Identity Theft Soaring While Financial Services Industry Fiddles?

STAMFORD, Conn. – If you haven’t been hit personally by identity fraud or credit card theft in the past year, you likely know someone who has. That’s because, according to a new national survey, 5.5% of U.S. adults (more than 11 million) were victimized by credit card fraud in the year ending June 30, while 3.4% (7 million) were victims of identity theft. And identity theft may be underreported because of the way such losses hit the ledger, according to a new report by research and advisory firm Gartner Inc. While the reported rate has soared (up 79% from the year-ago period), the chances of catching the culprit haven’t kept pace, according to Gartner’s survey of more than 2,400 adults conducted by mail in May. Gartner estimates that criminals face only a one-in-700 chance of being caught by federal authorities. The think firm came up with that by doubling the arrest rate of 2000, the last full year for which there are figures. That year, the FBI, Secret Service and U.S. Postal Service made 5,807 arrests in identity theft cases. Turning the tide is going to take pressure from legislators and industry associations on the financial services to first, recognize the extent of the problem, and second, implement prevention efforts, according to Avivah Litan, Gartner vice president and research director. “Many banks, credit card issuers, cell phone service providers and other enterprises that extend financial credit to consumers don’t recognize most identity theft fraud for what it is,” Litan says, noting that more than half of all identity theft where the method is documented are committed by people who have relationships with their victims – often family members, roommates, neighbors or co-workers. “Instead, they mistakenly write it off as credit losses, causing a serious disconnect between the magnitude of identity theft that innocent consumers experience and the industry’s proper recognition of the crime,” Litan says. There’s the underreporting. The Gartner research director says outside pressure, including from consumers and lobbyists, may be what it takes to get the industry to get behind such efforts as the U.S. Fair Credit Reporting Act, which would cover security and accuracy of personal financial information, and BITS’ Work on Identity Theft, which would make it easier to report such crimes to a financial institution. Industry recognition of the problem, however, must be accompanied by efforts to stop it. “Most importantly, financial service providers must implement solutions that effectively screen for application fraud, so they don’t wrongfully extend credit to identity thieves,” Litan says. “Without industry prevention efforts, consumers whose identities have been stolen will continue to bear the brunt of social and indirect economic costs.” -