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Big Banks, Telcos Top Identity Theft List

Bank of America, Sprint, AT&T biggest source of complaints

By Martin H. Bosworth
ConsumerAffairs.com

March 2, 2008    

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Consumers are constantly being exhorted to avoid identity theft, but there's not much information about the companies most likely to be involved in identity theft, which can make it hard to take effective preventive action.

A new report from the Berkeley Center for Law and Technology may be a first step in changing that.

It finds that it's the world's biggest banks and telecommunications companies that are most frequently the companies that fall for identity theft crimes and then make life miserable for consumers victimized by the incidents, according to data collected from the Federal Trade Commission (FTC).

The report, compiled from 88,000 complaints filed with the FTC over three months in 2006, shows that major banks and telecommunications companies accounted for a much larger portion of the filed complaints than other industries, and that telecommunications companies lacked a standard of measuring the complaints.

According to author Chris Hoofnagle, the report was designed to provide consumers and regulators "objective tools" to compare banks and utilities based on how they handle security and incidents of fraud and theft.

"Without such tools, consumers cannot 'vote with their feet' and choose safer institutions, regulators cannot allocate oversight and enforcement resources to high-risk institutions and practices, and businesses themselves cannot assess how well they perform relative to competitors in fighting this crime," said Hoofnagle, a senior fellow at the Berkeley Center.

"While competition is a powerful force for consumer protection, the lack of information about identity theft makes the market less effective in creating a race to the top among institutions to shield consumers from fraud."

Among the report's findings:

• Bank of America ranked highest of all the companies studied, with an average of 1,117 incidents over the three-month period. Next was AT&T with 763 incidents, followed by Sprint Nextel with 698. Rounding out the top five were JP Morgan Chase (including Chase and Bank One) with 613 cases, and Capital One with 442.

• The institutions with the lowest number of complaints over the period studied were Macy's (2.9 incidents per month), BellSouth (3.9 incidents per month), and Dell (1.8 incidents per month).

• In studying the banks, when Hoofnagle divided the incidents by total deposits, HSBC had a higher rate of fraud than Bank of America, at 21 incidents per billions of deposits compared to Bank of America's 17 incidents. ING Bank had the lowest rate of fraud, with one incident reported over the three-month time period.

First attempt

Hoofnagle cautioned that the report was a first attempt at analyzing the data, and many factors contributed to complicate studying the findings in clear fashion.

Among them were incidents of "synthetic identity theft," where the thief takes pieces of genuine identities and forges a new false identity to commit crimes with, would not be accurately reflected in the complaints. Other factors Hoofnagle noted included the lengthy FTC complaint form which could discourage consumers from providing accurate data, and the difficulty in linking incidents to the right financial institutions.

"The most obvious improvement upon this effort would be institution of voluntary, public reporting by institutions themselves on identity theft," Hoofnagle said.

The FTC annually publishes reports on the number and types of consumer fraud complaints it receives, and identity theft has topped the list for the past seven years.

According to the 2007 FTC report, of 813,899 total complaints received in 2007, 258,427, or 32 percent, were related to identity theft. Total consumer fraud losses totaled $1.2 billion, with the average monetary loss for an individual at $349.

The 2006 complaint list, from which Hoofnagle drew data for his report via the Freedom of Information Act (FOIA), identity theft and fraud complaints accounted for 36 percent of the 674,354 complaints received between January 1 and December 31.

Annual report

According to the FTC, total consumer fraud losses totaled $1.2 billion in 2007, with the average monetary loss for an individual at $349. Credit card fraud was the most common form of reported identity theft at 23 percent, followed by utilities fraud at 18 percent, employment fraud at 14 percent, and bank fraud at 13 percent.

The top form of credit card fraud was opening a fraudulent new account at 14.2 percent, followed by fraud on an existing account at 9.4 percent.

The FTC compiled fraud data from consumer complaints in all 50 states and the District of Columbia, and identified the 50 metropolitan areas with the highest incidence of fraud and identity theft. The metropolitan areas with the highest per capita rates of reported consumer fraud complaints were Albany-Lebanon, Oregon; Greeley, Colorado; and Napa, California.

The FTC received 140,000 more consumer fraud complaints in 2007 than in 2006, when the agency received 674,354 complaints. The agency received 686,000 complaints in 2005, 255,000 of which were related to identity theft.

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