Study Claims Identity Theft 'Continues To Decline'

Telephone calls new medium for fraud and phishing

By Martin H. Bosworth
ConsumerAffairs.com

February 12, 2008

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Identity theft and fraud declined by 12 percent in 2007, saving consumers and businesses $6 billion in potential losses, according to Javelin Strategy & Research's annual survey of trends relating to identity theft.

But the research group warned that even with greater vigilance on the part of citizens, business, and law enforcement, the average cost of an identity theft incident continued to increase, and techniques such as stealing information over the phone are becoming much more commonplace.

"While fraud is declining, it is still a concern for the American public," said James Van Dyke, Javelin's president. "Fraudsters are getting creative and leveraging new techniques to commit fraud, so Americans need to be as diligent as ever in protecting their personal information."

Among the report's key findings:

• 300,000 fewer adults in the United States fell victim to identity fraud in 2007 than in 2006, according to the Javelin survey. In 2007, 3.58 percent of the country's adults were victims of identity fraud, down from 4.25 percent of the overall adult population in the United States in 2004. Javelin's research analysts attributed this to consumers becoming more savvy in using the Web to conduct business transactions, such as checking bank accounts online and updating anti-virus and security software more frequently.

• Cases of fraud over the phone and through mail jumped from 3 percent in 2006 to 40 percent in 2007. Thieves were adept at using techniques known as "vishing" to get information, such as calling a victim and posing as a representative of a favored charity, bank, or other utility the victim did business with.

• The cost to the consumer of an average identity theft case continued to increase, averaged $691 in 2007, from $554 in 2006, an increase of 25 percent.

• The study measured geographic areas for incidence of fraud for the first time, and found that California, Illinois, Idaho, West Virginia and Delaware reported the highest incidents of fraud, while New England and the Plains States had the lowest.

The study was funded by Visa and electronic banking company CheckFree, and was conducted through telephone surveys of 5,000 consumers in October 2007.

Javelin's previous surveys have charted a regular decline in identity theft and fraud for three years, claiming that the majority of theft and fraud crimes took place offline, via "dumpster diving" for shredded records and physical theft.

Previous Javelin surveys have been contradicted by other research, such as the Federal Trade Commission's own findings that identity theft, both online and offline, was on the rise.

Competing analyst groups have often come up with different assessments of the identity theft problem, owing to the difficulty in connecting possible sources of identity theft to actual cases of fraud.

Whereas existing account fraud -- using someone's stolen information to make purchases in their name -- is relatively easy to track and correct, the new prevailing method of fraud is "synthetic identity theft," where the thieves build new identities out of pieces of existing data. Synthetic identities are much more difficult to identify as fake, and consequently much harder to link to actual cases of fraud.

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