Survey Sounds the Alarm on Identity Theft’s Scope

About 7 million Americans -- more than 3% of the adult population -- were victims of identity theft last year, a nearly 80% rise from year-earlier levels, according to a new survey. The survey, released Monday as federal regulators reached a settlement with an identity thief who targeted customers of the world’s biggest Internet service provider, painted a bleak picture of the scope of identity fraud, which previous estimateshad pegged at fewer than 1 million cases a year.

“Everybody is finally getting this wake-up call that we have a problem and it’s far more extensive than we have realized,” said Linda Foley, executive director of the Identity Theft Resource Center in San Diego. “Unless there are some big changes in how businesses handle information and how credit is granted, we are all going to be victims of identity theft at some point in our lifetimes.”

In cases of identity theft, criminals use stolen personal and financial information to obtain credit or open checking accounts in the victim’s name. The thefts often go undiscovered for months, until the thief stops making payments on the fraudulently obtained credit and the victim starts hearing from debt collectors.

Stamford, Conn.-based Gartner Inc., a research and consulting firm, surveyed more than 2,400 adults by mail on a wide range of issues, including identity fraud. The survey, one of the few comprehensive studies of the prevalence of the nation’s fastest-growing financial crime, had a sampling error margin of plus or minus 2 percentage points.

The Federal Trade Commission, which has kept identity theft reports for the last three years, last year logged 161,819 complaints, twice as many as in 2001. FTC officials have acknowledged that the complaints represent a fraction of the cases reported to law enforcement.

The agency is in the midst of a comprehensive telephone survey of 4,000 adults to determine the scope of the problem, but results are not yet available, said Lois Greisman, head of the FTC’s identity theft division.

“Identity theft is very much a national issue, and it’s a top priority for this agency, from both the consumer and business side,” Greisman said.

The FTC announced Monday that it had settled civil charges against an identity thief who stole credit card numbers by pretending to represent AOL Time Warner Inc.’s America Online division.

The thief sent e-mails requesting information from AOL subscribers, saying the data were needed to update their billing information. A minor whose identity wasn’t released, the thief used the information to make online purchases and open accounts in a scam dubbed “phishing.”

The FTC said the defendant was barred from sending unsolicited e-mails and agreed to surrender $3,500 in profit.

Foley of the Identity Theft Resource Center said she recently received dozens of reports about similar scams using bogus EBay and PayPal addresses. The problem, Foley said, is that the fake e-mails look so real that consumers frequently respond first and think about the possible consequences later.

Ironically, the publicity surrounding identity theft has helped attract criminals to the field, experts say. And the growth of the crime has raised the black-market value of stolen credit card receipts, financial records and Social Security numbers -- increasing the incentive to pilfer the information.

As reports about identity theft rose during the last two years, state and federal lawmakers, as well as industry groups, have stepped in.

“Creditors are concerned, along with everyone else, about the rise in identity theft seen in this country,” said Lynne B. Strang, a spokeswoman for the American Financial Services Assn. “There is a lot going on in this area right now.”

Last month, for example, several identity theft measures went into effect in California, including a law that requires companies to notify their customers if their personal information has been jeopardized by an employee theft or a computer break-in.

Sen. Dianne Feinstein (D-Calif.) recently introduced a bill in the Senate to create a similar federal law.

Credit-reporting companies, meanwhile, have banded together to make reporting identity theft somewhat easier. Still, more needs to be done to protect the privacy of consumer information and to provide help for identity theft victims, Foley said.

Although identity theft is a close cousin to credit card fraud -- in which a thief simply uses the victim’s plastic to buy consumer goods -- it’s a distinct crime that often has more negative repercussions for the victim, experts agree. Victims must prove to often hostile creditors that they were not the person who opened the accounts and made the charges -- and the creditors are the ones holding the evidence, such as credit applications and receipts, to prove the victim’s case.