Identity fraud levels drop to four-year low

February 8, 2011

Amateur trader Yan Qin checks her smartphone for stock reports in New York December 7, 2010.  REUTERS/Shannon Stapleton Thanks to signs of a burgeoning economic recovery, identity theft declined dramatically in 2010, but unlucky victims were forced to pay more out-of-pocket when defrauded, according to a survey by Javelin Strategy & Research released Tuesday.

The number of identity fraud victims decreased by 28 percent last year, bringing the total number of victims down to 2007 levels. Total annual fraud also decreased from $56 billion to $37 billion — the smallest dollar amount in the past eight years the study has been conducted.

The reason? Researchers found an almost-perfect inverse relation between the state of the economy and identity fraud. “The fraud incidence rate (has) almost a perfect inverse correlation to retail sales,”  says James Van Dyke, president and founder of Javelin. “As criminals have less money to spend on stuff, they are more likely to turn into identity criminals.” sharpretailsales

The decline is also attributed to fewer reported data breaches — just seven percent of U.S. consumers received notice their personal information was exposed to a data breach last year. Researchers note increasingly stringent creditworthiness guidelines from financial institutions also helped the decline in identity fraud, along with, an increase in online and mobile monitoring of financial accounts and an increase in the use of protection services.

But despite the drop in overall fraud, the cost to resolve identity fraud issues rose dramatically last year. Among the 5,004 people interviewed, the mean consumer out-of-pocket cost jumped 63 percent in 2010, rising from $387 in 2009 to $631 in 2010.

Why the dramatic uptick in price? The survey notes changes in the type of fraud being perpetuated — like new account fraud, which is harder to detect and is the most damaging to consumers — as one culprit.  New account fraud is also popular with “friendly fraudsters,” who target people they are personally acquainted with such as roommates or relatives.

Want to know how to avoid becoming the next victim? Here are some tips recommended by Javelin:

Stop being so social
Do you post your birthday on Facebook? Have a Twitter account set up under your pet’s name? Social networking can pose a significant threat to consumers because it allows a peek at your personal information, which can lead crooks right to your virtual door. Be sure to actively use privacy settings and rethink what kind of information you’re posting online.

“One of the data points that financial institutions use to identify their clients is your birthday. How many times, I can’t tell you,  I’ve seen my family putting their actual birthday – date, month and year – on Facebook or Myspace or whatever it happens to be. Putting those data points where many, or everyone can see depending on the privacy policy can become somewhat problematic,” says Erik Stein, vice president of portfolio management with Fiserv, which sponsored the survey along with Wells Fargo and Intersections Inc.

Get a grip on debit
Debit cards generally come with less consumer protection than credit cards, but that hasn’t stopped consumers from making it an increasingly popular form of plastic. “Debit cards come with a higher average of per-consumer, out-of-pocket cost,” says Van Dyke. Fraud resolution policies vary by bank. And those policies generally “aren’t as strong as those of credit cards,” he adds.

Obtain credit and debit cards from financial institutions that provide zero liability protection if a card is ever lost or stolen, and be sure to report missing or stolen cards immediately.

Protect yourself
Financial institutions offer a diverse array of ever-evolving consumer protection services like fraud alerts, credit freezes and database screenings. One such service is the Consent Based Social Security Number Verification Service program, which is a fee and consent-based service for enrolled private companies and government agencies. “Financial institutions now have the opportunity through the CBSC to be able to verify data points against the holder of record with the Social Security Administration. Things like this that are evolving, this is a new program, will continue to be helpful for us as we continue to move forward in combating ID fraud,” Stein says.

Javelin found that 48 percent of all reported identity fraud cases were first detected by consumers, so get in the habit of monitoring your accounts regularly, and sign up for text-message alerts to notify you of any suspicious account activity. Review your credit report at least once per year. Consumers can request a copy of their credit report from one of the three nationwide credit reporting agencies through

Sure, it sounds like a lot of work but you’ll avoid the self-loathing, knowing you did everything in your power, should you become a victim of identity fraud.

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