Identity Theft Complaints Have Decreased for Second Year in a Row

Susan Duke, a retired successful university professor of criminology from Seattle, celebrated her birthday every year with her three daughters and their families at her condo on the big island of Hawaii. Her daughters always paid for her expenses to fly to Hawaii and also gave her $500 in traveler's checks to cover other expenses for the two-week period.

Susan did not anticipate any extra major expenditures, so she left her credit card and other financial information at home on top of her nightstand for safekeeping — or so she thought. She had rushed to pack for the trip and forgot to put a hold on her mail with the post office, and she had not notified her newspaper carrier to stop delivery. So thieves saw the stacks of mail and newspapers and correctly assumed she was on an extended vacation. They stole her mail (which included an unsolicited credit card application), broke into her home and stole all her valuables, including her credit card and other financial information.

The thieves applied for a new credit card under Susan's name with a different address to help conceal the crime and even called her current credit card company asking for an increase on her credit limit, which they received. Susan had excellent credit, so the credit card company issued a new card in her name and increased the line of credit on her old card to $25,000. In about one month the fraudsters who stole her identity racked up more than $35,000 on her cards. It took Susan more than a year and thousands of dollars to cover her losses and restore her excellent credit history.

Unfortunately, even though it is fictional, this is a common case of identity theft, as shown in the recent complaint data reported by the U.S. Federal Trade Commission (FTC) in the 2010 Consumer Sentinel Network (CSN) Data Book.

The CSN statistics represent annual unverified complaints filed directly by consumers to the FTC through its many websites and telephone services (56 percent) and other agencies, including the Internet Crime Center (22 percent), Better Business Bureau (10 percent), Canadian Anti-Fraud Centre (3 percent), MoneyGram International (3 percent) and many others (6 percent), such as the U.S Postal Service, the Identity Theft Assistance Center, the National Fraud Information Center and numerous law enforcement agencies. Victims should be encouraged to report their identity theft and fraud complaints to the FTC at 1-877-ID THEFT and 1-877-FTC-HELP.

TOTAL COMPLAINTS DECREASE  

For the first time since the CSN has provided this data, the total reported complaints have dropped. From 2006 through 2009, the CSN recorded more than 6.1 million complaints for the three main classifications: "identity theft," "fraud" and "other." (Also, more than 7.8 million Do-Not-Call Registry complaints were reported.)

As Figures 1 ("Consumer Sentinel Network Complaint Type Percentages, Calendar Years 2008 through 2010" below) and 2 ("Consumer Sentinel Network Complaint Count, Calendar Years 2001 through 2010" below) show, 1,339,265 total complaints for the three main classifications were reported in 2010. This is compared to 1,377,845 in 2009 and 1,241,086 in 2008. (The numbers reported in 2010 for years 2009 and 2008 are not the same as were reported in previous CSN reports because they are adjusted in subsequent years when agencies file their complaint data late. This common occurrence can result in a dramatic shift in the percentages for the categories when comparing the adjusted to the original data.)  

Figure 1 shows a shift from previous years in the percentage of complaints within each of the three main classifications with "identity theft," "fraud" and "other" accounting for 19 percent, 54 percent and 27 percent, respectively. Comparable percentages were 20 percent, 50 percent and 30 percent for 2009 and 25 percent, 49 percent and 26 percent for 2008.

IDENTITY THEFT COMPLAINTS DROP DRAMATICALLY

Figure 3 (below) shows a more relevant shift in the data as the number of identity theft complaints have dropped for the second year in a row from 314,521 in 2008 to 278,356 in 2009 and 250,854 in 2010, which represents a decrease of more than 20 percent from 2008. This is good news, but we must keep in mind that the public does not report all identity theft complaints to law enforcement agencies, but if they are, many agencies do not report them to the CSN. Even so, assuming the same agencies who report the complaints do so consistently, then we can ascertain that identity theft complaints actually are decreasing because the number of complaints reported represent a valid sample from the population of real complaints.

LAW ENFORCEMENT CONTACT

When identity theft victims contact the FTC they normally are asked if they contacted their local law enforcement agency. Figure 4 (at left) shows that of the 100,217 respondents, 62 percent notified a police department and filed a report, 7 percent notified a police department and did not file a report, 3 percent notified a police department and did not indicate if a report was filed and 28 percent did not notify a police department.

These statistics do not take into account the number of identity theft victims who do not report their complaints to any agency, including the FTC. Cities and other municipalities should be encouraged to adopt plans for their citizens for reporting identity theft complaints to their local authorities. This would allow the authorities to receive a more meaningful measure of the magnitude of the problem and adopt strategies to help curtail it.

COMMON TYPES OF ID THEFT

The major types of fraud and their complaint percentages in 2009 and 2010, respectively, include credit card (17 percent and 15 percent), government documents or benefit (16 percent and 19 percent), phone or utilities (15 percent and 14 percent), employment-related (13 percent and 11 percent), bank (10 percent and 10 percent), loan (4 percent and 4 percent), "other" identity theft frauds (23 percent and 22 percent) and attempted identity theft (6 percent and 7 percent). (These percentages do not 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 percentages as well as reported complaints for the subtypes of some of the major identity theft frauds.

Credit Card Fraud. The CSN report shows that credit card fraud complaints decreased dramatically from 2009 to 2010 — 47,320 to 37,778 complaints. However, this change could be attributed to similar trends in two related subtype frauds: new credit card accounts (from 10.2 percent to 9 percent with 28,392 to 22,577 complaints) and existing credit card accounts (from 7 percent to 6.7 percent with 19,485 to 16,807 complaints).

The numbers could be down because of increased public awareness programs sponsored by financial and governmental agencies about the use and protection of credit cards and credit card applications. But whatever the cause of the decrease, credit card fraud related to identity theft remained a major problem in 2010 with 15 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 by calling 1-888-567-8688. If more people used the service, identity theft related to new credit card account fraud would decrease at a faster rate.

Government Documents or Benefits Fraud. This fraud rose somewhat with 44,537 complaints in 2009 to 47,662 in 2010 or an increase from 16 percent to 19 percent. The subtype "tax or wage related fraud" accounted for most of the change increasing from 12.7 to 15.5 percent, or 35,351 and 38,882 complaints, respectively. The other subtypes, including "government benefits applied for/received" (1.7 percent to 1.8 percent), "other government documents issued/forged" (1.1 percent to .9 percent) and "driver's license issued/forged (.9 percent and .9 percent) saw small changes in their percentages.

Phone or Utility Fraud. The percentages decreased slightly from 15 percent to 14 percent, but the number of complaints decreased from 41,753 to 35,120, which is significant. The subtype "utilities – new accounts" increased slightly from 8.2 percent to 9.3 percent with 22,825 to 23,329 complaints. The subtype "wireless – new accounts" decreased from 4.6 percent to 3.7 percent, or from 12,804 to 9,318 complaints, which accounted for more than 50 percent of the overall decrease in the main category. The other two subtypes, "telephone – new accounts (2 percent to 1.5 percent) and "unauthorized charges to existing accounts" (.6 percent to .5 percent) decreased slightly.

Bank Fraud. The percentage remained the same for 2009 and 2010 at 10 percent, but the number of complaints actually decreased from 27,837 to 25,085. All the subtypes saw minor changes with "electric fund transfer" going from 4.4 percent to 4.8 percent; "new accounts," from 3.1 percent to 3.2 percent; and "existing accounts," from 3.1 percent to 2.8 percent.

Employment-Related Fraud. Employment-related fraud from 2009 to 2010 decreased from 13 percent to 11 percent — 36,186 to 27,594 complaints — which was very significant.

Loan Fraud. Percentages for 2009 and 2010 stayed the same at 4 percent with a drop in complaints from 11,324 to 10,034, which was insignificant. The subtypes changed insignificantly.

Other Identity Theft. This category decreased in 2010 from 2009 from 23 percent to 22 percent or from 64,021 to 55,188 complaints. The 12 subtypes insignificantly decreased in their percentages and number of complaints.

IDENTITY THEFT 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 accounted for 8 percent of all the complaints in 2010, compared to 7 percent in 2009 or 18,504 and 18,941 complaints, which represents a minor increase. The percentages are derived from the number of identity theft victims who reported their ages (94 percent in 2010 and 95 percent in 2009), not the total identity theft complaints.

The results for the 19 and under age group are somewhat disappointing, though I did predict that stats would not decrease. I reported in my January/February 2010 column, "Will Credit Card Laws Help Reduce ID Theft for Young Consumers?" that "We will have to wait until the FTC issues the 2010 Consumer Sentinel Network Data Book in early 2011 to see the impact of the Credit Card Act of 2009, but I believe there will be a minimal initial positive impact at best."

The Credit Card Act bans a consumer under the age of 21 from applying for a credit card unless someone over that age co-signs the account or assures the credit card company that the minor applying for the card has available resources to pay off the account in a timely manner. The Credit Card Act is written tightly, and I do not know why there are not positive changes. It might take more time for us to see the effects of the act, so let's see what happens in this age group next year.

MORE HELP FOR THE COMMUNITY

The improvements in the identity theft complaints for the past two years are encouraging, but the conclusion is still the same: Identity theft and related fraud schemes are here to stay. I hope you will share this column with your family, friends and clients. And check out the 110-page CSN report. 

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, CICA, is a distinguished professor of accounting and research. 

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