The How, Why and When

        Identity theft as we know it today has its roots in the rise of technology and the growing influence of instant credit as a means of making purchases.

        As markets and methods for collecting, processing, and trading consumer data have evolved, few regulations have been put in place to ensure data is handled responsibly and securely. As a result, there is more personal data than ever in circulation – and criminals are getting better and better at figuring out how to get their hands on it.

        The increasing amount and availability of personal data out there today wouldn’t be so bad if it weren’t for the fact that it’s also pretty easy for criminals to convert that data into cash. Today it is possible to walk into almost any store without as much as a penny, sign up for instant credit, and walk out the door with thousands of dollars worth of merchandise. It’s this phenomenon that makes your personal credit information so valuable to identity thieves.

        Criminals may steal your wallet, hack into a company’s database, steal your checkbook, or buy your information from a trader on the Internet. No matter how they get it, once they have enough information, criminals can assume your identity and use it for their own gain. Common things criminals do with your information once they have it include:

• Credit cards: Some charge to an existing account; most create new ones. Thanks to new safeguards, this category has been trending down since 2002.
• Phone/utilities: 16% of all identity theft complaints mention opening new phone accounts; 5% mention utilities charges.
• Banks: Twice as many identity thieves draw from (and drain) existing accounts as create new ones; fraudulent electronic fund transfer has doubled since 2002.
• Employment: Using stolen name and identity to get hired; up 4% in the past three years.
• Government: Bogus Social Security cards and driver’s licenses; tax fraud; stealing benefits.
• Loans: Mostly business, personal or student loans; also auto loans/leases and mortgages.
• Other: Using stolen identification when caught committing a crime; also insurance and securities fraud, health-care scams and bankruptcy schemes.

        A quick look at the numbers: 9.3 million Americans were victimized in 2004. The median cost per fraud victim was $750. Victims on average spent 28 hours resolving the resulting credit, financial and other problems caused by fraud.¹ The Federal Trade Commission estimates that 27 million Americans were victims of some kind of identity theft in the past five years. Other studies suggest as many as 1 in 5 Americans have been hit by identity theft². The problem is massive and it will probably take years for law enforcement and regulatory forces to make the fundamental changes needed to fix it. In the meantime, the smart among us will do what we can to protect ourselves.

How Identity Theft Really Happens

It’s usually people you know - and it’s usually done offline
Things you usually don’t hear about in news stories about identity theft: family members and neighbors make up about half of all known identity thieves. Also, despite all the news about electronic thefts, in cases where the method was known, more than two-thirds of the time information is stolen offline – through lost or stolen wallets, misappropriation by family and friends, or through the theft of paper mail.¹

Victims are usually the first to discover fraud – not credit issuers
Even though credit issuers use lots of tools for fraud detection, victims are usually the first to discover fraud – 54% of the time, in fact.¹

Victims who bank electronically usually find out sooner…
Further, if you manage your personal finances online, you have a better chance of detecting fraud sooner - the mean fraud detection time for those who review their statements on paper is 114 days; for those who review finances online, by ATM or by other electronic means, the mean fraud detection time is just 8 days.¹

…and when it comes to identity theft, time = money
Whether it’s you or your credit issuer, the sooner someone discovers the fraud, the less money will be involved. If you discover the fraud early, you’ll wind up paying less to fix everything. Check out these numbers: The slowest methods of discovering fraud are to be contacted by creditors or turned down when applying for credit. In these cases, the mean loss is $12,021. The mean loss when the fraud is discovered by the victim through paper statement review is $4543. And the mean loss when victims discover fraud through review of their statements electronically? Just $551.¹ Given these facts, if you’re not already reviewing your statements electronically you should start doing so now.

What’s Being Done to Protect Us?

How Can I Find Out What My State's Laws Are?
Go to your state government website and learn about your credit freeze options, or check the state identity theft laws section of FTC’s website - www.consumer.gov/idtheft/. 

About Fraud Alerts
Can’t you put a fraud alert on your credit reports right now? Thanks to the FACTA legislation of 2004, yes - but it’s not the same thing as a security freeze. A fraud alert is an alert that the three major credit reporting companies attach to your credit file that alerts creditors that your private information has been, or may be, compromised. This free service alerts creditors to use additional steps to verify your identity before opening new accounts in your name. A fraud alert may not prevent a scammer from opening a new account in your name. Creditors are asked to call and verify all credit applications made in your name before they open any new credit account or grant any new credit. However, creditors are not required by law to contact you. In other words, fraud alerts can legally be ignored by creditors.