SAN FRANCISCO, CA -- The 2007 Identity Fraud Survey Report - released today by Javelin Strategy & Research - provides compelling new information about the reduction of identity fraud across the United States, while also identifying important risk differentiators between age and income demographics. In a key finding, the report identified a significant reduction in fraudulent new account openings using a person's private information, traditionally one of the most common types of fraud. It also confirmed that more fraud occurs in traditional physical channels, such as in-person transactions and by the direct theft of personal data by individuals, rather than online.
In its third consecutive year, this comprehensive, longitudinal survey is independently produced by Javelin Strategy & Research and is considered the nation's largest and most up-to-date benchmark on identity fraud. Identity fraud is defined as access to personal account information that leads to fraud. In October 2006, a sample size of 5,000 telephone interviews with consumers turned up surprising results that challenge common beliefs. The survey is co-sponsored by CheckFree, Visa and Wells Fargo & Company.
The Survey Found
- Identity fraud is dropping in the United States - Down by an estimated 12 percent over the previous year, which translates into a total fraud reduction of $6.4 billion.
- Fraudulent new account openings are down over the previous year with average fraud amounts also dropping significantly.
- Young adults are at the greatest risk for identity fraud - Adult victims between the ages of 18 and 24 are least likely to take easy but important safeguards such as shredding documents and using antivirus software and firewalls, resulting in more than five percent of those surveyed falling victim.
- A fraud detection digital divide - Americans earning less than $15,000 are least likely to be victims but take the longest to uncover fraud when it happens. They also react differently to fraud than those Americans earning more than $150,000.
The Decline of ID Fraud
Approximately 500,000 fewer adults in the United States fell victim to identity fraud in 2006 than in 2005. Of America's overall adult population, 3.7 percent were victims, as compared to 4.0 percent in 2005. This demonstrates a continued year-over-year decrease since data was first collected in 2003 when 4.7 percent of the adult population was victimized.
In terms of total dollars, identity fraud in this year's report dropped by an estimated 12 percent over the previous year, from $55.7 billion to $49.3 billion.
Factors that contribute to this decline include better consumer education and awareness, and the increased usage of online banking and financial sites that allow individuals to more frequently monitor their accounts. As industry and consumers work together to protect sensitive data by adopting online financial services, such as electronic banking and bill paying, further fraud reduction is expected by Javelin.
"While identity fraud is still a serious criminal issue in the United States, Javelin's new study points to significant identity fraud reduction as a direct result of changes in industry and consumer behaviors," says James Van Dyke, Javelin's president and founder, who oversaw the Identity Fraud Survey Report for the third consecutive year. "Thanks in part to comprehensive data protection, fraud monitoring, and consumer education, we now have more effective methods to quickly catch - or even prevent - fraud before it occurs by utilizing common online technologies such as electronic banking and bill payment."
"The trends revealed in Javelin's latest comprehensive report on identity fraud are a call to action for more consumer education and show its ability to build trust and confidence in today's marketplace," said Steve Cole, president and CEO, Council of Better Business Bureaus.
Reduction in Fraudulent Account Openings
The survey found a noticeable reduction in the incidents of new account fraud in the past 12 months. New account fraud takes place when criminals use a victim's personal data to establish a new account using the victim's identity and confidential information. New account fraud dropped from 1.5 percent of all respondents in 2006 to one percent in 2007. Additionally, when fraudulent accounts are opened, many victims caught the fraud more quickly utilizing online channels, such as the viewing of statements, resulting in average fraud amounts dropping from more than $10,000 in 2006 to $7,260 on average in 2007.
In addition to the reduction in fraud amounts, consumers reported dramatically improved resolution times, decreasing from a typical 25 hours in 2006 to only 5 hours in 2007.
Young Adults Most at Risk
Contrary to conventional wisdom, younger American adults between the ages of 18 and 24 are more at risk of ID fraud. The survey found that victims in this age group are less likely to utilize the most basic precautions, such as shredding documents, turning off paper bills and financial statements, or using antivirus, anti-spyware software or firewalls. These are some of the most important prevention techniques available to consumers today.
Members of this age group were the most likely to fall victim to fraud in the past 12 months when compared to all other age groups. The overall adult population of the United States reported a fraud rate of 3.7 percent. Younger adults between 18 and 24 reported a much greater incident rate of 5.3 percent. Additionally, more than half of these victims reported knowing their perpetrators, which could include friends, neighbors or in-home employees, as compared to just 23 percent of overall respondents.
Income a Factor
Americans with the lowest income surveyed - those earning $15,000 or less - are least likely to be victims of identity fraud, with only 2.8 percent reporting cases. Americans with incomes of more $150,000 per year are the most likely to be victimized (7.3 percent reporting abuses).
When the lowest income population is victimized, misuse lasts twice as long and the fraud is the hardest to uncover, taking on average 70 percent longer to detect than fraud in higher income populations. These victims spent 75 percent, or 44 hours on average, more time resolving the fraud.
The survey found that fraud victims earning more than $150,000 are two times more likely to turn off paper statements and bills, choosing to adopt electronic alternatives, a technique to help prevent fraud. They are 65 percent more likely to monitor their accounts online, giving them a timely advantage in catching fraud before large incident values build up. In comparison, lower income victims are more than twice as likely to reduce their overall spending, almost three times more likely to avoid online purchases, and are also three times more likely to avoid online banking.
Identity Safety Tips That Can Protect Consumers
PREVENT access to your personal information.
- Only carry credit and identification cards that you use, and do not carry your social security card. Lock personal information, sensitive documents, checkbooks, credit cards, etc. in a secure place.
- Whenever possible, protect your accounts (banking, utility, merchant, etc.) by adding difficult-to-deduce PINs and passwords to them. Secure PINs and passwords, even inside your home, and change them frequently.
- Replace paper invoices, statements and checks with electronic versions, if offered by your employer, bank, utility or merchant. Sign up for automatic payroll deposits and e-mail or telephone alerts, which will warn you of any unusual account activity.
- When responding to e-mail from businesses with which you have an account, do not link to their Web site through the address provided in the e-mail. Go to the business site through your search engine and type in the URL.
- Never provide personal information over the phone unless you made the call or you are certain of whom you are talking to. Do not respond to automated phone messages or e-mail requesting you call a number to resolve an account issue.
- If you have a home computer, install and regularly update firewall, anti-spyware, anti-virus and browser security software.
- Secure your sensitive mobile data with a strong password or file protection software, whether it is stored in your laptop or a PDA device.
- If you receive a solicitation to pay an advance fee (i.e., for a prize, preapproved credit or loan), verify the identity of the organization through a legitimate source (such as the Better Business Bureau) before sending any payment.
- Shred all sensitive documents prior to disposal.
- Use a secure mailbox for incoming mail.
DETECT unauthorized activity
- Contact your bank, credit card company or merchant immediately, if your checkbook, wallet or debit/credit cards are lost or stolen or if you do not receive statements, invoices or new or renewed credit/debit cards.
- Monitor your bank and credit card account activity regularly. Check your account balances weekly through the phone, ATM or Internet. Confirm that all transactions are authorized.
- Review your credit information regularly (free reports are available at www.annualcreditreport.com or by calling 1-877-322-8228). Confirm that all accounts listed are yours.
- If offered by your bank, use e-mail or telephone alerts to monitor transfers, payments, low balances and withdrawals.
RESOLVE fraud promptly, minimizing losses and protecting your credit record.
If you think you are a victim of theft:
- Notify your financial providers.
- Close any affected accounts immediately.
- Place an "alert" at all three credit bureaus (Equifax, Experian and TransUnion).
- File a report with your local police where the identity theft took place. Get a copy of the police report for your records.
- Ask your financial provider about its zero-liability protection against fraud and about dedicated resources to help you resolve and recover from any potential losses.
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About Javelin Strategy & Research
Javelin is the leading provider of independent, industry-specific, quantitative research and strategic direction for payments and financial services initiatives. Javelin rigorously researches technology issues, industry trends, attitudes and activities of consumers, small businesses, institutions, processors, merchants, billers, and other organizations in order to deliver relevant, high-impact findings. Javelin can be found on the Web at www.javelinstrategy.com.
For more information on this project or other Javelin studies, visit www.javelinstrategy.com/research.