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Identity theft victims sideswiped by crime

When a catastrophe happens, the usual response is: “I never thought it would happen to me.”

identity theftEvery year, that same lament is echoed by millions of Americans who unexpectedly find themselves victims of identity theft. 

If you are one of them, reestablishing your credit and identity can be costly. Identity theft insurance, which costs between $25 and $60 a year, helps cover some of these costs, according to the National Association of Insurance Commissioners. Most policies have a limit between $10,000 and $15,000 and require you pay the first $100 to $500 incurred.

Who are the victims of identity theft?  They’re probably just like you.  How has it impacted their lives?  Let’s take a look.

Annually, about 4.8 percent of Americans are victims of identity theft, according to the   “2010 Identity Fraud Survey Report” by Javelin Strategy & Research, a research and strategy consulting firm. Not so bad, you think.  And it’s true – you’ve got better than 20:1 odds of dodging the bullet.  But run the quick calculation, and you’ll see that total comes to an alarming 11.1 million people nationwide, for a total annual fraud amount of $54 billion.

Look around you, at your co-workers, at your family.  Going by the numbers, out of every 100 people you know, five are likely to have their identities stolen sometime in the next 12 months.  And it could be more.

How does it happen?

Now look around you again, see those same people and think about this: the No. 1 way that victims report their identity being compromised is that it’s stolen by someone that the victim already knows personally, according to the Federal Trade Commission’s 2006 Identity Theft Survey Report.”  That’s 16 percent of all identity theft.

Numerous methods of attack

You might be surprised to learn that only 2 percent of thefts are reported to stem from information obtained from the mail, only 1 percent from the thief’s hacking into the victim’s computer, and 1 percent from information compromised by “phishing” software online, says the FTC report.  Shredding those bills and putting an extra password safeguard on the computer will help. 

The other ways of obtaining information break down as follows:

  • 7 percent from a purchase or other transaction.
  • 5 percent from the victim’s wallet.
  • 5 percent from a company that had the victim’s information.
  • 7 percent in some other way.

The alarming statistic is that the majority of victims don’t know how their information was taken.  A total of 56 percent of the victims (that’s 4.6 million people) reported that they were unaware of how their personal information had been compromised, according to the FTC.

Such a high figure undeniably throws the other statistics, such as the number of thefts from phishing, dumpster-diving and computer hacking, into a shadow of doubt.  In fact, such anonymous methods of identity theft as these are more likely to escape the victim’s detection.

So what’s the damage?

Fortunately, the $50,000 credit card tabs we occasionally hear about on the news tend to be the exception rather than the rule.  In most instances, the thief is only able to get away with less than $500, according to the FTC, although 10 percent of the time, the damage ranges upwards of $6,000, and in 5 percent of cases, upwards of $13,000.

The critical distinction in the total loss category is whether the thief exploits only existing accounts or is able to open new accounts or perpetrate other fraud.  If only existing accounts are compromised, the damages average slightly lower than the overall figures listed above, according to the FTC.  If, on the other hand, the thief executes further fraud, the costs of identity theft can soar.

The median cost for new account and other frauds is $1,350, with 10 percent topping $15,000 and 5 percent over $30,000, says the FTC.  And although such frauds only account for 22 percent of identity theft, and $30,000 crimes are only 1.1 percent of ID theft, that’s still more than 90,000 people per year, or about 250 every day.

Stop the bleeding

Perhaps the only good thing about the rash of identity theft in the last decade or so is that these days, everyone knows about it – and most of us are on the lookout for it.  As a result, victims are often able to limit the extent of the crimes’ damage after detecting them earlier.

According to FTC data, 26 percent of ID theft is discovered by the victim in the course of monitoring his or her account, and an additional 18 percent discover the crime upon receiving the resulting bill.  These, the two most-frequently reported circumstances of discovery, combined with 6 percent who discover problems while reviewing their credit reports, account for half of the total.

Making up the other half of the victims are 15 percent who are notified by their individual credit card companies, 11 percent by a credit monitoring service, 9 percent by a debt collector, 5 percent when applying for a job/credit/benefits and 11 percent who find out in some other way.

On one hand, it’s encouraging to see that many Americans are conscious of the threat of identity theft and are prepared to face it.  On the other hand, it’s somewhat less than reassuring that American Express, Visa and the rest only discover half of identity fraud on their own.

The Quiet Crime

Thanks to the continuing vigilance of American consumers and the protective policies of the major credit companies, nearly 40 percent of identity theft victims discovered the misuse of their information within a week of the crime having been committed, according to the FTC report.

Still, this is a figure that can be improved upon.  In far too many cases, especially cases of new-account fraud, the compromise of valuable information can go unabated for far too long:  56 percent of new account fraud continues longer than one month and 24 percent continues more than six months.

The same companies do something to make up for their shortcomings, however, in the course of resolving identity theft crises, usually swallowing most or all of the monetary damage.

For the majority of identity thefts perpetrated nationwide, the victim’s out-of-pocket expenses—unreimbursed losses, legal fees and actual lost wages— are zero, according to the FTC.  Even in the case of new-account fraud (in which the ID thief actually opens new fraudulent accounts in the victim’s name), the median cost to the victim is only $40.  Then again, there are those few unfortunate cases, with 10 percent of all ID thefts racking up costs over $1,200 and 10 percent of new-account fraud cases over  $3,000.

As always, such cases are a minority.  Only a small percentage of Americans become victims of identity theft; only a small percentage of ID thefts are instances of new account fraud; and only a small percentage of such frauds come to cost the victim thousands or tens of thousands of dollars.

Odds are, it won’t affect you.

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