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FTC Findings Undercut Industry Claims that Identity Theft Is Declining

By Martin H. Bosworth
ConsumerAffairs.com

February 9, 2007

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The financial services industry, hoping to befuddle the new Congress, has been busily laying down a smokescreen claiming that identity theft is on the wane.

But the Federal Trade Commission's latest compilation of consumer complaints and a survey by the National Crime Prevention Council should do much to clear the air.

The FTC's complaint list was dominated by -- guess what? -- identity theft and fraud issues for the seventh year in a row. Identity theft complaints to the FTC totaled nearly 250,000, a whopping 36 percent of the total number of complaints the agency received in 2006.

The FTC reported that credit card fraud was the most pervasive form of identity theft at 25 percent, followed by utilities/phone fraud (16 percent), bank fraud (16 percent), and employment fraud (14 percent).

The total identity fraud losses reported to the FTC topped $1.1 billion, with the median money individual loss placed at $500.

Meanwhile, a Harris Interactive survey commissioned by the National Crime Prevention Council (NCPC) found that identity theft and credit card fraud top the list of crimes about which adult Americans are extremely concerned.

Identity theft outranks concern over such crimes as credit card fraud, burglary, and robbery, according to the survey of 813 adults.

Say What?

The FTC complaint findings serve as a counterpoint to industry claims that identity theft is somehow less of a threat these days.

A study recently released by Javelin Research claimed that identity theft instances declined by 11.5 percent between 2005 and 2006, with 2006 losses declining to $49.5 billion. The Javelin study was funded by Visa, Wells Fargo, and check-printing company CheckFree.

A study conducted by the industry-funded Identity Theft Assistance Center (ITAC) claimed that two in five identity theft victims knew the thief personally -- usually a friend or family member. The Javelin study also made similar claims.

The Javelin study has been taking a lot of hits from privacy advocates who note that, even if one accepts the two in five figure, this would still mean that three out of five identity theft victims had no inkling who the thief was.

Critics also said the survey ignored instances of "synthetic identity theft."

Synthetic identity theft occurs when thieves use pieces of data from different victims to create new identities, such as one person's name and another person's Social Security number, rather than stealing someone's information whole cloth and using it for fraud.

Synthetic identity fraud is much harder to detect, as banks and credit agencies will often simply create "subfiles" for the new accounts, and the original information holders never know about the new accounts until bill collectors come looking for them.

On his blog, Chris Hoofnagle of the Electronic Privacy Information Center (EPIC) shared communications between the FTC and Wall Street Journal reporter Robin Sidel, using the Freedom of Information Act, in which the FTC criticized Javelin's findings as "misleading."

FTC official Claudia Bourne Farrell said that, "Since most surveyed -- 74 percent -- could not identify the person who stole their identity,and half the 26 percent who could identify the thief either didn't personallyknow the thief or said it was someone other than a friend or relative, it would be misleading to suggest that the 'culprit is likely a friend or relative.'"

PIRG's Ed Mierzwinski noted that the Javelin study pinpointed over eight million victims of identity theft in 2006 -- over thirty-two times more than the people who complained to the FTC.

As he put it, "for every consumer who takes the time to complain, there are often 10-20 or more others standing behind him or her with the same problem."

NCPC Survey

The NCPC survey found that people with high levels of concern about identity theft are no more knowledgeable about the issue than those who are less concerned (57 percent versus 56 percent of other respondents) about how to prevent it.

The survey, conducted in November 2006, also found that:

• Two-thirds of adult females (66 percent) see identity theft as a major problem, compared with 47 percent of adult males.

• People who feel increasingly vulnerable on the Internet are more likely than their counterparts to see identity theft as a major problem (80 percent of those who feel more vulnerable than a year ago compared with just about half of those who are less afraid or feel unchanged about Internet vulnerability.

• Fourteen percent of respondents report that they have at sometime in their lives been victims of identity theft -- which represents over 40 million adult Americans.

• Twenty-four percent of respondents knew someone who has been an ID theft victim.

• Those who know ID theft victims are significantly more likely to be most concerned about that crime -- 31 percent versus 24 percent of all other adults.

• People could name a variety of preventive actions that might prove helpful: shredding (destroying) sensitive personal documents, avoiding use of Social Security numbers, taking care not to give out personal information on the phone (including credit card and Social Security numbers), avoiding giving out computer or other passwords, and refusing to give out personal information via the Web, among others.

• The black community appears to be disproportionately victimized by ID theft: 31 percent report being victims compared with 14 percent of the population overall, and 45 percent know family members or close friends who are victims, compared with 25 percent of the general population.

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