Every three seconds there was a new victim of identity fraud last year according to the Javelin Strategy & Research’s 2012 Identity Theft Report released on Feb. 20. That is the highest recorded number of victims, an increase of 1 million consumers over 2011. A disturbing item was that one in four people who received a data breach notice became on identity theft victim. Breaches involving Social Security numbers were the most damaging to victims, being five times more likely to be a victim of fraud than the average consumer.
More than $21 billion was stolen in 2012 according to the report. That is business loss that all consumers end up paying in higher prices, tax and interest rates. While each person's data was misused for fraud for a shorter period of time in 2012 than in 2011, the increased amount of money lost indicates that criminals are getting more proficient at maximizing the stolen information. This increase was driven by dramatic jumps in the two most severe fraud types, new account fraud (NAF) and account takeover fraud (ATF).
“We have to keep up with fraudsters faster,” says Jim Van Dyke, CEO of Javelin. “The degree to which new account fraud is up sharply as well and that is the most damaging form of ID fraud.
"This past year was one where there were both successes and setbacks for consumers, institutions and fraudsters. Consumers and institutions are now starting to act as partners—detecting and stopping fraud faster than ever before. But fraudsters are acting quicker than ever before and victimizing more consumers. Consumers must take data breach notifications more seriously and maintain vigilance to safeguard personal information, especially Social Security numbers.”
This means fraudsters are using personal information to open new account taking advantage of the fact that consumers cannot monitor and close accounts they don’t know about. More than 50 percent of victims were actively detecting fraud using financial alerts, credit monitoring or identity protection services, as well as by monitoring their accounts, according to the report.
“Take any [new] letters or notices as a call for alarm,” Van Dyke says. “People are reacting just the opposite; they think they can rest easy.”
For the purpose of the study identity fraud was defined as the unauthorized use of another person’s personal information to achieve illicit financial gain. Identity fraud can range from simply using a stolen payment card account, to making a fraudulent purchase, to taking control of existing accounts or opening new accounts, including mobile phone or utility services.
The survey also found that fraud victims are more selective where they shop after an incident, and small businesses were the most dramatically impacted. The study found that 15 percent of all fraud victims decided to change behaviors and avoid smaller online merchants. This is a much higher percentage than those that avoid larger retailers.
More than 1.5 million victims knew the person who committed the fraud in 2012. Many of those were probably within the immediate family. Lower income consumers were more likely to be victims of familiar fraud. The information most likely to be taken via familiar fraud includes name, Social Security number, address and checking account numbers.
The survey found that collaborative efforts among consumers, financial institutions and identity protection services is having a positive impact. In 33 percent of cases, consumers were notified of the fraud by a bank or card issuer. Email and other proactive alerts can help consumers discover and stop identity fraud more quickly.
About half of the consumers that stay vigilant found the fraud themselves by monitoring their bank accounts, statements, credit scores and purchasing identity protection services. When reported in a timely manner, costs can be kept down. Monitoring bank and credit card accounts is vital and can be done easily online.
The FBI recently released a warning about cramming. Cramming is when the fraudster makes small purchases on a consumer’s credit card, hoping that no one will notice the charges. As an identity theft expert I cannot state how critical it is to go over each and every item on a bill to make sure someone authorized to use the card made the purchase.
“As the survey pointed out, consumers must also be aware of information security risks,” said Jay Foley of the ID Theft Info Source and an identity theft expert for the past 15 years. “For instance, the survey found only 40 percent of consumers considered public Wi-Fi locations risky. This does not come as a surprise for those who understand the technology. Consumers do not understand that it is possible to use a backdoor to access information distributed from these public spots. The fact that fraud incidence rate is 45 percent higher for those who use public locations shows the inherent danger of these public locations and is the reason we strongly recommend avoiding them.”