SAN FRANCISCO, Calif. (2/9/11)--Credit unions that have applied more stringent criteria to authenticate users and determine credit risk will be happy to learn their efforts work. The number of identity fraud victims in 2010 dropped by 28% to 8.1 million U.S. adults--the largest single-year decrease since 2003. And the total amount decreased to $37 billion--the smallest amount in eight years. However, consumers out-of-pocket expenses rose significantly--63%, said a new study. The survey, independently produced by San Francisco-based Javelin Strategy & Research and whose results were released Tuesday, is the nation's longest-running study of identity fraud. It was sponsored by Fiserv, Intersections Inc., and Wells Fargo & Co. (Business Wire
Feb. 8), and is based on 5,004 telephone interviews. Intersections Inc. is a CUNA Strategic Services provider. The 8.1 million fraud victims were three million fewer than in 2009, and the total amount decreased from 2009's $56 billion to $37 billion. Javelin said consumers' costs rose significantly due to the types of fraud that were successfully perpetrated and an increase in "friendly fraud." The study defined identity fraud as unauthorized use of another person's personal information to achieve illicit financial gain. "Identity fraud underwent a marked decline and shift over the past year. This great news is a testament to the significant efforts businesses, the financial services industry and government agencies are making to educate consumers, protect data, and prevent and resolve identity fraud," said James Van Dyke, Javelin's president and founder. "Economic conditions also appear to have contributed to this year-over-year decline, as well as increased security measures and some significant law enforcement successes." He noted the increase in out-of-pocket costs "carries a warning: Consumers cannot put their finances on autopilot or ignore important safeguards. Simple safeguards may dramatically reduce fraud risk, such as frequently monitoring banking, credit and other financial activities, securing computers and paper records, and activating electronic alerts to help prevent fraud and address the situation quickly when it occurs." Among other findings:
* The mean fraud amount per victim declined to $4,607 from $4,991 in 2009. A likely factor, said Javelin, was the significant drop in reported data breaches. Industry reports indicated 404 breaches in 2010 with 26 million records exposed. That compares with 604 the year before with 221 million records exposed. * The mean consumer out-of-pocket cost due to identity fraud increased in 2010 to $631 per incident from $387 in 2009. The report attributed the rise to changes in the types of fraud perpetrated. These include new account and debit card fraud, and they highlight the need for continued consumer vigilance, said Javelin. The costs include those incurred by the victim toward payoff of any fraudulent debt as well as legal and other fees to resolve the fraudulent claims. * The most damage was caused by new account fraud. Although all types of fraud declined the past year, new account fraud--in which accounts are opened without the victim's knowledge--was responsible for the largest amount--$17 billion. Javelin reasoned this type of fraud is harder to detect and is the most likely to severely impact victims. Existing card fraud amounts declined by 38% to $14 billion from $23 billion in 2009. * Friendly fraud, or fraud perpetrated by people known to the victim such as a relative or roommate, grew 7% last year. Consumers between 25 and 34 years old were most likely to be victims in this type of fraud and most likely (41%) to report theft of their Social Security number. * Fraud inversely mirrors retail sales. The amount of fraud almost perfectly inversely mirrored retail sales over the past seven years. When retail sales increase, fraud has decreased. That, said Javelin, points to economic hardships as an overall contributor to fraudsters committing an identity crime.
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later this week for more details about the findings.