyware and antivirus and browser security software on computers.

•  Shred all sensitive documents prior to disposal.

•  Use a secure mailbox for incoming mail.

Hopefully, with education and awareness such as this, we will continue to see identity fraud drop in the coming years.

Biography
Eric J. Sinrod is a partner in the San Francisco office of Duane Morris. His focus includes information technology and intellectual-property disputes. To receive his weekly columns, send an e-mail to [e-mail] with "Subscribe" in the subject line. This column is prepared and published for informational purposes only, and it should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.

More Perspectives

[bigjtk]

Less Identity theft

95 million Americans have had there identity compromised. Thats 45% of working Americans.
The total lack of data security, mostly by large banks, credit account agents and the government makes us all at risk of this kind of theft.
These agencies take no responsibility except to notify the victims. Some times there is restoration of funds, but mostly it is (sorry we screwed up your life - have a nice day).
So far I have only seen the government protect these agencies.
If there is less identity theft in the past year, it is dumb luck.
The only way this will change is to make the
agencies criminally accountable for there lack of security.

[Fremia]

Re: Less Identity theft

"95 million Americans have had there identity compromised. Thats 45% of working Americans. The total lack of data security, mostly by large banks, credit account agents and the government makes us all at risk of this kind of theft. These agencies take no responsibility except to notify the victims. Some times there is restoration of funds, but mostly it is (sorry we screwed up your life - have a nice day). So far I have only seen the government protect these agencies. If there is less identity theft in the past year, it is dumb luck. The only way this will change is to make the agencies criminally accountable for there lack of security."

I agree with you there, but the liklihood of that ever happening though is close to zero.

[bigjtk]

Less Identity theft

95 million Americans have had there identity compromised. Thats 45% of working Americans.
The total lack of data security, mostly by large banks, credit account agents and the government makes us all at risk of this kind of theft.
These agencies take no responsibility except to notify the victims. Some times there is restoration of funds, but mostly it is (sorry we screwed up your life - have a nice day).
So far I have only seen the government protect these agencies.
If there is less identity theft in the past year, it is dumb luck.
The only way this will change is to make the
agencies criminally accountable for there lack of security.

[Fremia]

Re: Less Identity theft

"95 million Americans have had there identity compromised. Thats 45% of working Americans. The total lack of data security, mostly by large banks, credit account agents and the government makes us all at risk of this kind of theft. These agencies take no responsibility except to notify the victims. Some times there is restoration of funds, but mostly it is (sorry we screwed up your life - have a nice day). So far I have only seen the government protect these agencies. If there is less identity theft in the past year, it is dumb luck. The only way this will change is to make the agencies criminally accountable for there lack of security."

I agree with you there, but the liklihood of that ever happening though is close to zero.

[drdoolittle2800]

Stick To Being A Lawyer

I don't believe a single aspect of the notion that identity theft is down:

1a) Via telephone interviews - if its online fraud, why use the phone? This is online fraud, stick to people online (apples and apples?),

1b) You're analyzing what amounts to a cotton candy phone poll. How about doing an in-depth survey of the three major credit reporting agencies and see what they have to say? They would, at least, have credible numbers. Scientists know what a random-sample survey is and how to conduct one. This poll was probably paid for by the Justice Department!

2) That was an awful lot of gobbledegook about fewer poor people being defrauded than rich people. S'pose that has anything to do with owning a computer and having an expensive broadband connection? What self-respecting thief would waste time waiting for some schmuck with dial-up access and an old x386 machine?

3) Maybe this phoney reduction has more to do with the criminals getting smarter? S'pose maybe they got tired of getting caught setting up new accounts and switched over to such things as "snatch-and-grab cash transactions?"

Their (and Mr Sinrod's) idea of online account monitoring is preventive only - it has NO deterrent affect, whatsoever. It would not have an impact on new fraud cases, though it would help stop the fraud once started.

These stupid polls are no better than the ones politicians and talking heads use to "forecast" the winners at an election. Mr Sinrod, please, we're smarter than this. Give us a little credit, will ya? Online fraud is not decreasing! It may be shifting and a bit harder to quantify now, but no more telephone polls, okay?

Thanks for all the fancy words and statistics, though. They were really cool. :-)

A former thief...

[drdoolittle2800]

Stick To Being A Lawyer

I don't believe a single aspect of the notion that identity theft is down:

1a) Via telephone interviews - if its online fraud, why use the phone? This is online fraud, stick to people online (apples and apples?),

1b) You're analyzing what amounts to a cotton candy phone poll. How about doing an in-depth survey of the three major credit reporting agencies and see what they have to say? They would, at least, have credible numbers. Scientists know what a random-sample survey is and how to conduct one. This poll was probably paid for by the Justice Department!

2) That was an awful lot of gobbledegook about fewer poor people being defrauded than rich people. S'pose that has anything to do with owning a computer and having an expensive broadband connection? What self-respecting thief would waste time waiting for some schmuck with dial-up access and an old x386 machine?

3) Maybe this phoney reduction has more to do with the criminals getting smarter? S'pose maybe they got tired of getting caught setting up new accounts and switched over to such things as "snatch-and-grab cash transactions?"

Their (and Mr Sinrod's) idea of online account monitoring is preventive only - it has NO deterrent affect, whatsoever. It would not have an impact on new fraud cases, though it would help stop the fraud once started.

These stupid polls are no better than the ones politicians and talking heads use to "forecast" the winners at an election. Mr Sinrod, please, we're smarter than this. Give us a little credit, will ya? Online fraud is not decreasing! It may be shifting and a bit harder to quantify now, but no more telephone polls, okay?

Thanks for all the fancy words and statistics, though. They were really cool. :-)

A former thief...