New Javelin Report Finds 22% Increase in Identity Theft Victims

by Jeff Sovern

Javelin's latest identity fraud survey, released yesterday, contains, at best, mixed news on the progress made in preventing and detecting identity fraud.  Here's the first paragraph of the press release:

The 2009 Identity Fraud Survey Report – released today by Javelin Strategy & Research (www.javelinstrategy.com) – confirms that the number of identity fraud victims has increased 22 percent to 9.9 million adults in the United States, while the total annual fraud amount only increased slightly by seven percent to $48 billion over the past year. The report found detection and resolution efforts are working well—consumers and businesses are detecting and resolving fraud more quickly. As a result the mean consumer costs of identity fraud plummeted by 31 percent to $496 per incident in 2008. The study also found that women were 26 percent more likely to be victims of identity fraud than men this past year.

So what does this say about the effectiveness of the 2003 FACTA Act, which was aimed in large part at identity theft?  It's too soon to be certain, but so far FACTA does not seem like an adequate solution to the problem of identity theft.  There are at least three reasons it's hard to be certain. First, many of the regulations FACTA directed regulators to draft took years to produce and become effective, so it's probably too soon to evaluate them.  Second, the state of the economy is likely to have driven more people to take up identity theft, and that alone may be responsible for some of the increase.  And third, because some of the FACTA provisions increase the likelihood that identity theft victims will learn about the crime more quickly, it may be that some of the increase in consumers reporting their victimization is in part a function of earlier or increased awareness that identity theft has occurred (the Javelin study is based on telephone interviews).  So it's too soon to give up on FACTA, but so far FACTA is not looking promising as an identity theft preventative.  

Where FACTA seems likely to have succeeded is in reducing the mean losses caused by identity theft.  For example, the fraud alert provisions and rules requiring credit bureaus to provide consumers free annual credit reports--which may have helped consumers detect identity fraud more quickly--might have contributed to the reduction in mean losses.  But then again, perhaps some of the reduction in losses is attributable to greater public awareness of identiy theft.  Reducing the average loss caused by identity fraud is a worthy accomplishment, but less worthy than preventing the losses in the first place.  My own view remains that the best way to prevent identity theft from occurring is to impose liability on credit bureaus and furnishers of information for reporting errors, to give them an incentive to improve accuracy, as stated in The Jewel of Their Souls: Preventing Identity Theft Through Loss Allocation Rules, 64 University of Pittsburgh Law Review 343 (2003) (as I mentioned in a post on Sunday).

Comments

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