FTC Consumer Sentinel Network Data Book

Here’s a case that hits close to home. My wife, an elementary school teacher, recently called me on her lunch break to tell me she had just received a questionable e-mail from Laura, the mother of one of her students. The message said that Laura was in the United Kingdom, had lost her wallet, and was asking my wife to wire $2,500 to an account in the UK. I told my wife that the message obviously was fraudulent, and she should call Laura.

My wife was just one of more than 40 people who had contacted Laura (who wasn’t stranded in the UK) to tell her they had received the same fake e-mail from her. Laura told my wife that during the previous month she’d innocently provided her personal e-mail account information (username, password, etc.) to someone masquerading as a Yahoo! employee. After she typed in her personal info, she hit the reply button and the fraudster had what he needed to infiltrate her computer, hijack her e-mail contact list, and send the “I need money” e-mail to more than 200 people. Fortunately, no one wired funds to the UK account. Not this time.

This scam is representative of the many that have been reported to the Federal Trade Commission (FTC) and reflected in its 2009 Consumer Sentinel Network (CSN) Data Book, which was begun in 1997.

The CSN reports annual unverified complaints filed directly by consumers to the FTC and other agencies including the Better Business Bureau, Department of Defense, Federal Bureau of Investigation, Identity Theft Assistance Center, Internet Crime Complaint Center, National Association of Attorneys General, National Consumers League, PhoneBusters, U.S. Postal Service, state and local government, and police and sheriff departments.

The CSN sorts the complaints into 30 categories including “identity theft” (which is one category), 12 in the “other” category and 17 in the “fraud” category, which includes:

• Investment-related
• Travel, vacations and timeshare plans
• Computer equipment and software
• Internet services
• Internet auctions
• Multi-level marketing, pyramids and chain letters
• Prizes, sweepstakes and lotteries 
• Advance-fee loans and credit protection/repair
• Foreign money offers and counterfeit check scams
• Telephone and mobile services
• Office supplies and services
• Business opportunities, employment agencies, and work-at-home plans
• Shop-at-home and catalog sales
• Health care
• Charitable solicitations
• Debt /management and credit counseling
• Magazines and buyers clubs

In addition, beginning in 2008, the CSN report began to include an “other” category, which covers deceptive practices relating to banks and lenders; clothing, textiles, and jewelry; credit bureaus, information furnishers, and report users; credit cards; grants; home repair, improvement, and products; real estate; telecom equipment; television and electronic media; third-party creditor debt collection; auto related; and video games.

All the categories accounted for 87 percent (21 percent, 41 percent, and 25 percent for “identity theft,” “fraud,” and “other” complaint classifications, respectively) of the total complaints reported in 2009. (The other 13 percent of the total complaints included miscellaneous items that fell under the “fraud” area but weren’t included under any of the specific categories.)

TOTAL COMPLAINTS INCREASE

Hang on – I know there are a lot of stats, but they’re significant. For the years 2005 through 2009, the CSN recorded more than 5.4 million complaints for the three main classifications – “identity theft,” “fraud,” and “other.” (Also, more than 6.9 million Do-Not-Call Registry complaints were reported.) As Figures 1 (on page 17) and 2 (on page 18) both show, 1,330,426 total complaints for the three main classifications were reported in 2009, which is 105,431 more than reported in 2008 and 280,043 more than 2007.

Figure 1 shows a dramatic shift from previous years in the percentage of complaints within each of the three main classifications with “identity theft,” “fraud,” and “other” accounting for 21 percent, 54 percent, and 25 percent respectively. Comparable percentages were 26 percent, 52 percent, and 22 percent for 2008 and 25 percent, 55 percent, and 20 percent for 2007.

The complaint count from 2000 through 2009, as shown in Figure 2, shows a dramatic continuation of a trend: The total complaints reported in 2009 were 1,330,426, compared to 230,628 in 2000 – an increase of 1,099,998 or 574 percent.

[Figure 1 and Figure 2 are no longer available. — Ed.]

CSN ID THEFT RATE DECREASES 

Total identity theft complaints decreased remarkably when comparing 2008 to 2009, from 314,484 to 278,078 or an 11.5 percent decrease.

Can we assume the level of real identity theft is decreasing? Not necessarily. In fact, it could be increasing. Why? For numerous reasons. Primarily, U.S. agencies report their data to the FTC voluntarily. Because it’s not mandatory, we can safely say the data traditionally has been significantly underreported.

Also, perhaps some of the increase in reported identity theft complaints from 2000 to 2008 is because of a jump in the number of agencies and individuals reporting. If that’s the case, we can’t attribute the “perceived” growth in reported complaints over the years solely to real growth in the level of identity theft.

Many victims of fraud and identity theft don’t report the crimes to law enforcement, reporting agencies, or the FTC. Yet, based on consumer reports and surveys, it’s estimated that there are more than 10 million cases of identity theft per year in the United States.

Still, the CSN data can be extremely helpful because it represents a real level of identity theft. Therefore, we can use its findings to discover those agencies that receive the most reports, gauge approximately how the trend in identity theft is evolving, and learn what kinds of identity theft are occurring the most so we can target efforts to curb it.

COMMON TYPES OF ID THEFT 

The CSN report classifies the major types and subtypes of fraud associated with identity theft complaints and the percent of complaints for each compared to the total CSN complaints for the three-year period from 2007 through 2009. I’ll focus on 2008 and 2009 here.

The major types and their complaint percentages in 2008 and 2009, respectively, include credit card fraud (20 percent and 17 percent), government documents or benefit fraud (15 percent and 16 percent), phone or utilities fraud (13 percent and 15 percent), employment-related fraud (15 percent and 13 percent), bank fraud (11 percent and 10 percent), loan fraud (4 percent and 4 percent), “other” identity theft frauds (24 percent and 23 percent), and attempted identity theft (6 percent and 6 percent). These percentages don’t add up to 100 percent in either year because some of the complaints included more than one type of identity theft.

To get a little deeper into the analysis, we need to look at the changes in the subtypes of some of the major identity theft frauds.

As reflected in the percentages above, the CSN report shows that credit card fraud complaints decreased sharply when comparing 2008 to 2009 – i.e. 62,897 and 47,273 complaints respectively. However, this change could be attributed to similar trends in two related subtype frauds: new credit card accounts (from 12.3 percent to 10.2 percent) and existing credit card accounts (from 8 percent to 7 percent). The numbers could be down because of increased public awareness programs about the use and protection of credit cards sponsored by financial and governmental agencies. But whatever the cause of the decrease, credit card fraud, related to identity theft, remained a major problem in 2009 as it represented 17 percent of all CSN complaints.

As I’ve mentioned in past columns, you and your clients or friends can opt out of the pre-approved credit card offers sent through the mail by visiting www.optoutprescreen.com or calling 1-888-567-8688. Identity theft related to new credit card account fraud would decrease at a faster rate if more people used the service.

Decreases occurred in “government-related fraud,” and “other identity theft.” Positive changes from 2008 to 2009 in “bank fraud” can be attributed to decreases in two subtypes: “electronic fund transfer” (from 4.6 percent to 4.4 percent) and “existing accounts” (3.4 percent to 3.1 percent).

Although fraud in other major types was up, some of their subtypes decreased: “other government documents issues/forged” (1.3 percent to 1.1 percent) in the “government documents or benefits fraud” category, “telephone-new accounts” (3.4 percent to 2 percent) in the “phone or utilities fraud” category, “auto loan/lease” (1.3 percent to 1.2 percent) and “real estate loan” (91.2 percent to 1.1 percent) in the “loan fraud” category and “property rental fraud” (.2 percent to 1 percent) and “securities/other investments” (.2 percent to .1 percent) in the “other identity theft” category.

On the other hand, fraud increased in several sub-types including “government benefits applied for/received” (1.3 percent to 1.7 percent) in the “government documents or benefits fraud” category, “utilities – new accounts” (5.5 percent to 8.2 percent), “wireless – new accounts” (4.1 percent to 4.6 percent) and “unauthorized charges to existing account” (.5 percent to .6 percent) in the “phone or utilities fraud” category, “new accounts” (3 percent to 3.1 percent) in the “bank fraud” category, and “Internet/e-mail” (1.1 percent to 1.2 percent) in the “other identity theft category.”

IDENTITY THEFT BY AGE 

Figures 4 and 5 show the three-year trend of identity theft complaints by age. Although there are no significant changes among the age categories, the highest percentages of complaints are in the 20 to 29 and 30 to 39 age groups. The 19-and-under group accounts for 7 percent of all the complaints. However, this should improve in the 2010 CSN report because, as reported in my January/February column, “Will Credit Card Laws Help Reduce ID Theft for Young Consumers?”, the Credit Card Act of 2009, which went into effect in February, bans a consumer under the age of 21 from applying for a credit card. That is, unless someone over the age of 21 promises to act as a co-signer on the account or provides assurances that the underage applicant has the resources available to pay off the account.

[Figure 4 and Figure 5 are no longer available. — Ed.]

CSN’S STATE COMPLAINT RATES 

The CSN report includes a table that lists the identity theft complaints per 100,000 population and the total identity theft complaints for all 50 American states. Florida leads the pack with 22,664 complaints or 122.3 complaints per 100,000 population followed by Arizona, Texas, California, Nevada, New Mexico, Georgia, New York, Colorado, and Illinois. (South Dakota has the best statistics with only 236 complaints or 29.1 per 100,000 people.)

The top five states are no surprise because their populations include a significant number of retirees and it is commonly known that they are especially susceptible to identity theft and other fraudulent schemes compared to other groups. The FBI supports this in one of its online publications on elder fraud: “Individuals who grew up in the 1930s, 1940s, and 1950s were generally raised to be polite and trusting. Two very important and positive personality traits, except when it comes to dealing with a con-man. The con-man will exploit these traits knowing that it is difficult or impossible for these individuals to say ‘no’ or just hang up the phone.” (See “State Financial Regulators Roundtable Guide to Financial Services Issues for Senior Citizens.”)

CSN METROPOLITAN AREA RANKING FOR IDENTITY THEFT COMPLAINTS 

The report includes a ranking of the 50 largest metropolitan areas for identity theft complaints per 100,000 and total complaints for each reported area. The top 10 metropolitan areas include the Brownsville-Harlingen, Texas, area, which leads the pack with 1,016 complaints or 262.6 per 100,000 people, followed by McAllen-Edinburg, Texas; Laredo, Texas; Miami-Fort Lauderdale-Pompano Beach, Fla.; Madera, Calif.; Dunn, N.C.; Merced, Calif.; Corpus Christi, Texas; Greeley, Colo.; and Bakersfield, Calif.

These rankings are no surprise because these cities include relatively more retirees than other similar large cities. Of the 50 reported metropolitan areas, the Denver-Aurora, Colo., area has the best results with 2,892 complaints or 117.3 per 100,000 people.

MORE HELP FOR THE COMMUNITY 

This is a boatload of statistics (and some might seem to be a bit perplexing), but the conclusion is still the same: identity theft and related fraud schemes are here to stay. I hope you’ll share this column with your family, friends, and clients. And check out the 110-page CSN report at https://www.ftc.gov/reports/consumer-sentinel-network-data-book-january-december-2009.

Based on my discussions with students, faculty, and attendees at my outreach programs, many are ignorant about the methods for detection and prevention of identity theft. We must step up our efforts to educate the public to begin to gain control of the problem.

Please contact me if you have any identity theft issues you would like me to research and possibly include in future columns. Stay tuned!

Robert E. Holtfreter, Ph.D., CFE, is distinguished professor of accounting and research.