The Federal Trade Commission (FTC) released complaint statistics for 2011 last week and identity theft topped the list of fraud complaints for the 12th consecutive year. Overall FTC complaints increased 20% to 1.8 million compared to 2010. Seventy percent of the 1.8 million complaints filed in 2011 were fraud related with identity theft, a type of fraud, making up 15% of the total complaints followed by debt collection fraud at 10%.
In Wisconsin, total complaints logged by the FTC were up 48% compared to 2010, whereas identity theft complaints increased almost 10%. Like the national results identity theft was the most prevalant category of fraud in Wisconsin followed by debt collection fraud.
Identity theft complaints were up 11% in 2011 nationwide compared to 2010 and other types of fraud that were up 10%. Identity theft as a whole has not been declining as popular opinion once suggested it would. Identity theft complaints in 2011 totaled 279,156 compared to 86,250 a decade ago. Although this is more than a three-fold increase in complaints filed, the total identity theft complaints have been rather steady with an annual average of 266,000 since 2004.
The numbers of complaints received annually are much smaller than the annual estimates of identity theft incidences in the U.S., which have been projected at approximately 10 million by the FTC. This estimate is based on a study commissioned by the FTC early last decade that determined that most victims do not report identity theft to authorities. Even today, victims of identity theft may resolve minor identity theft cases quickly with a financial institution or creditor, and the incident goes unaccounted. Other victims may not resolve the fraud or report it. While 70% of those that filed an ID Theft complaint in 2011 notified a police department, only 57% indicated the police took a report. If one resides in a state where the identity theft laws require police to take an identity theft crime report, consumers should report the police department to the state attorney general office if the police refuse to take a proper report.
The FTC Consumer Sentinel Report for 2011 (as well as previous reports) divides identity theft in several major categories each composed of one to several subcategories. The category of Government Documents and Benefits Fraud composed 27% of all the identity theft reports in 2011 and increased 57% compared to the prior year.
This type of fraud accounted for 23% of all identity theft reported from Wisconsin and the incidents of this type of fraud increased 59% compared to 2010.
This category consists of four subcategories: tax or wage fraud (24.1%), government benefits applied for/received (1.5%), government documents issued/forged (0.8%) and driver’s license issued/forged (0.8%). All of these subcategories decreased slightly in 2011 compared to 2010 except for tax and wage fraud which rocketed by over 70%.
Tax and wage fraud primarily reflects fraudulent tax returns filed in the name of the identity theft victim, where the identity thief obtains the tax refund belonging to the victim. To do so, the identity thief must have knowledge of the victim’s name, Social Security number and some idea of their reported wages. Wage information can be obtained from employers, W-2 forms and tax returns. Taxpayer wage information can be obtained through theft of the information in the workplace, mail theft, and by other means including phishing and other social engineering. Unscrupulous tax preparers may also be involved in this type of fraud. It is critical that consumers take appropriate steps to protect their wage information and report tax fraud to the IRS and the FTC and to file a police report locally.
While some types of identity theft are on the rise, like tax and wage fraud, other types of identity theft are stabilizing or declining such as credit card fraud (up a half percent), phone and utility fraud (down 2%), bank fraud (down 10%), and employment fraud (down 19%) compared to 2010.
Credit card and bank fraud may be decreasing or stabilizing because of the Red Flags Rule that was effective for financial institutions in November 2008. The Red Flags Rule required financial institutions to look for a series of red flags that would suggest that a person was committing identity theft. Employment fraud may have decreased as a result of the current economy and high unemployment.
These statistics should remind us that fraud and identity theft are crimes of opportunity. While financial institutions have taken steps to curb credit card and bank related identity theft, new opportunities for the thieves have arisen because of more people filing online tax returns and a general lack of awareness by consumers of tax and wage related identity theft.
The creative criminal mind will invent new ways of committing the crime as situations change and as steps are taken to curb certain types of identity theft such as credit card and bank fraud. Presently the IRS is taking steps to educate the public on tax and wage identity theft and to prosecute these types of crimes.
Consumers reported paying $1.5 million in fraud in 2011. The average and medium amount paid was $2,267 and $537. On average Wisconsinites paid $1913.
Sixty-eight percent of consumers that reported fraud said they made a payment. They also reported that the fraudulent payments were made primarily by wire transfers (50%), credit card (16%) and bank account debit (13%). Consumer loss could be mitigated by educating consumers to make online purchases with credit cards rather than by providing payment to online retailers by using bank account information and debit cards. With these payment types, the identity thieves fronting as a business can wipe out the victims accounts, whereas purchases made with credit cards are made with the creditor's money and can be disputed if fraud is involved.
Sixty percent of fraud complaints also identified the method of initial contact. Email contact was the most common method of initial contact at 43%, 13% was through a Website presumably initiated by the consumer, and 7% was by snail mail. Twenty-nine percent of the initial contacts were by telephone. Consumers should use extreme caution when responding to unsolicited emails and telephone calls. The safest approach is to respond to neither. Before responding to any offer, especially those that sound too good to be true, one should thoroughly research the company on the Internet.
The 50-59 age group reported the most (23%) of all types of fraud (excluding ID Theft) whereas the 20-29 year old age group reported the most identity theft, also 23%. It appears that identity theft affects younger age groups whereas other fraud affects the older age groups. The under 50 group composed 70% of all the identity theft complaints filed whereas the 40 and above age group composed 65% of all of the other fraud complaints.
Among nationwide metropolitan areas ranking for fraud and other complaints (excluding identity theft), Wisconsin cities ranked as follows in the top 50: Wausau (12), Appleton (15), Oshkosh-Neenah (19) and Whitewater (44).
In the identity theft ranking, Wisconsin cities did not appear in the top 50. Madison was ranked 269 and Milwaukee was ranked 193.