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Saturday, February 12, 2011

According to one study, volume of identity theft dropped last year ... or did it?

According to Bloomberg News, the cost of identity theft fraud dropped in 2010 by 34% to $37 billion, the lowest since 2003 when Javelin Strategy & Research began tracking such information.  Good news, right?

Well, not so fast.  Once again, the definition of identity theft that is used to make this calculation is broad, possibly skewing the results.  Javelin's definition apparently includes such things as account take over, which in essence is not identity theft but merely the use of someone else's account.  In an account take over situation, the criminal does not utilize the name, SSN or other personal identifiers of a victim to open a new account in the victim's name.  Instead, the perpetrator merely accesses an already existing account of the victim, making charges with the victim's already existing credit or debit card.  The cost caused by this type of fraud is much less than the cost of fixing a true name identity theft fraud.

This distinction is born out by the other data reported on by Bloomberg, namely that average out of pocket costs for all types of victims (both true identity theft and account takeover) rose in 2010 to $631, up from $387 in 2009.  Conversely, average out of pocket costs for new account fraud (i.e. what I call true identity theft or true name identity theft) rose from $787 in 2009 to $1,267 in 2010. 

This study also underscores another point that I have made to people in the past, namely that you are more at risk from account take over when you use your debit card than when you use your credit card.  Debit card users put at risk whatever amount of money that's in their respective checking accounts, while credit card users do not risk their money but instead risk the money of the credit card companies.  If you are going to bet, its better to bet with someone else's money, don't you think?

One last point ... I think it is also misleading to think of identity theft or account take over in only the terms of out of pocket loss.  In my 11 plus year experience representing identity theft victims, I can tell you that the out of pocket costs associated with identity theft pale in comparison to the true damage caused by the theft of an identity, from the damage to reputation, the cost of time lost dealing with the problem and the sheer mental anguish caused by losing control over one's finances and the sense of betrayal, mistrust and paranoia caused by identity theft.

Here's a link to Bloomberg's full article - http://www.fa-mag.com/fa-news/6819-identity-theft-fraud-falls-34-victims-pay-more.html.

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