What does the identity theft report really tell us? - Consumer Law ...

A recent post by Jeff Sovern discusses a Department of Justice Report indicating that identity theft is on the rise, and the amount of loss suffered as a result of identity theft is increasing. These are alarming statistics. But a few points should be mentioned before we begin to discuss how to reduce the incidence of this crime, or whether existing laws are working.

??????????? First, traditionally, identity theft has been distinguished from simple credit card fraud. Identity theft is a complex scheme whereby a thief steals personal information, adopts the identity of the victim and applies for credit in the name of the victim. Identity theft takes time, and requires the thief to actually assume the identity of the victim. Credit card fraud, on the other hand, is a simple crime whereby a thief makes a charge to an exiting account. The Department of Justice report mixes and matches these crimes through its use of the term ?Identity theft.? According to the report, ?Identity theft is defined as the unauthorized use or attempted misuse of an existing credit card or other existing account, the misuse of personal information to open a new account or for another fraudulent purpose, or a combination of these types of misuse.? Thus any unauthorized use of a credit card constitutes identity theft, and is included within the report, as is any ?attempted misuse,? which is often resolve with no inconvenience or financial loss.

??????????? According to the report, the incidence of true identity theft, the misuse of personal information, has been declining substantially, about 30% from 2005 to 2010. I assume this is due primarily to one simple act by creditors?whenever a major change, such as an address change, is made to an existing account notice is sent to the prior address to confirm the change.? This usually alerts the consumer to the beginning of an identity theft scam, which can be prevented before any problems arise. This act, coupled with consumer awareness of the importance of reviewing?one's credit report, should continue to reduce true identity theft.

??????????? The report also seems to indicate that loss allocation is not working to solve the problem of unauthorized credit card use. ?Notwithstanding the fact that maximum liability for the unauthorized use of a credit card is capped by federal law at $50, the mean loss reported is $1,260. To me, this indicates that either credit card issuers are completely ignoring the law, or, the? ?misuse? was actually authorized. (A third alternative is that the consumer was unaware of the law and simply paid the full amount.).

??????????? More surprising to me was the actual loss suffered as a result of true identity theft. My identity was stolen, and while the process of repairing my financial records was tedious, I did not lose any money. Once I was able to reach the right person, it was relatively easy to establish that I was not in fact the borrower. The Report, however, indicates that in 2010, the mean direct financial loss suffered by the misuse of personal information, (true identity theft) was $13,160. I can?t imagine how a loss of this much happens.

??????????? I don?t want to suggest that identity theft, in the broadest sense of the word, is not a serious problem that imposes a large cost on consumers and the marketplace. I do, however, suggest that we read the report carefully before we consider how to resolve the problem.

Source: http://pubcit.typepad.com/clpblog/2012/11/what-does-the-identity-theft-report-really-tell-us.html

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