Identity theft complaints soared in 2011

Identity theft is alive and thriving. The U.S. Federal Trade Commission's Consumer Sentinel Network reports a significant increase in complaints.

On July 1, in Rankin County, Miss., three men were indicted after police, during a traffic stop, discovered 485 credit cards and gift cards hidden behind their car's dashboard. The defendants' names were on some of the cards, but when police scanned the cards' magnetic strips, names of other credit card holders came up. 

On Aug. 2, 2011, the U.S. Secret Service joined forces with the Gallatin, Tenn., police department to investigate reports of 94 incidents of fraudulent credit card charges of $90 to $100 each originating from a Florida business. Fraudsters used all the victim's cards in the Volunteer State Community College area. Investigators believed the perpetrators collected the victims' card data via a card skimmer inside an area card swipe machine.

These actual examples are representative of the thousands of identity theft cases that victims report to the Federal Trade Commission (FTC) and are listed in its Consumer Sentinel Network (CSN) Data Book, which it began in 1997.

According to the CSN, it received more than 28,000 additional identity theft complaints in 2011 from 2010 (251,105 to 279,156) — a sizeable increase. Though the figures have fluctuated yearly, we can make one conclusion: Identity theft hasn't abated, and will continue to be a major problem for consumers and businesses.

A new feature in the 2011 CSN report is the inclusion of complaint data for military consumers. The military consumer complaint data is included in several tables incorporating complaints by consumer military branch, pay grade and status.

Identity theft complaints for military consumers totaled 4,976 or 27 percent of their total complaints compared to 15 percent for the general population. Identity theft fraud complaints were similar for enlisted and officer military with 31 percent and 30 percent, respectively. Compared to the general population, it's quite obvious that the military consumers are having significantly more problems with identity theft issues.

CSN FIGURES MIGHT BE LOW

The CSN figures actually might be quite low; most identity theft victims still don't report their experiences to the FTC or any law enforcement agency. Also, many law enforcement agencies don't share their complaint data with the FTC. Therefore, the identity theft data reported in the CSN is significantly understated for any given year. In fact, the FTC estimates that identity theft claims more than 10 million victims annually.

However, assuming there's a consistent flow of consumers who report identity theft complaints each year and assuming that the law enforcement agencies that report identity theft do it consistently each year, we can conclude that the CSN identity theft complaint data reported in any given year is representative of the real levels of identity theft. The CSN identity theft data can be considered useful for determining trends not only for aggregate data but for identity theft fraud subtypes. This enables law enforcement agencies to target their efforts to help control specific types of identity theft fraud.

So, I'm going to give you a lot of stats here. Don't be overwhelmed — you can pick and choose. You can use them as "leading indicators" to help your clients, family members, friends and your communities know the hot areas and how to protect themselves.

To report a complaint, visit the Federal Trade Commission or call 1-877-ID THEFT (identity theft complaints) and 1-877-FTC-HELP (fraud and other complaints).

Check out the 110-page CSN report. 

THE CSN LAY OF THE LAND

The CSN Data Book includes annual unverified identity theft, fraud and other complaints that are:  

1. Voluntarily reported by consumers using the FTC web site or one of its toll-free telephone numbers. 
2. Shared by multiple state and federal agencies. 
3. Shared by non-governmental entities including the Council of Better Business Bureaus in North America, Catalog Choice and the Center for Democracy and Technology, among others.

The CSN sorts the complaints into 30 categories including "identity theft" (279,156 complaints), 11 "other" categories and the following 18 "fraud" categories:

• Advance fee loans and credit protection repair (47,414 complaints). 
• Business opportunities, employment agencies and work-at-home plans (36,111 complaints).
• Buyer' clubs (2,660 complaints).
• Charitable solicitations (3,474 complaints).
• Foreign money offers and counterfeit check scams (43,101 complaints).
• Grants (12,823 complaints).
• Health care (38,246 complaints).
• Imposter scams (73,281 complaints).
• Internet auction (35,926 complaints).
• Internet services (81,805 complaints).
• Investment-related complaints (7,657 complaints).
• Magazines and books (21,636 complaints).
• Mortgage foreclosure relief and debt management (38,140 complaints).
• Office supplies and services (15,917 complaints).
• Prizes, sweepstakes and lotteries (100,208 complaints).
• Shop-at-home and catalog sales (98,306 complaints).
• Telephone and mobile services (70,024 complaints).
• Travel, vacations and timeshare plans (32,736 complaints). 

The "other" area, which the CSN began in 2008, includes complaints relating to deceptive practices pertaining to the following 11 categories: 

• Auto related (77,435 complaints).
• Banks and lenders (89,341 complaints).
• Clothing, textiles and jewelry (3,358 complaints).
• Computer equipment and software (13,435 complaints).
• Credit bureaus, information 
• furnishers and report users (30,203 complaints).
• Credit cards (37,932 complaints).
• Debt collection (180,928 complaints).
• Education (3,164 complaints).
• Home repair improvement and 
• products (13,020 complaints).
• Real estate (8,763 complaints).
• Television and electronic media (37,404 complaints).

NOW WE PLOW THROUGH THE STATS

Keep with me; we have a lot of stats, but they're important. Since 2007 and through 2011 the CSN has reported more than 7 million "identity theft," "fraud" and "other" complaints. (Also, the CSN reported more than 9 million "Do-Not-Call Registry" complaints.)

In Figures 1, 2 and 3, we see that 1,813,080 total complaints for the "identity theft," "other" and "fraud" categories were reported in 2011 compared to 1,460,368 in 2010 and 1,419,030 in 2009. The 2010 CSN Data Book reported that the total complaints had decreased from 2009 to 2010, which were based on the unadjusted complaint data for 2010 at the time. As the new 2011 numbers show, the total complaints actually increased from 2009 to 2010.

[Figures 1, 2 and 3 are no longer available. — Ed.]

(Except for 2011, the data shown in Figures 1 and 2 represent adjusted data, which is more accurate for comparison purposes. Why? Because when the complaint data is reported for any given year it doesn't include all the complaints for that year because some agencies report their data too late to be posted. The "late" data is used when that year's data is adjusted in the following year's report.)

Figure 1 shows a shift from previous years in the percentage of complaints within each of the three main classifications with "identity theft," "other" and "fraud" accounting for 15 percent, 30 percent and 55 percent respectively. Comparable percentages were 17 percent, 27 percent and 56 percent for 2010 and 20 percent, 31 percent and 49 percent for 2009.

A total of 18,644 military consumer complaints were reported in the total CSN data, which included 4,976 (27 percent), 11,186 (60 percent) and 2,424 (13 percent) complaints for the "identity theft," "fraud" and "other" categories respectively.

Compared to the percentages for the three complaint categories for the total CNS complaint data noted above, the military consumer complaint data differs dramatically and significantly. For example, the "identity theft" category complaint percentage for the military consumers was almost double (27 percent versus 15 percent) that of the total CNS reported identity theft complaints. In a similar fashion, the military consumer complaint percentages for the "other" category were approximately one-third (13 percent versus 30 percent) of the total CNS reported "other" complaints whereas the percentage of complaints reported for the military for the "fraud" category exceeded (60 percent versus 55 percent) the total CNS reported "fraud" complaints.

Figure 3 shows a relatively dramatic increase in identity theft complaints for 2011 with 279,156 reported compared to 251,105 for 2010 (adjusted from 250,854). This places the 2011 complaint data on par with the 278,385 (adjusted from 278,356) identity theft complaints reported for 2009 but still below the record high of 314,594 reported in 2008.

COMMON TYPES OF IDENTITY THEFT FRAUDS

How do fraudsters use the personal identifiable information of identity theft victims to commit fraud? The following analysis should help to answer this question.

The major types of identity theft related frauds and their complaint percentages in 2010 and 2011, respectively, include "credit card fraud" (15 percent and 14 percent), "government documents or benefit fraud" (19 percent and 27 percent), "phone or utilities fraud" (14 percent and 13 percent), "employment-related fraud" (11 percent and 8 percent), "bank fraud" (10 percent and 9 percent), "loan fraud" (4 percent and 3 percent), "other identity theft fraud" (22 percent and 23 percent) and "attempted identity theft" (7 percent and 7 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 go a little deeper into the analysis, we need to look at the changes in the percentages noted above.

Credit card fraud

The CSN report shows that the total credit card fraud complaints actually increased from 39,423 to 39,640 while their percentages of the total identity theft complaints decreased from 15.7 percent to 14.2. The differences are attributed to the changes in the statistics for the related subtype categories. For example, the subtype category "new credit card accounts fraud" complaints increased from 22,599 to 23,449 (from 9 percent to 8.4 percent of the total identity theft complaints) while "existing credit card account fraud" complaints category decreased from 16,824 to 16,191 (from 6.7 to 5.8 percent).

The total credit card complaints are up slightly, and it probably would be much worse if it weren't for the effectiveness of increased public awareness programs sponsored by financial and governmental agencies, which help to educate individuals about the use and protection of credit cards and credit card applications. But identity theft related to credit card fraud was still a major problem in 2011 accounting for 14.2 percent of the total reported CSN complaints.

"New credit card accounts fraud," accounting for 8.4 percent or 23,449 of the total identity theft complaints, is intolerable; it's something that can be reduced dramatically very easily. Entities typically market new credit cards through the mail via "pre-approved" credit card offer applications, many of which are directly stolen from mailboxes and through consumers' careless disposal. Individuals can opt out of the "pre-approved" credit card offers sent through the mail by visiting www.optoutprescreen.com or by calling 1-888-5657-8688. If more people used the service, identity theft related to "new credit card account fraud" would decrease significantly.

CSN showed 972 "credit card fraud" complaints for military consumers, which was approximately 20 percent of their total identity theft complaints. This is almost 1.4 times the percentage of "credit card fraud" for the total complaint data for the general population — 20 percent compared to 14 percent.

The subtype category "new accounts credit card fraud" accounted for about 16.6 percent or 827 of total complaints for military consumers, which is about double the 8.4 percent reported for total "new accounts credit card fraud" for the general population. "Existing accounts credit card fraud" for military consumers accounted for 9.8 percent of their total complaints or nearly double the 5.8 percent recorded for the general population's total "existing credit card fraud."

Obviously, military consumers are having difficulty protecting their existing credit cards and handling "pre-approved credit card offer" applications, which is a major reason the incurrence of identity theft within this group is significantly higher comparable to the general population.

Government documents or benefits fraud

In August, two Omaha, Neb., brothers were convicted of conspiracy and theft in a Social Security fraud case. One of the brothers, Mark, owned a trucking business at which his other brother, Tim, worked. Mark was charged in the case because he knew that Tim had received about $135,000 in Social Security disability benefits illegally over the previous few years. 

Government documents and benefits fraud rose in dramatic fashion from 19.2 percent in 2010 to 27.2 percent in 2011 as the number of complaints soared from 48,212 to 75,930. The subtype category "tax or wage-related fraud" accounted for most of the change by increasing from 15.6 percent to 24.1 percent or 39,172 and 67,277 complaints, respectively.

The other subtype categories, including "government benefits applied for/received fraud" (1.8 percent to 1.5 percent), "other government documents issued/forged fraud" (.9 percent to .8 percent) and "driver's license issued/forged fraud" (.9 percent and .8 percent) saw small changes in their complaint numbers.

Finding valid reasons for the significant increase in the "tax and wage-related fraud" area is relatively difficult. Two different scenarios may help explain this situation. There has been an increase in the income tax-related scams this past year in which fraudsters have stolen the identities of numerous victims to claim their tax refunds. Also, many people have lost their jobs during the economic downturn, and this has probably led to a sharp increase in scams used to steal the identities of victims to fraudulently steal their unemployment benefits.

For military consumers, "government documents or benefits fraud" accounted for 19 percent or 949 of their total complaints compared to 27 percent for the general population. The subtype category "tax or wage related fraud" accounted for the majority of the 949 complaints with 15.6 percent compared to 24.1 percent for the general population.

The other identity theft fraud subtype categories, namely "government benefits applied for/received fraud," "other documents issue/forges fraud" and "driver's license issued or forged fraud" reported minor amounts ranging from .8 percent to 2.3 percent, which were comparable to the total complaint data.

Phone or utilities fraud

In July 2012, a telephone company reported a telephone fraud case to the local police. Shortly after someone opened an account, she purchased four telephones, with a value of $1,049.99. The individual soon racked up phone charges of $2,204.92. The telephone company received two electronic payments totaling $2,065.58, which were later determined to be from a fraudulent account at a local bank. The individual had used a fake name to set up the telephone account and bilked the company out of thousands of dollars. 

The percentages for "phone or utilities fraud" decreased slightly from 14.1 percent in 2010 to 13.3 percent to 2011, but the number of complaints increased from 35,405 to 37,128, which is somewhat significant. The subtype category "utilities — new accounts fraud" decreased slightly from 9.4 percent to 8.7 percent with their complaints increasing from 23,603 to 24,286. The subtype category "wireless — new accounts fraud" decreased from 3.7 percent to 3.1 percent or from 9,291 to 8,654 complaints. The other two subtype categories, "telephone — new accounts fraud" (2 percent to 1.5 percent) and "unauthorized charges to existing accounts fraud" (.6 percent to .5 percent) saw insignificant changes in their total complaints.

The "phone or utilities fraud" category for military consumers accounted for 15 percent of their total complaints, which was similar to the general population that reported 13 percent. The subtype category "utilities — new accounts fraud," accounted for most of the "phone or utilities fraud" category complaints with 11.2 percent, which was slightly above the 8.7 percent reported for the same subtype category for the general population. The other subtype categories "wireless — new accounts fraud," "telephone — new accounts fraud" and "unauthorized charges to existing accounts fraud" reported minor percentages ranging from .6 to 4 percent, all of which were similar for the same subtype fraud categories for the general population.

Bank fraud

On August 21, in Eugene, Ore., a U.S. District judge sentenced a former manager of a Springfield, Ore., bank branch to 30 months in federal prison for identity theft and bank fraud. He admitted that he took and used a Social Security number of an account holder at the bank without that person's authorization. He also transferred the names, dates of birth and Social Security numbers of 2,937 present or previous account holders to his personal email address with the intent to use them for personal gain. 

"Bank fraud" identity theft complaint percentages were 10.8 percent for 2010 and 8.7 percent for 2011, and the number of complaints decreased from 27,119 to 24,287. The subtype category "electric fund transfer fraud" accounted for most of the change with the complaints going from 12,053 in 2010 to 10,608 to 2011 or from 4.8 percent to 3.8 percent. The other two subtype categories "new accounts fraud" (from 3.2 percent to 2.6 percent) and "existing accounts fraud" (from 2.8 percent to 2.3 percent) incurred insignificant changes in their number of complaints.

For military consumers, "bank fraud" accounted for 11 percent in 2011 of their total complaints compared to 9 percent for the general population. The subtype category "electronic fund transfer fraud" accounted for 5.9 percent of their total complaints in 2011 compared to 3.8 percent for same subtype category for the general population. The subtype category "new accounts fraud" and "existing accounts fraud" reported 3.3 percent and 3.2 percent respectively in 2011, both of which were similar to the 2.6 and 2.3 percentages reported for the general population.

Employment-related fraud

In 2009, a woman in Cary, N.C., became a victim of income tax identity theft. She had expected a tax refund of $2,300, but it was stolen. Three weeks after filing her tax return online, she went online to determine the status of her refund. She was told to call the IRS, which said her mailing address wasn't in its files; someone with a New Jersey address had filed her return online. 

Employment-related fraud decreased from 11 percent in 2010 to 8 percent in 2011 or from 27,622 to 22,332 complaints, which was somewhat significant. The same category for military consumers registered 5 percent of their total complaints, which was significantly less than the 8 percent noted above for total complaints for the general population.

Loan fraud

On August 20, federal authorities charged a former Los Angeles man with aggravated identity theft. He operated a foreclosure-rescue scam in Southern California in which he bilked more than 800 distressed homeowner victims out of more than $1 million by promising to postpone their foreclosure sales. 

Each householder would pay a $700 monthly fee to him. The fraudster would then go into a public bankruptcy database, steal the identity of individuals who had recently filed for bankruptcy and pull their bankruptcy petitions. He told each client to transfer 1/100th fractional interest in a notarized grant deed to a bankruptcy debtor.

The fraudster would then fax a copy of a cover letter, the debtor's bankruptcy petition and the notarized grant deed to the victim's lender and tell him to stop the impending foreclosure because of the bankruptcy. This forced the lender to comply because bankruptcy petitions create an automatic stay in the foreclosure process to protect the property of the debtor. This scheme allowed the fraudster to delay the foreclosure sales of about 824 properties by utilizing at least 414 bankruptcies in 26 judicial districts throughout the U.S.

The complaint percentages for "loan fraud" identity theft decreased from 3.7 percent to 3.1 percent and the complaints dropped from 9,290 to 8,654, which was insignificant. The percentages and total complaints for the subtypes "business/personal/student loan fraud," "auto loan/lease fraud" and "real estate loan fraud" changed insignificantly.

For the military consumers, "loan fraud" identity theft accounted for 4 percent of their total complaints, which wasn't significant compared to the 3.1 percent reported above for total identity theft complaints. Their subtypes reported insignificant percentages, which were comparable to the percentages for the same subtypes for the general population.

Other identity theft fraud

This category of identity theft fraud increased from 22.5 percent in 2010 to 23.6 percent in 2011 or from 54,499 to 65,881 complaints. Their 12 subtypes all changed insignificantly in terms of their percentages and number of complaints. The "data breach fraud" subtype category appears for the first time in the CSN data notebook and accounted for only 1.7 percent of their total complaints.

The "other identity theft fraud" category for military consumers registered 23 percent of their total complaints, which was very similar to the 23.6 percent reported for the complaints for the general population. Except for the "data breach fraud" subtype category, which accounted for 6.5 percent of the total identity theft complaints for military consumers, all the other 11 subtype categories reported insignificant numbers. It appears that the military consumers are experiencing a bigger problem with identity theft related to data breaches than the general population.

IDENTITY THEFT COMPLAINTS BY AGE

Figures 4 and 5 below include identity theft complaints by age. (You probably noticed that the total identity theft complaints by age reported in Figure 4 don't agree with the total identity theft complaints reported in Figures 1 and 2. This is because not all victims report their age when they file their complaints. In fact, 95 percent of the victims who filed an identity theft complaint in 2011 reported their age compared to 94 percent in 2010.)

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

The total identity theft complaints by age reported rose to 248,538 in 2011, which is an increase of about 11,500 from the 236,996 complaints by age reported in 2010.

The good news is the total for 2011 is still below the 264,383 complaints by age reported in 2009. Except for the 20 to 29 age category, which decreased by about 500 complaints from 2010, each of the age categories showed increases in their number of complaints from approximately 500 to 3,000 respectively.

Although there are no significant changes among the age categories, the highest percentage of complaints are in the 20 to 29 and 30 to 39 age groups which account for 44 percent of the total complaints. The 19-and-under group accounts for 8 percent of all the complaints, which increased by about 800 in 2011.

I expected another slight decrease for this age group in 2011 to continue with the downward trend that occurred in 2010, but it didn't happen. The Credit Card Act of 2009, which went into effect in February 2010 bans a consumer under the age of 21 from applying for a credit card 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. The act has a few weaknesses, but I feel that it has enough strength to gradually reduce identity theft in this important age group. This will only be determined over time, but there will probably be a point when the act will have to be amended to make it stronger.

CSN STATE RANKING FOR IDENTITY THEFT COMPLAINTS

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, continuing its record from previous years, leads the pack with a whopping 33,595 complaints or 178.7 per 100,000 population followed by Georgia, 120; California, 103.6; Arizona, 98.5; Texas, 96.1; New York, 92.3; Nevada, 89.9; New Jersey, 86.4; Maryland, 83.5; and Delaware, 83.5.

The complaint rate for Florida is significantly higher than second-ranked Georgia and the rest of the states. Compared to 2010, New Mexico, Illinois and Colorado fell out of the top 10 and were replaced with New Jersey, Maryland and Delaware.

The top five states — especially Florida — are no surprise because their populations include a significant number of retirees and minorities, both of whom are especially susceptible to identity theft compared to other groups. North Dakota has the best statistics with only 156 complaints or 23.2 per 100,000.

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 Miami-Fort Lauderdale-Pompano Beach, Fla., area, which leads the pack with a staggering 17,546 complaints or 324.1 per 100,000. That's followed by Montgomery, Ala., 168.6; Greeley, Co., 165.3; Columbus, Ga., 163.7; Dunn, N.C., 162.8; Port St. Lucie, Fla., 160.5; Tampa-St. Petersburg-Clearwater, Fla., 156.2; Madera, Cal., 152.2; Savannah, Ga., 149.4 and Albany, Ga., 149.3.

The complaint rate for the Miami-Fort Lauderdale-Pompano Beach, Fla., area is significantly higher than second-ranked Montgomery, Ala. and the rest of the cities. Miami-Fort Lauderdale-Pompano Beach, Fla.; Dunn, N.C.; and Greeley, Colo. are repeat offenders in the top 10.

These rankings are no surprise because these cities include relatively more retirees and minorities. Of the 50 reported metropolitan areas, the Warner Robbins, Ga., area has the best results with 149 complaints or 113.7 per 100,000.

FRAUDSTERS HITTING MILITARY CONSUMERS BUT ALL BEWARE

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.

What stands out in the data is that military consumers are having a relatively more difficult time coping with identity theft frauds. I would recommend that U.S. services increase their efforts to educate their constituents, including spouses and retirees, about identity theft, especially credit card fraud.

Of course, military consumers are not alone because all consumers, especially the elderly and young consumers, need to become more involved in identity theft education.

Robert E. Holtfreter, Ph.D., CFE, CICA, is distinguished professor of accounting and research and author of the Taking Back the ID column in Fraud Magazine.

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