Identity fraud in the United States fell an estimated 12 percent from 2005 to 2006, which translates into fraud reduction of $6.4 billion. This was one of the surprising findings from the annual Identity Fraud Survey Report, released this month by Javelin Strategy & Research, a provider of independent, industry-specific, quantitative research. Identity fraud is defined as access to personal account information that leads to fraud. “ID fraud is dropping because consumers, financial institutions and the government are improving in their efforts to fight fraud,” said James Van Dyke, president and founder of Javelin Strategy & Research, San Francisco. Several years of data now exist from which to learn about criminal patterns, and “resources are much stronger as measured by systems, staff and sophistication. More and more consumers are changing their behavior to effectively protect their personal information, and institutions and the government are helping to provide further education for fraud prevention and detection as well as greater assistance in resolving fraud cases.” The survey, done via 5,000 telephone interviews with consumers in October, is co-sponsored by CheckFree, Visa and Wells Fargo & Co. It is considered the nation’s largest, most up-to-date benchmark on identity fraud.
About 500,000 fewer U.S. adults fell victim to identity fraud in 2006 than in 2005. Of the nation’s adult population, 3.7 percent were victims, down from 4.0 percent in 2005. This shows a continued year- over-year decrease since data were first collected in 2003, when 4.7 percent of the adult population was victimized.
The survey also found fewer incidents of new account fraud in the past 12 months. New account fraud takes place when criminals establish a new account using the victim’s identity and confidential information. Victims of new account fraud totaled 1 percent of all respondents in the current survey, down from 1.5 percent a year ago. Also, when fraudulent accounts were opened, many victims caught the fraud faster using online channels, such as the viewing of statements, resulting in average fraud amounts dropping from more than $10,000 a year ago to $7, 260. In addition, consumers reported much-improved resolution times, shrinking from a typical 25 hours in 2006 to five hours.
“The decrease in new accounts fraud is due to increased control, through changes in procedures by both businesses and consumers,” Mr. Van Dyke said. “New specific methods are also in place, such as credit alerts, freezes and even access to credit report for improving the ability to detect problems. New accounts fraud has been one of the most common types of fraud for criminals because it is the most difficult to detect.”
Contrary to conventional wisdom, younger adults ages 18-24 are more at risk of ID fraud. The survey found that victims in this age group are less likely to use basic precautions, such as shredding documents, switching paper bills and financial statements to electronic versions or using antivirus, anti-spyware software or firewalls. These are among the most important prevention techniques available to consumers.
Members of this age group were the most likely to fall victim to fraud in the past 12 months, with an incident rate of 5.3 percent. And more than half of these victims reported knowing their perpetrators, often friends, neighbors or in-home employees, compared with just 23 percent of overall respondents.
Americans with the lowest income surveyed – $15,000 or less – are least likely to be identity fraud victims, with only 2.8 percent reporting cases. Americans with annual income surpassing $150,000 are the most likely to be victimized, at 7.3 percent.
But when the lowest-income population is victimized, misuse lasts twice as long and the fraud is the hardest to uncover, taking on average 70 percent longer to detect than fraud in higher-income populations, the survey found. These victims spent 44 hours on average resolving the fraud.
Fraud victims earning more than $150,000 are twice as likely to switch paper statements and bills to electronic alternatives, a technique to help prevent fraud. They are 65 percent more likely to monitor their accounts online, giving them an advantage in catching fraud before large incident values build up. In comparison, lower- income victims are more than twice as likely to reduce their overall spending, almost three times more likely to avoid online purchases and are also three times more likely to avoid online banking. “The lowest-income group takes the longest to uncover fraud because they are not as aggressive with particular detection methods, such as regularly monitoring accounts online, signing up for alerts, etc., compared to other income groups,” Mr. Van Dyke said. So how can direct marketers or online merchants let customers know that their information is safe with their companies? “Let your customers know what you are doing to protect them,” Mr. Van Dyke said. “Establish policies against using embedded links in e-mail correspondence to eliminate the threats posed by phishing. Use personalized e-mail formats to allow customers to authenticate the source of the e-mail. Communicate in plain, uncomplicated language about both the threats and benefits of using online methods so that people avoid the one while taking advantage of the other.”