The incidence of identity fraud dropped by nearly a third last year, according to study findings announced Tuesday by Javelin Strategy & Research. Only 3.5 percent of the U.S. population was victimized by this crime in 2010, down from 4.8 percent the year before.
Identity fraud and identity theft are not exactly the same thing. ID theft is the crime of someone stealing your personal information, particularly your Social Security number, home address, and date of birth. ID fraud is the actual use of that information to fraudulently obtain cash, credit, goods, or services, or commit other crimes in your name.
The rate of all types of ID fraud fell, including the one most threatening to consumers: New-account fraud, in which a crook opens new credit accounts in your name without your knowledge, had an incidence of only 1.1 percent in 2010, down from 1.3 percent in 2009.
This great news is the result of a multitude of factors, including greater care by financial institutions in confirming identities before handing over your cash or credit; more eagle-eyed consumers watching over their accounts; and the post-recession recovery of retail sales, which have an inverse relationship with ID fraud—when sales rise, ID fraud drops, and vice versa.
The study also produced important details about two heightened risks worth keeping a closer eye on.
First, consumers are exposed to significantly greater out-of-pocket losses when a crook steals an existing debit card then when he does the same thing with a credit card. The average consumer cost of ID fraud with a debit card was $795 vs. only $434 with a credit card.
Most banks protect credit card holders with zero loss liability guarantees, but they don’t always extend that same protection to debit cards. “Visa and MasterCard have done a good job getting people to think about zero liability for credit card fraud losses, but over the last few years, Visa and MasterCard transaction volume has been increasingly moving from credit to debit,” says James Van Dyke, president and founder of Javelin.
Only 44 percent of the nation’s 27 largest banks and credit unions offer zero liability for debit transactions involving a PIN security code, and only 33 percent offer zero liability for PIN-based ATM withdrawals, according to another Javelin survey.
Our advice: Ask to make sure that your bank offers zero liability for debit card transactions. If it doesn’t, consider switching to one of the institutions that properly protects you from debit-card theft: Banco Popular, Bank of America, Bank of The West, BB&T, BBVA, Capital One, Chase, Citizens Bank, Golden One Credit Union, HSBC, Navy Federal Credit Union, and Wells Fargo.
Second, so-called “friendly fraud,” committed by friends, relatives, co-workers, and other people who know their victims, produces the highest out-of-pocket losses for consumers. One in seven ID fraud victims knew that the crook was a friend. And because these nogoodniks knew their victims’ habits and behavior, the total theft was higher ($8,233 vs. $3,666 for non-friendly fraud). Adding insult to injury, because victims often didn’t want to put their “friends” or family member in legal jeopardy, those soft touches ate greater out-of-pocket losses—$1,723 vs. $448 for those who didn’t know the crook.
Our advice: With friends like these, who needs enemies? Safeguard your personal financial information from everyone. At the least, trust your instincts about those folks in your life who seem likely to have sticky fingers. Never leave your wallet or purse unattended at work; store financial account statements, medical records, and tax filings in a secure place at home, especially if you let workers or others inside; and shred personal financial documents when you no longer need them.