Identity fraud hits 10 million in 2008

02.17.09
By Christopher Maag

After a couple years of slight decline, the number of identity fraud cases skyrocketed in 2008, according to a new report by Javelin Strategy & Research. The number of victims grew by almost two million to 10 million, a 25-percent increase in just a single year.

"We have smarter criminals and more data breaches," says Steve Schwartz, executive vice president of consumer services for Intersections, an identity theft solutions company that co-sponsored the research. "We weren’t surprised that the rates went up because in a dropping economy, crime rises."

The Javelin report distinguishes between identity theft, in which an identity is merely stolen, and identity fraud, in which a stolen identity is actually used to commit a financial crime.

"More consumers are becoming victimized," according to the report.

Surprising trend
For the study, Javelin interviewed 4,800 people about their financial behaviors. Most consumers who became identity theft victims in 2008 – a full 65 percent – had no idea how their identities came to be stolen. Of the remaining 35 percent, the Javelin report found what it calls a surprising trend: "Traditional" identity theft involving paper documents and face-to-face contact appeared to be far more prevalent than computer-based fraud.

Among the 35 percent of people who knew how the theft occurred, 43 percent said they were victimized after their wallet was lost or stolen. Nineteen percent of cases happened while consumers were conducting a financial transaction, such as thieves stealing identity information while the consumer made a purchase in a store or over the phone. In 13 percent of cases, fraud started with the theft of documents out of the home, often by friends or family members.  Another three percent of crimes were the result of stolen mail.

A full 78 percent of identity fraud happened through "traditional" means. The fact that so few cases happened online may surprise consumers and journalists, Javelin said in the report.

"Although many people believe that most identity theft only occurs over the Internet and that hackers are responsible for all identity theft and fraud, Javelin research has found that many thefts occur through more traditional methods," according to the report. "In fact, among the victims who knew how their data was taken, lost or stolen wallets, checkbooks or credit cards accounted for nearly four times as many instances of theft as all online attack methods put together."

Difficult to trace    
However, these results may not reflect the full scope of the problem. That’s because consumers are far more likely to notice a stolen wallet than they are a malware software program that’s quietly stealing passwords and account numbers from their computer.

"People know when they lose their wallet," Schwartz says. "More sophisticated criminals using things like malware programs are more difficult to detect."

While interviewing consumers about identity theft is a valuable exercise, it could give an incomplete picture of the problem because so many people do not know how their identities were stolen; and often, they may not even know that their identities have been stolen until they become a victim of fraud.  So the potential numbers for identity theft (separate from identity fraud) could be much higher than Javelin’s numbers on identity fraud alone.

Nevertheless, the new report contains valuable information to help consumers protect themselves from identity theft. It divides these activities into three categories: Prevention, Detection and Resolution.

Prevention

• At home, keep your paper documents in a locked file cabinet. Don’t just throw them in the trash when you no longer need them – shred them!
• Be mindful of your wallet or purse. Don’t carry your Social Security card or more credit cards than you need.  
• To protect private information on your computer, install and regularly update anti-spyware, anti-virus and firewall software on your computer
• Beware online. Do not reveal any sensitive information on social networking sites like MySpace or LinkedIn.
• Be careful buying online. Make sure a site is secure before giving it your account numbers. You can do this by clicking on the padlock symbol next to the address box and checking its safety certificate.

Detection

• Regularly check your credit report for free at annualcreditreport.com
• Check your bank and credit card statements every month for fraudulent charges
• Sign up for online or mobile alerts through your credit card company or bank

Resolution

• If you find that your identity has been stolen, immediately contact your bank or credit card company. Work with them to decide whether to get a new card, close the account and open a new one, etc.
• Get a police report. Especially if the thief is a persistent criminal using your information to set up multiple accounts (cell phone, car loan, etc.), a police report is a crucial tool in proving to lenders and other companies that you are the innocent victim.
• Report the incident to the Federal Trade Commission at: www.ftc.gov/bcp/edu/microsites/idtheft, or by telephone at: I-877-IDTHEFT (1-877- 438-4338)
• Call the three main credit reporting agencies – TransUnion, Experian and Equifax to place a fraud alert on your credit report. That way, anyone attempting to open new credit or make a purchase using your credit (including you) will be asked to provide additional identification before the purchase is approved.

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Javelin study found that 78 percent of identity fraud happened through traditional means.