U.S.: Identity Theft Complaints Skyrocket

Instances of identity theft nearly doubled in 2002, topping the U.S. Federal Trade Commission’s list of consumer complaints and accounting for 43 percent of the agency’s fraud reports.

In fact, identity theft ranked as the number one complaint for the third year in a row, with 161,819 reported instances in 2002, up 88 percent from last year’s figure of 86,198. Of those cases, 42 percent of identity theft victims said new or existing credit card accounts were abused in their name, while 22 percent were victims of utility or phone fraud, with fraudulent cell phone use accounting for half of that total. Banking fraud accounted for another 17 percent of abuses.

Carol McKay, spokesperson for the National Consumers League, told the E-Commerce Times that the FTC figures indicate identity theft is an increasingly easy crime to commit. However, she added, consumers’ awareness also has increased.

“ID theft is becoming more of a household term all the time,” Kay said. “There is significant coverage by major media because often it’s a sad and dramatic story.”

Better Agency Cooperation

Meanwhile, the number of complaints to federal agencies in general increased last year to 380,000, up from 220,000 in 2001. J. Howard Beales III, director of the FTC’s Bureau of Consumer Protection, attributed that increase partly to improved outreach by federal departments, and partly to an increase in the number of departments reporting to a shared database.

Results were tabulated from a database that includes reporting from the Social Security Administration’s Office of Inspector General, the Internet Fraud Complaint Center, the National Consumers League’s National Fraud Information Center, and Better Business Bureaus across the country.

Internal Threats Pervasive

Although consumers often fear the Internet will be used as a tool in identity theft, such a scenario is often the least likely one, according to Giga Information Group vice president Andrew Bartels.

Rather, employees who have access to many users’ personal data are of greatest concern to Bartels. “In most cases, the online merchants have done a better job of protecting [their] databases from external hackers than they have protecting them from employee misuse,” he told the E-Commerce Times.

Fortunately, Bartels noted, the most mature online merchants have started to encrypt user data in order to limit access and curtail employees’ ability to walk out the door with that information.

Internet Auction Fraud on Increase

Other instances of Internet fraud grew 5 percent compared with 2001 and accounted for 47 percent of all reported fraud. Half of those complaints were the result of Internet auction fraud.

“The auction fraud issue has been a concern from the beginning,” said Bartels, “but it has not deterred the growth, obviously, of eBay.” He noted that major auction sites have fought back against fraudsters, implementing enhanced seller rating systems and regular policing of auctions.

All Internet fraud, stemming from auctions, online catalog sales, Internet access and adult services, cost consumers a combined US$122.3 million. The average fraud victim paid $1,295 in damages, according to the FTC.

The NCL’s McKay said the FTC figures for Internet fraud closely mirror the League’s own 2002 numbers, with auction fraud topping the list once again. However, McKay noted, there has not been a significant increase in the number of such complaints since the organization began publishing those figures in 1996.

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