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Consumers Lose $8 Billion to Online Fraud

August 8, 2006
The risks associated with using the Internet remain high according to Consumer Reports' latest "State of the Net" survey. CR projects that U.S. consumers lost more than $8 billion over the last two years to viruses, spyware, and phishing schemes.

Additionally, the "State of the Net" survey shows that consumers face a 1 in 3 chance of becoming a cybervictim, an incidence that hasn't abated in the past year.

Online consumers who fell prey to phishing schemes experienced a five-fold increase in financial losses since the 2005 survey. The median cost per phishing incident was $850 -- five times higher than the median cost of $165 in 2005. Consumer Reports projects that U.S. consumers lost $630 million over the past two years to fraudulent phishing e-mail scams.

The 2006 "State of the Net" survey was conducted by the Consumer Reports National Research Center among a nationally representative sample of more than 2,000 households with Internet access.

Based on the survey, Consumer Reports projects that Americans spent at least $7.8 billion for computer repairs, parts, and replacement over the past two years to correct problems caused by viruses and spyware.

Among CR's key 2006 "State of the Net" findings:

Twenty-nine percent of survey respondents said a virus, spyware, or phishing scam caused serious computer problems and/or financial losses in the last two years. And based on survey projections, virus infections prompted an estimated 2.6 million households to replace their computers in the past two years.

Additionally, 35% of survey respondents didn't use software to block or remove spyware. And CR projects that 2.4 million US households with broadband remain unprotected by a firewall.

• Spam: The incidence of heavy spam remains as elevated as last year. Survey results indicate that about 795,000 households continued to buy products advertised through spam. Additionally, in 8% of the households surveyed that had children under 18, a child had inadvertently seen pornographic material as a result of spam.

• Viruses: The frequency of virus-induced problems is at the same high level as last year. In the latest survey, 39% of respondents reported a virus infection in the past 2 years. Of those, 34% had to reformat their hard drives; 16% permanently lost important data; and 8% had to replace hardware.

• Spyware: In the past six months spyware prompted nearly a million U.S. households to replace their computers. Among survey respondents, two of the biggest risk factors for spyware infection were using file-sharing software (like Kazaa) and having minors at home who go online. In homes where children under 18 used the Internet, there was a 28% greater incidence of spyware infection in the past six months than in other homes.

• Phishing: Only 8% of respondents submitted personal information in response to conventional phishing e-mails. But the median cost of a phishing incident is up substantially at $850 versus $165 in 2005. New variants on phishing have emerged. "Pharming" infects a computer so that even if you type in a legitimate Web address you're redirected to a fraudulent site. "Spear phishing" targets email addresses stolen from a company.

It isn't enough for software programs to eliminate familiar viruses and spyware. To provide superior protection, a program must be able to defend against threats it has never seen. To test antivirus software, the experts at Consumer Reports employed consumer tests in which viruses that CR created were unleashed under high security on antivirus programs.

CR notes that for staying safe online, software suites have several pluses. If the suite has a consistent user interface across the components, it eliminates the need for consumers to wrestle with three programs. Suites generally cost less than the sum of individual packages, and there is only one annual fee for licensing and updates.

Among the 10 popular suites that CR tested, only Zone Labs Zone Alarm Internet Security Suite ($70) did it all well. The suite's antivirus and antispam components did an Excellent job in CR's individual tests, and its antispyware was Very Good.

For an antivirus/antispam combination, Trend Micro PC-cillin Internet Security ($50) received a high score for both performance and features; its antivirus and antispam components rated Very Good in CR's individual tests (the suite's antispam and antispyware components are not the same as the ones available individually.)

For antispyware protection, CR's suggests adding Spybot's free Search and Destroy, which scored Very Good in CR's tests.

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