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After Decline, Identity Theft Back on the Rise

By Christopher Maag

More than 11.5 million Americans became victims of identity fraud in 2011, a disappointing 12.6-percent increase after a dramatic decline the previous year, according to a new study released this week by Javelin Strategy & Research.

The study also found that users of popular social media websites are putting themselves at greater risk of identity fraud. The highest fraud rate was among LinkedIn users, 10.1 percent of whom had their identities stolen and used for fraud in 2011, according to the study.

Google+ users came in second, with a fraud rate of 7 percent. Next came Twitter and Facebook users, who suffered higher average rates of fraud than the 4.9 percent experienced by all consumers nationally. Identity fraud was also significantly higher among people who check into social media sites using the GPS function on their mobile devices, and people who click on new applications.

“Regardless of privacy settings, the Internet facilitates the dissemination of personal information that was previously difficult to obtain by fraudsters,” according to the report. “While the information on these profiles is often used for their intended purposes, fraudsters can also leverage information found on these profiles into spear phishing attacks against the user.”

Ever since Javelin started issuing reports on identity theft eight years ago, there was a consistent relationship between the economy and fraud: As the economy improved, identity fraud went down. But 2011 was the first year when that correlation didn’t hold. The incidence rate of fraud involving existing credit cards shot up 39 percent in 2011, even as the economy expanded somewhat, largely because unemployment remains high, according to Javelin.

Despite the fact that identity fraud hurt more people, the actual cost to the average victim went down, from $625 in 2010 to $472 last year, Javelin found. That’s at least partly because new account fraud declined, while existing account fraud increased.

Thieves are able to steal significantly more money by opening new accounts in victims’ names because it typically takes consumers longer to detect the scam, and companies longer to shut it down.

Hijacking existing accounts is easier to detect, and quicker to resolve, Javelin says. Many other types of fraud were not included in the study, including crime resulting from medical, criminal, tax or synthetic identity theft.

Victims of identity fraud are much more likely to have high incomes. The identity fraud rate among people with incomes over $150,000 was 7.7 percent, more than double the rate among people with incomes below $15,000.

Nevertheless, low-income people wind up paying a higher price out-of-pocket when their identities are used for fraud. High-income consumers paid just $82, on average, the lowest of all income groups, while people making below $15,000 paid $898, significantly more than any other income group.

That’s largely because high-income people are much more likely to have their identities stolen by way of their credit cards, which have significant protections against fraud. Many credit card issuers hold cardholders blameless in fraud, and eat the costs themselves. People with lower incomes are less likely to have credit cards, making them more vulnerable to identity frauds against which they have no protection.

“Those in the lowest income bracket are subjected to the most detrimental types of fraud: account takeover fraud and new account fraud,” the report found. “As a result, nearly half (47%) of victims with annual incomes less than $15,000 report that they are very affected or severely affected by fraud, compared to 18% of fraud victims overall.”

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[Related Article: Valve: Online Gamers' Data Hacked]

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