ID Theft Declined in 2010 but Average Losses Increased: Survey

The number of identity fraud victims dropped in 2010, but the average out-of-pocket losses have gone up, as thieves focus on new account fraud and stealing from people they know.

Total card-related identity fraud in the United States dropped by a third from $56 billion in 2009 to $37 billion in 2010, according to the results of a consumer fraud survey released Feb. 9 by Javelin Strategy and Research. The total number of victims nationwide also dropped more than 26 percent, from 11 million in 2009 to 8.1 million in 2010, the report found. The mean fraud amount per victim also declined from $4,991 in 2009 to $4,607 in 2010, Javelin said.

While the number of victims are currently at 2007 levels, the drop between 2009 and 2010 is the largest single-year decrease since Javelin started the survey back in 2003.

While all that sounds like good news, the report noted that victim’s losses, which include the costs of clearing up identity theft and covering some of the charges incurred by thieves, have shot up 63 percent, on average, from $387 in 2009 to $631 per incident in 2010, the report found.

“Identity fraud underwent a marked decline and shift over the past year,” said James Van Dyke, Javelin’s president and founder.

Annual incidence rates also fell to 3.5 percent of all card transactions, compared to 4.8 percent in 2009, Javelin said. Identity theft victims account for 3.5 percent of the population in the United States, Javelin found.

The “significant drop” in reported data breaches may have contributed to the decline, Javelin said. There were 404 breaches with 26 million records compromised in 2010, compared to 604 breaches and 221 million records in 2009, according to the research report.

The recovering economy appears to have contributed somewhat to the decline in identity theft, along with increased security measures and stronger law enforcement, according to Van Dyke. As retail sales grow, fraud incidents decrease, indicating a correlation between an individual’s financial condition and the likelihood of perpetuating identity fraud, the report said.

Although all types of fraud declined over the past year, new account fraud was the most damaging, netting scammers $17 billion in 2010, the report found. In this type of fraud, an account is opened in the victim’s name without consent. It was also the costliest for victims, with out-of-pocket losses averaging $1,267 in 2010, up from $787 in 2009, according to the report.

This type of fraud also accounted for a greater proportion of all types of identity fraud, at about 46 percent, compared to 38 percent in 2009, the report found.

In contrast, amounts stolen through existing cards, where the thieves had the actual card number or a cloned card, declined by 38 percent to $14 billion in 2010, from $23 billion in 2009, the report said.

"New account fraud on average takes longer to detect and results in higher mean consumer costs than other types of fraud," according to Javelin

Still, the typical ID theft victim rarely has to cover the fraud amount, because of the zero-liability fraud protection policies in place at the majority of banks and card issuers, Javelin said. “Most victims will have to pay out-of-pocket expenses only to cover their time in resolving fraud, not to reimburse fraudulent charges," the study said.

However, debit-card fraud is generally more expensive for consumers than credit card because zero-liability policies are less common for debit cards, according to the study.

Resolving ID theft can take up time. On average, victims spent 33 hours resolving identity fraud issues, up from a mere 12 hours in 2009. The last time resolution times have been so high was in 2005, at 40 hours.

There was a growing trend in “friendly fraud,” or when the victim knew the thief, especially amongst 25 to 34 year olds, according to the report. About 14 percent of identity theft in 2010 was committed by someone the victims knew, according to Javelin. Social security numbers were the most commonly stolen identity information.

Javelin said consumers need to be proactive about identity theft. In 35 percent of identity fraud cases, victims said they learned of fraud through their financial institution or credit card provider. The next most common method was for victims to review their own statements, the report said.

Of the 5,004 people surveyed by phone between September and November, 470 were victims of identity fraud, according to Javelin.