In the past five years, more than 27 million Americans have been victims of identify theft, according to the Federal Trade Commission.
Quashing the Identity Theft Epidemic
In the past five years, more than 27 million Americans have been victims of identify theft, according to the Federal Trade Commission.
The problem is growing. In a 2003 study, the FTC estimated that 10 million Americans were victimized in the previous year. Each victim lost an average of $500 and wasted 30 hours to sort out the situation. That adds up to out-of-pocket losses of $5 billion, and 300 million hours. The cost to businesses and financial institutions is much higher. Their losses from identity theft totaled $48 billion, according to the FTC.
Moreover, the American Bankers Association’s 2002 Check Fraud Survey revealed that attempted check fraud doubled in the past two years, and surpassed $2.2 billion.
In the most common types of cases, the perpetrators use the victims’ identities to use their existing credit cards, open new credit accounts, apply for loans, or empty their savings accounts. In nearly one in three cases, the thief is someone the victim knows. In the majority of cases, however, thieves prowl mailboxes, trash cans, the Internet, and company databases for information.
Most of the time, the criminals are based in the U.S., but that isn’t always the case. In earlier issues of Trends, we’ve analyzed the benefits and risks of offshoring. One risk that is often overlooked is that American’s personal information is being sent overseas. Workers in India, Russia, China, and Eastern Europe now process U.S. citizens’ income tax returns, insurance claims, and medical bills.
All of that data is particularly vulnerable because the newest laws that guarantee the privacy of consumer and medical information do not extend to offshoring firms. Public Citizen, a public interest group, has asked the federal government to prohibit companies from giving foreigners access to information that is protected within the U.S. but not in the other country.
Even in the U.S., the workplace exposes personal information to identity thieves. Pay stubs offer thieves access to employees’ social security numbers, income, and bank account numbers if they have direct deposit. Expense reports can reveal the employee’s credit card number and driver’s license number on a car rental agreement.
Not long ago, an employee of Ligand Pharmaceuticals found a box of personnel records for 38 former employees of Glycomed, a company that Ligand acquired.
The employee and her accomplices signed up for dozens of credit cards, spent $100,000, and opened 20 cell-phone accounts. Eventually the employee was caught and convicted. The former employees sued the company for negligence and received an out-of-court settlement.
Whether in the workplace or at home, the threat of identity theft has become nearly universal, according to a recent survey by the market research firm InsightExpress. Eighty-five percent of the respondents said they believe identity theft could happen to them, while 42 percent are more concerned about identity theft today than they were a year ago, and 59 percent are changing their behavior to protect themselves.
Security experts advise consumers to protect their personal information by taking the following steps: 1. Shred charge receipts, credit-card applications and offers, insurance forms, checks, and bank statements before throwing them away. 2. Do not give out your social security number or financial information in response to unsolicited phone calls or e-mails.3. Never use your entire social security number when writing a check, and don’t include it on your driver’s license.4. Don’t place your outgoing mail in your mailbox, where it can be picked up by thieves.5. Check your credit history on a regular basis.
With nearly two-thirds of Americans now taking such measures to protect their financial information, we can extrapolate this trend into three forecasts:
First, there will be an explosion of revenues for businesses that provide products that address identity theft risks. Consider the sales of paper shredders. In 2003, Staples sold 1.3 million shredders, a 50 percent increase over the previous year. Sales are up by 30 percent at Office Max, according to a report by CNN.com. A Staples official told the Information Management Journal that the company expects even bigger sales in coming years, because shredders have penetrated only 20 percent of American households. Businesses have also increased their shredding, posting double-digit growth in the past year for the shredding industry.
Second, new services will succeed by responding to the need for better security. For example, several companies, including Brink’s and Cintas, are entering the lucrative “mobile shredding” business. Companies outsource the job of shredding documents to these businesses. Also, services that offer “identity theft protection” provide access to credit reports, e-mail alerts about changes in customers’ credit status, and insurance that can cover expenses they might incur in fixing problems are rapidly growing, according to a recent Associated Press article. These services are already providing a steady stream of profits for the big three credit bureaus. Equifax’s Credit Watch, which includes up to $20,000 in insurance, costs $99.95 per year. It contributed $70 million of Equifax’s $1.2 billion in revenue in 2003 and should bring in $100 million this year. TransUnion’s service includes a credit monitoring service and $2,500 in insurance for $64 a year. It has more than 150,000 customers, and it is growing by 100 percent each year. Experian Information Solutions has enrolled 1.6 million subscribers for its monitoring services, such as its Credit Manager for $89.95 annually.
Third, consumers’ growing fear and outrage about identity theft will lead lawmakers to pass legislation that more effectively safeguards personal information. As a beginning, the Fair and Accurate Credit Transactions Act of 2003, which goes into effect in December 2004, will allow every U.S. citizen to receive a free credit report every year to check for fraud. The new law will also require businesses to safely dispose of consumer information rather than placing it in a trash dumpster where it can be retrieved by thieves. Looking ahead, we expect tougher penalties for people convicted of identity theft, and stricter rules for businesses that hold them accountable for tactics like mass-mailing pre-approved credit applications that are often used by criminals to open accounts in victims’ names. In addition, we believe that financial services firms, insurance companies, and other businesses will be prohibited from sending personal information to off-shore outsourcing providers.
References List : 1. The Associated Press, May 22, 2004, "As Identity Theft Jumps, So Do Costly Monitoring Services," by Brian Bergstein. ⓒ Copyright 2004 by The Associated Press. All rights reserved.2. Texas Banking, May 2004 "Stop Identity Theft." ⓒ Copyright 2004 by Bank News, Inc., sponsored by the Texas Bankers Association. All rights reserved.3. The Plain Dealer, May 24, 2004. "Outsourcing Brings Identity-Theft Risk," by Chris Seper. ⓒ Copyright 2004 by Plain Dealer Publishing Co. All rights reserved.4. Desert Morning News, May 30, 2004, "Identity Theft Thrives in the Workplace." ⓒ Copyright 2004 by Desert News Publishing Co. All rights reserved.5. Essence, May 2004, "Five Ways to Prevent Identify Theft," by LaShieka Purvis. ⓒ Copyright 2004 by ECI. All rights reserved.6. Information Management Journal, May 2004, "Identity Theft Spurs Shredder Sales," by Nikki Swartz. ⓒ Copyright 2004 by the Association of Records Managers & Administrators. All rights reserved.7. The Associated Press, May 22, 2004, "As Identity Theft Jumps, So Do Costly Monitoring Services," by Brian Bergstein. ⓒ Copyright 2004 by The Associated Press. All rights reserved.
